VETERANS MANPOWER v.
CA
This is a petition for review on certiorari of the decision dated
August 11, 1989, of the Court of Appeals in CA-G.R. SP No. 15990,
entitled "The Chief of Philippine Constabulary (PC) and Philippine
Constabulary Supervisory Unit for Security and Investigation
Agencies (PC-SUSIA) vs. Hon. Omar U. Amin and Veterans Manpower
and Protective Services, Inc. (VMPSI)," lifting the writ of preliminary
injunction which the Regional Trial Court had issued to the PC and
PC-SUSIA enjoining them from committing acts that would result in
the cancellation or non-renewal of the license of VMPSI to operate
as a security agency.
On March 28, 1988, VMPSI filed a complaint in the Regional Trial
Court at Makati, Metro Manila, praying the court to:
"A. Forthwith issue a temporary restraining order to preserve
the status quo, enjoining the defendants, or any one acting
in their place or stead, to refrain from committing acts that
would result in the cancellation or non-renewal of VMPSI's
license;
"B. In due time, issue a writ of preliminary injunction to the
same effect;
"C. Render decision and judgment declaring null and void the
amendment of Section 4 of R.A. No. 5487, by PD No. 11
exempting organizations like PADPAO from the prohibition
that no person shall organize or have an interest in more
than one agency; declaring PADPAO as an illegal
organization existing in violation of said prohibition, without
the illegal exemption provided in PD No. 11;declaring null
and void Section 17 of R.A. No. 5487 which provides for the
issuance of rules and regulations in consultation
with PADPAO; declaring null and void the February 1, 1982
directive of Col. Sabas V. Edadas, in the name of the then PC
Chief, requiring all private security agencies/security forces
such as VMPSI to join PADPAO as a pre-requisite to
secure/renew their licenses; declaring that VMPSI did not
engage in 'cut-throat competition' in its contract
with MWSS; ordering defendants PC Chief and PC-SUSIA to
renew the license of VMPSI; ordering the defendants to
refrain from further harassing VMPSI and from
threatening VMPSIwith cancellations or non-renewal of
license, without legal and justifiable cause; ordering the
defendants to pay to VMPSI the sum of P1,000,000.00 as
actual and compensatory damages,
P1,000,000.00 as exemplary damages, and P200,000.00 as
attorney's fees and expenses of litigation; and granting such
further or other reliefs to VMPSI as may be deemed lawful,
equitable and just."
The constitutionality of the following provisions of R.A.
5487(otherwise known as the "Private Security Agency Law"), as
amended, is questioned by VMPSI in its complaint:
"SEC. 4. Who may Organize a Security or Watchman Agency. - Any
Filipino citizen or a corporation, partnership, or association, with a
minimum capital of five thousand pesos, one hundred per cent of
which is owned and controlled by Filipino citizens may organize a
security or watchman
agency: Provided, That no person shall organize or have an interest i
n, more than one such agency except thosewhich are already existin
g at the promulgation of this Decree: x x x." (As amended by P.D.
Nos. 11 and 100.)
"SEC.
17. Rules and Regulations by Chief, Philippine Constabulary. - The Ch
ief of the Philippine Constabulary, in consultation withthe Philippine  On April 18, 1988, the lower court denied VMPSI's application for a
Association of Detective and Protective Agency Operators, Inc. and
subject to the provision of existing laws, is hereby authorized to
issue the rules and regulations necessary to carry out the purpose of
this Act."
VMPSI alleges that the above provisions of R.A. No. 5487 violate the
provisions of the 1987 Constitution against monopolies, unfair
competition and combinations in restraint of trade, and tend to
favor and institutionalize the Philippine Association of Detective and
Protective Agency Operators, Inc. (PADPAO) which is monopolistic
because it has an interest in more than one security agency.
Respondent VMPSI likewise questions the validity of paragraph 3,
subparagraph (g) of the Modifying Regulations on the Issuance of
License to Operate and Private Security Licenses and Specifying
Regulations for the Operation of PADPAO issued by then PC Chief Lt.
Gen. Fidel V. Ramos, through Col. Sabas V. Edades, requiring that "all
private security agencies/company security forces must register as
members of any PADPAO Chapter organized within the Region
where their main offices are located..." ((pp. 5-6, Complaint in Civil
Case No. 88-471). As such membership requirement in PADPAO is
compulsory in nature, it allegedly violates legal and constitutional
provisions against monopolies, unfair competition and combinations
in restraint of trade.
On May 12, 1986, a Memorandum of Agreement was executed by
PADPAO and the PC Chief, which fixed the minimum monthly
contract rate per guard for eight (8) hours of security service per day
at P2,255.00 within Metro Manila and P2,215.00 outside of Metro
Manila.
On June 29, 1987, Odin Security Agency (Odin) filed a complaint with
PADPAO accusing VMPSI of cut-throat competition by undercutting
its contract rate for security services rendered to the Metropolitan
Waterworks and Sewerage System (MWSS), charging said customer
lower than the standard minimum rates provided in the
Memorandum of Agreement dated May 12, 1986.
PADPAO found VMPSI guilty of cut-throat competition, hence, the
PADPAO Committee on Discipline recommended the expulsion of
VMPSI from PADPAO and the cancellation of its license to operate a
security agency (Annex D, Petition).
The PC-SUSIA made similar findings and likewise recommended
the cancellation of VMPSI's license (Annex E, Petition).
As a result, PADPAO refused to issue a clearance/certificate of
membership to VMPSI when it requested one.
VMPSI wrote the PC Chief on March 10, 1988, requesting him to set
aside or disregard the findings of PADPAO and consider VMPSI's
application for renewal of its license, even without a certificate of
membership from PADPAO (Annex F, Petition).
As the PC Chief did not reply, and VMPSI's license was expiring on
March 31, 1988, VMPSI filed Civil Case No. 88-471 in the RTC-Makati,
Branch 135, on March 28, 1988 against the PC Chief and PC-SUSIA.
On the same date, the court issued a restraining order enjoining the
PC Chief and PC-SUSIA "from committing acts that would result in
the cancellation or non-renewal of VMPSI's license" (Annex
G,Petition).
The PC chief and PC-SUSIA filed a "Motion to Dismiss, Opposition to
the Issuance of Writ of Preliminary Injunction, and Motion to Quash
the Temporary Restraining Order," on the grounds that the case is
against the State which had not given consent thereto and that
VMPSI's license already expired on March 31, 1988, hence, the
restraining order or preliminary injunction would not serve any
purpose because there was no more license to be cancelled (Annex
H, Petition). Respondent VMPSI opposed the motion.
writ of preliminary injunction for being premature because it "has up
Page 1 of 41
to May 31, 1988 within which to file its application for renewal
pursuant to Section 2 (e) of Presidential Decree No. 199, x x x." (p.
140, Rollo.)
On May 23, 1988, VMPSI reiterated its application for the issuance of
a writ of preliminary injunction because PC-SUSIA had rejected
payment of the penalty for its failure to submit its application for
renewal of its license and the requirements therefor within the
prescribed period in Section 2(e) of the Revised Rules and
Regulations Implementing R.A. 5487, as amended by P.D. 1919
(Annex M, Petition).
On June 10, 1988, the RTC-Makati issued a writ of preliminary
injunction upon a bond of P100,000.00, restraining the defendants,
or any one acting in their behalf, from cancelling or denying renewal
of VMPSI's license, until further orders from the court.
The PC Chief and PC-SUSIA filed a Motion for Reconsideration of the
above order, but it was denied by the court in its Order of August 10,
1988 (Annex R, Petition).
On November 3, 1988, the PC Chief and PC-SUSIA sought relief by a
petition for certiorari in the Court of Appeals.
On August 11, 1989, the Court of Appeals granted the petition. The
dispositive portion of its decision reads:
"WHEREFORE, the petition for certiorari filed by petitioners PC Chief
and PC-SUSIA is hereby GRANTED, and the RTC-Makati, Branch 135,
is ordered to dismiss the complaint filed by respondent VMPSI in
Civil Case No. 88-471, insofar as petitioners PC Chief and PC-SUSIA
are concerned, for lack of jurisdiction. The writ of preliminary
injunction issued on June 10, 1988, is dissolved." (pp. 295-296,
Rollo.)
VMPSI came to us with this petition for review.
The primary issue in this case is whether or not VMPSI's complaint
against the PC Chief and PC-SUSIA is a suit against the State without
its consent. The answer is yes.
The State may not be sued without its consent (Article XVI, Section
3, of the 1987 Constitution). Invoking this rule, the PC Chief and PC-
SUSIA contend that, being instrumentalities of the national
government exercising a primarily governmental function of
regulating the organization and operation of private detective,
watchmen, or security guard agencies, said official (the PC Chief) and
agency (PC-SUSIA) may not be sued without the Government's
consent, especially in this case because VMPSI's complaint seeks not
only to compel the public respondents to act in a certain way, but
worse, because VMPSI seeks actual and compensatory damages in
the sum of P1,000,000.00, exemplary damages in the same amount,
and P200,000.00 as attorney's fees from said public respondents.
Even if its action prospers, the payment of its monetary claims may
not be enforced because the State did not consent to appropriate
the necessary funds for that purpose.
Thus did we hold in Shauf vs. Court of Appeals, 191 SCRA 713:
"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 duties. The rule is that if the judgment against
such officials will require the state itself to perform an 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 formallyimpleaded." (Emphasis
supplied.)
A public official may sometimes be held liable in his personal or
private capacity if he acts in bad faith, or beyond the scope of his
authority or jurisdiction (Shauf vs. Court of Appeals, supra),
however, since the acts for which the PC Chief and PC-SUSIA are
being called to account in this case, were performed by them as part
of their official duties, without malice, gross negligence, or bad faith,
no recovery may be had against them in their private capacities.
We agree with the observation of the Court of Appeals that the
Memorandum of Agreement dated May 12, 1986 does not
constitute an implied consent by the State to be sued:
"The Memorandum of Agreement dated May 12, 1986 was entered i
nto by the PC Chief in relation to the exercise of a functionsovereign 
in nature. The correct test for the application of state immunity is no
t the conclusion of a contract by the State but the legalnature of the 
act. This was clearly enunciated in the case of United States of Ameri
ca vs. Ruiz where the Hon. Supreme Court held:
"'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
a business contract. It does notapply where the contract relates to t
he exercise of its sovereign functions.' (136 SCRA 487, 492.)
"In the instant case, the Memorandum of Agreement entered into b
y the PC Chief and PADPAO was intended to professionalize theindus
try and to standardize the salaries of security guards as well as the c
urrent rates of security services, clearly, a governmentalfunction. Th
e execution of the said agreement is incidental to the purpose of R.A
. 5487, as amended, which is to regulate theorganization and operati
on of private detective, watchmen or security guard agencies.
(Underscoring Ours.)" (pp. 258-259, Rollo.)
Waiver of the State's immunity from suit, being a derogation of
sovereignty, will not be lightly inferred, but must be
construed strictissimijuris (Republic vs. Feliciano, 148 SCRA 424). The
consent of the State to be sued must emanate from statutory
authority, hence, from a legislative act, not from a mere
memorandum. Without such consent, the trial court did not acquire
jurisdiction over the public respondents.
The state immunity doctrine rests upon reasons of public policy and
the inconvenience and danger which would flow from a different
rule. "It is obvious that public service would be hindered, and public
safety endangered, if the supreme authority could be subjected to
suits 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" (Siren vs. U.S. Wall, 152, 19 L. ed.
129, as cited in 78 SCRA 477). In the same vein, this Court in Republic
vs. Purisima (78 SCRA 470, 473) rationalized:
"Nonetheless, a continued adherence to the doctrine of non-
suability is not to be deplored for as against the inconvenience that
may be caused [by] private parties, the loss of governmental
efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were
abandoned and the availability of judicial remedy were not thus
restricted. With the well known propensity on the part of our people
to go to court, at the least provocation, the loss of time and energy
required to defend against law suits, in the absence of such a basic
principle that constitutes such an effective obstacle, could very well
be imagined." (citing Providence Washington Insurance Co. vs.
Republic, 29 SCRA 598.)
WHEREFORE, the petition for review is DENIED and the judgment
appealed from is AFFIRMED in toto.
Page 2 of 41
 MARIANO E. GARCIA,  vs. THE CHIEF OF STAFF
This is an appeal from an order of dismissal.
It appears that on December 1, 1961, the plaintiff-appellant,
Mariano E. Garcia, filed with the Court of First Instance of
Pangasinan an action to collect a sum of money against the
Chief of Staff and the Adjutant General of the Armed Forces
of the Philippines, the Chairman of the Philippine Veterans
Board and /or the Auditor General. The complaint alleged:
that sometime in July, 1948, the plaintiff suffered injuries
while undergoing the 10-month military training at Camp
Floridablanca, Pampanga; that sometime thereafter he filed
his claim under Commonwealth Act 400 and in April, 1957, he
submitted some papers in support of his claim to the Adjutant
General's Office upon the latter's request; that on May 2,
1957, he received a letter from the said Adjutant General's
Office disallowing his claim for disability benefits; that on
November 24, 1958, after further demands of the plaintiff,
the Adjutant General's Office denied the said claim, alleging
that Commonwealth Act 400 had already been repealed by
Republic Act 610 which took effect on January 1, 1950; that
by reason of the injuries suffered by plaintiff he was deprived
of his sight or vision rendering him permanently disabled; and
that by reason of the unjustified refusal by defendants of
plaintiff's claim, the latter was deprived of his disability
pension from July, 1948 totalling no less than P4,000 at the
rate of P20 a month and suffered thereby moral damages and
attorney's fees the amount of P2,000.00.
The Philippine Veterans Administration and the Chief of Staff
of the Armed Forces filed separate motions to dismiss the
complaint on the grounds that the court has no jurisdiction
over the subject matter of the complaint; that the plaintiff
failed to exhaust all administrative remedies before coming
to court; that the complaint states no cause of action; and
that the cause of action is barred by the statute of
limitations.1äwphï1.ñët
ERNESTO L. CALLADO, vs. INTERNATIONAL RICE RESEARCH INSTITUTE
Did the International Rice Research Institute (IRRI) waive its
immunity from suit in this dispute which arose from an
employer-employee relationship?
We rule in the negative and vote to dismiss the petition.
Ernesto Callado, petitioner, was employed as a driver at the
IRRI from April 11, 1983 to December 14, 1990. On February
11, 1990, while driving an IRRI vehicle on an official trip to the
Ninoy Aquino International Airport and back to the IRRI,
petitioner figured in an accident.
Petitioner was informed of the findings of a preliminary
investigation conducted by the IRRI's Human Resource
Development Department Manager in a Memorandum dated
March 5, 1990.  In view of the aforesaid findings, he was
charged with:
(1) Driving an institute vehicle while on official duty under the
influence of liquor;
(2) Serious misconduct consisting of your failure to report to
your supervisors the failure of your vehicle to start because of
a problem with the car battery which, you alleged, required
you to overstay in Manila for more than six (6) hours,
whereas, had you reported the matter to IRRI, Los Baños by
Acting on the said motion, the court, on March 2, 1962,
rendered an order dismissing the complaint on the ground
that the action has prescribed.
Motion for reconsideration of the said order having been
denied, the plaintiff has interposed this appeal.
Without need of discussing the various questions raised, We
have to uphold the order of dismissal, not necessarily on the
same ground as found by the lower court; but for the simple
reason that the Court of First Instance has no jurisdiction over
the subject matter, it being a money claim against the
government.
This Court has already held (New Manila Lumber Co. Inc. vs.
Republic, G.R. No. L-14248, April 28, 1960) that a claim for the
recovery of money against the government should be filed
with the Auditor General, in line with the principle that the
State cannot be sued without its consent. Commonwealth Act
327 provides:
SECTION 1. In all cases involving the settlement of accounts or
claims, other than those of accountable officers, the Auditor
General shall act and decide the same within sixty days,
exclusive of Sundays and holidays, after their
presentation. . . .
SEC. 2. The party aggrieved by the final decision of the
Auditor General in the settlement of an account or claim may,
within thirty days from receipt of the decision, take an appeal
in writing:
x x x           x x x           x x x.
(c) To the Supreme Court of the Philippines, if the appellant is
a private person or entity.
The well established rule that no recourse to court can be had
until all administrative remedies had been exhausted and that
actions against administrative officers should not be
entertained if superior administrative officers could grant
relief is squarely applicable to the present case.
In view therefor, the order dismissing the complaint is hereby
affirmed, without pronouncement as to costs.
telephone, your problem could have been solved within one
or two hours;
(3) Gross and habitual neglect of your duties. 
In a Memorandum dated March 9, 1990, petitioner submitted
his answer and defenses to the charges against him. 3After
evaluating petitioner's answer, explanations and other
evidence, IRRI issued a Notice of Termination to petitioner on
December 7, 1990. 
Thereafter, petitioner filed a complaint on December 19,
1990 before the Labor Arbiter for illegal dismissal, illegal
suspension and indemnity pay with moral and exemplary
damages and attorney's fees.
On January 2, 1991, private respondent IRRI, through counsel,
wrote the Labor Arbiter to inform him that the Institute
enjoys immunity from legal process by virtue of Article 3 of
Presidential Decree No. 1620,  and that it invokes such
diplomatic immunity and privileges as an international
organization in the instant case filed by petitioner, not having
waived the same. 
IRRI likewise wrote in the same tenor to the Regional Director
of the Department of Labor and Employment. 
Page 3 of 41
While admitting IRRI's defense of immunity, the Labor
Arbiter, nonetheless, cited an Order issued by the Institute on
August 13, 1991 to the effect that "in all cases of termination,
respondent IRRI waives its immunity,"  and, accordingly,
considered the defense of immunity no longer a legal
obstacle in resolving the case. The dispositive portion of the
Labor arbiter's decision dated October 31, 1991, reads:
WHEREFORE, premises considered, judgment is hereby
rendered ordering respondent to reinstate complainant to his
former position without loss or (sic) seniority rights and
privileges within five (5) days from receipt hereof and to pay
his full backwages from March 7, 1990 to October 31, 1991,
in the total amount of P83,048.75 computed on the basis of
his last monthly salary.  clearly necessitated by their international character and
The NLRC found merit in private respondent' s appeal and,
finding that IRRI did not waive its immunity, ordered the
aforesaid decision of the Labor Arbiter set aside and the
complaint dismissed.  Department of Labor in these instances would defeat the very
Hence, this petition where it is contended that the immunity
of the IRRI as an international organization granted by Article
3 of Presidential Decree No. 1620 may not be invoked in the
case at bench inasmuch as it waived the same by virtue of its
Memorandum on "Guidelines on the handling of dismissed
employees in relation to P.D. 1620."  performance of their functions.
It is also petitioner's position that a dismissal of his complaint
before the Labor Arbiter leaves him no other remedy through
which he can seek redress. He further states that since the
investigation of his case was not referred to the Council of
IRRI Employees and Management (CIEM), he was denied his
constitutional right to due process.
We find no merit in petitioner's arguments.
IRRI's immunity from suit is undisputed.
Presidential Decree No. 1620, Article 3 provides:
Art. 3. Immunity from Legal Process. The Institute shall enjoy
immunity from any penal, civil and administrative
proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or
his authorized representatives.
In the case of International Catholic Migration Commission v.
Hon. Calleja, et al. and Kapisanan ng Manggagawa at TAC sa
IRRI v. Secretary of Labor and Employment and IRRI,  the
Court upheld the constitutionality of the aforequoted law.
After the Court noted the letter of the Acting Secretary of
Foreign Affairs to the Secretary of Labor dated June 17, 1987,
where the immunity of IRRI from the jurisdiction of the
Department of Labor and Employment was sustained, the
Court stated that this opinion constituted "a categorical
recognition by the Executive Branch of the Government
that . . . IRRI enjoy(s) immunities accorded to international
organizations, which determination has been held to be a
political question conclusive upon the Courts in order not to
embarass a political department of Government.  We cited
the Court's earlier pronouncement in WHO v. Hon. Benjamin
Aquino, et al.,  to wit:
It is a recognized principle of international law and under our
system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to
look beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government . . .
or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so
exercise their jurisdiction . . . as to embarass the executive
arm of the government in conducting foreign relations, it is
accepted doctrine that in such cases the judicial department
of (this) government follows the action of the political branch
and will not embarrass the latter by assuming an antagonistic
jurisdiction. 
Further, we held that "(t)he raison d'etre for these
immunities is the assurance of unimpeded performance of
their functions by the agencies concerned.
The grant of immunity from local jurisdiction to . . . and IRRI is
respective purposes. The objective is to avoid the danger of
partiality and interference by the host country in their
internal workings. The exercise of jurisdiction by the
purpose of immunity, which is to shield the affairs of
international organizations, in accordance with international
practice, from political pressure or control by the host
country to the prejudice of member States of the
organization, and to ensure the unhampered the
 
The grant of immunity to IRRI is clear and unequivocal and an
express waiver by its Director-General is the only way by
which it may relinquish or abandon this immunity.
On the matter of waiving its immunity from suit, IRRI had,
early on, made its position clear. Through counsel, the
Institute wrote the Labor Arbiter categorically informing him
that the Institute will not waive its diplomatic immunity. In
the second place, petitioner's reliance on the Memorandum
with "Guidelines in handling cases of dismissal of employees
in relation to P.D. 1620" dated July 26, 1983, is misplaced.
The Memorandum reads, in part:
Time and again the Institute has reiterated that it will not use
its immunity under P.D. 1620 for the purpose of terminating
the services of any of its employees. Despite continuing
efforts on the part of IRRI to live up to this undertaking, there
appears to be apprehension in the minds of some IRRI
employees. To help allay these fears the following guidelines
will be followed hereafter by the Personnel/Legal Office while
handling cases of dismissed employees.
xxx xxx xxx
2. Notification/manifestation to MOLE or labor arbiter
If and when a dismissed employee files a complaint against
the Institute contesting the legality of dismissal, IRRI's answer
to the complaint will:
1. Indicate in the identification of IRRI that it is an
international organization operating under the laws of the
Philippines including P.D. 1620. and
2. Base the defense on the merits and facts of the
case as well as the legality of the cause or causes for
termination.
3) Waiving immunity under P.D. 1620
If the plaintiff's attorney or the arbiter, asks if IRRI will waive
its immunity we may reply that the Institute will be happy to
do so, as it has in the past in the formal manner required
thereby reaffirming our commitment to abide by the laws of
the Philippines and our full faith in the integrity and
impartially of the legal system. 
Page 4 of 41
 From the last paragraph of the foregoing quotation, it is clear
that in cases involving dismissed employees, the Institute
may waive its immunity, signifying that such waiver is
discretionary on its part.
We agree with private respondent IRRI that this
memorandum cannot, by any stretch of the imagination, be
considered the express waiver by the Director-General.
Respondent Commission has quoted IRRI's reply thus:
The 1983 . . . is an internal memo addressed to Personnel and
Legal Office and was issued for its guidance in handling those
cases where IRRI opts to waive its immunity. It is not a
declaration of waiver for all cases. This is apparent from the
use of the permissive term "may" rather than the mandatory
term "shall" in the last paragraph of the memo. Certainly the
memo cannot be considered as the express waiver by the
Director General as contemplated by P.D. 1620, especially
since the memo was issued by a former Director-General. At
the very least, the express declaration of the incumbent
Director-general supersedes the 1983 memo and should be
accorded greater respect. It would be equally important to
point out that the Personnel and Legal Office has been non-
existent since 1988 as a result of major reorganization of the
IRRI. Cases of IRRI before DOLE are handled by an external
Legal Counsel as in this particular
case.  organization, deprives its employees of the right to self-
The memorandum, issued by the former Director-General to
a now-defunct division of the IRRI, was meant for internal
circulation and not as a pledge of waiver in all cases arising
from dismissal of employees. Moreover, the IRRI's letter to
the Labor Arbiter in the case at bench made in 1991 declaring
that it has no intention of waiving its immunity, at the very
least, supplants any pronouncement of alleged waiver issued
in previous cases.
Petitioner's allegation that he was denied due process is
unfounded and has no basis.
E. MERRITT, vs. GOVERNMENT OF THE PHILIPPINE ISLANDS
This is an appeal by both parties from a judgment of the Court of
First Instance of the city of Manila in favor of the plaintiff for the
sum of P14,741, together with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in
limiting the general damages which the plaintiff suffered to P5,000,
instead of P25,000 as claimed in the complaint," and (2) "in limiting
the time when plaintiff was entirely disabled to two months and
twenty-one days and fixing the damage accordingly in the sum of
P2,666, instead of P6,000 as claimed by plaintiff in his complaint."
The Attorney-General on behalf of the defendant urges that the trial
court erred: (a) in finding that the collision between the plaintiff's
motorcycle and the ambulance of the General Hospital was due to
the negligence of the chauffeur; (b) in holding that the Government
of the Philippine Islands is liable for the damages sustained by the
plaintiff as a result of the collision, even if it be true that the collision
was due to the negligence of the chauffeur; and (c) in rendering
judgment against the defendant for the sum of P14,741.
The trial court's findings of fact, which are fully supported by the
record, are as follows:
It is a fact not disputed by counsel for the defendant that when
the plaintiff, riding on a motorcycle, was going toward the
western part of Calle Padre Faura, passing along the west side
thereof at a speed of ten to twelve miles an hour, upon
crossing Taft Avenue and when he was ten feet from the
southwestern intersection of said streets, the General Hospital
ambulance, upon reaching said avenue, instead of turning
It is not denied that he was informed of the findings and
charges resulting from an investigation conducted of his case
in accordance with IRRI policies and procedures. He had a
chance to comment thereon in a Memorandum he submitted
to the Manager of the Human Resource and Development
Department. Therefore, he was given proper notice and
adequate opportunity to refute the charges and findings,
hereby fulfilling the basic requirements of due process.
Finally, on the issue of referral to the Council of IRRI
Employees and Management (CIEM), petitioner similarly fails
to persuade the Court.
The Court, in the Kapisanan ng mga Manggagawa at TAC sa
IRRI  case,  held:
Neither are the employees of IRRI without remedy in case of
dispute with management as, in fact, there had been
organized a forum for better management-employee
relationship as evidenced by the formation of the Council of
IRRI Employees and Management (CIEM) wherein "both
management and employees were and still are represented
for purposes of maintaining mutual and beneficial
cooperation between IRRI and its employees." The existence
of this Union factually and tellingly belies the argument that
Pres. Decree No. Decree No. 1620, which grants to IRRI the
status, privileges and immunities of an international
organization.
We have earlier concluded that petitioner was not denied
due process, and this, notwithstanding the non-referral to the
Council of IRRI Employees and Management. Private
respondent correctly pointed out that petitioner, having
opted not to seek the help of the CIEM Grievance Committee,
prepared his answer by his own self.  He cannot now fault the
Institute for not referring his case to the CIEM.
IN VIEW OF THE FOREGOING, the petition for certiorari is
DISMISSED. No costs.SO ORDERED.
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.
Page 5 of 41
 At another examination six days before the day of the trial,
Dr. Saleeby noticed that the plaintiff's leg showed a
contraction of an inch and a half and a curvature that made
his leg very weak and painful at the point of the fracture.
Examination of his head revealed a notable readjustment of
the functions of the brain and nerves. The patient apparently
was slightly deaf, had a light weakness in his eyes and in his
mental condition. This latter weakness was always noticed
when the plaintiff had to do any difficult mental labor,
especially when he attempted to use his money for
mathematical calculations.
According to the various merchants who testified as
witnesses, the plaintiff's mental and physical condition
prior to the accident was excellent, and that after having
received the injuries that have been discussed, his physical
condition had undergone a noticeable depreciation, for he
had lost the agility, energy, and ability that he had
constantly displayed before the accident as one of the best
constructors of wooden buildings and he could not now
earn even a half of the income that he had secured for his
work because he had lost 50 per cent of his efficiency. As a
contractor, he could no longer, as he had before done,
climb up ladders and scaffoldings to reach the highest parts
of the building.
As a consequence of the loss the plaintiff suffered in the
efficiency of his work as a contractor, he had to dissolved
the partnership he had formed with the engineer. Wilson,
because he was incapacitated from making mathematical
calculations on account of the condition of his leg and of
his mental faculties, and he had to give up a contract he
had for the construction of the Uy Chaco building."
We may say at the outset that we are in full accord with the trial
court to the effect that the collision between the plaintiff's
motorcycle and the ambulance of the General Hospital was due
solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are
drawn in question by the plaintiff are (a) P5,000, the award awarded
for permanent injuries, and (b) the P2,666, the amount allowed for
the loss of wages during the time the plaintiff was incapacitated
from pursuing his occupation. We find nothing in the record which
would justify us in increasing the amount of the first. As to the
second, the record shows, and the trial court so found, that the
plaintiff's services as a contractor were worth P1,000 per month. The
court, however, limited the time to two months and twenty-one
days, which the plaintiff was actually confined in the hospital. In this
we think there was error, because it was clearly established that the
plaintiff was wholly incapacitated for a period of six months. The
mere fact that he remained in the hospital only two months and
twenty-one days while the remainder of the six months was spent in
his home, would not prevent recovery for the whole time. We,
therefore, find that the amount of damages sustained by the
plaintiff, without any fault on his part, is P18,075.
As the negligence which caused the collision is a tort committed by
an agent or employee of the Government, the inquiry at once arises
whether the Government is legally-liable for the damages resulting
therefrom.
Act No. 2457, effective February 3, 1915, reads:
An Act authorizing E. Merritt to bring suit against the
Government of the Philippine Islands and authorizing the
Attorney-General of said Islands to appear in said suit.
Whereas a claim has been filed against the Government of
the Philippine Islands by Mr. E. Merritt, of Manila, for
damages resulting from a collision between his motorcycle
and the ambulance of the General Hospital on March
twenty-fifth, nineteen hundred and thirteen;
Whereas it is not known who is responsible for the
accident nor is it possible to determine the amount of
damages, if any, to which the claimant is entitled; and
Whereas the Director of Public Works and the Attorney-
General recommended that an Act be passed by the
Legislature authorizing Mr. E. Merritt to bring suit in the
courts against the Government, in order that said
questions may be decided: Now, therefore,
By authority of the United States, be it enacted by the
Philippine Legislature, that:
SECTION 1. E. Merritt is hereby authorized to bring suit in
the Court of First Instance of the city of Manila against the
Government of the Philippine Islands in order to fix the
responsibility for the collision between his motorcycle and
the ambulance of the General Hospital, and to determine
the amount of the damages, if any, to which Mr. E. Merritt
is entitled on account of said collision, and the Attorney-
General of the Philippine Islands is hereby authorized and
directed to appear at the trial on the behalf of the
Government of said Islands, to defendant said
Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
Did the defendant, in enacting the above quoted Act, simply waive
its immunity from suit or did it also concede its liability to the
plaintiff? If only the former, then it cannot be held that the Act
created any new cause of action in favor of the plaintiff or extended
the defendant's liability to any case not previously recognized.
All admit that the Insular Government (the defendant) cannot be
sued by an individual without its consent. It is also admitted that the
instant case is one against the Government. As the consent of the
Government to be sued by the plaintiff was entirely voluntary on its
part, it is our duty to look carefully into the terms of the consent,
and render judgment accordingly.
The plaintiff was authorized to bring this action against the
Government "in order to fix the responsibility for the collision
between his motorcycle and the ambulance of the General Hospital
and to determine the amount of the damages, if any, to which Mr. E.
Merritt is entitled on account of said collision, . . . ." These were the
two questions submitted to the court for determination. The Act was
passed "in order that said questions may be decided." We have
"decided" that the accident was due solely to the negligence of the
chauffeur, who was at the time an employee of the defendant, and
we have also fixed the amount of damages sustained by the plaintiff
as a result of the collision. Does the Act authorize us to hold that the
Government is legally liable for that amount? If not, we must look
elsewhere for such authority, if it exists.
The Government of the Philippine Islands having been "modeled
after the Federal and State Governments in the United States," we
may look to the decisions of the high courts of that country for aid in
determining the purpose and scope of Act No. 2457.
In the United States the rule that the state is not liable for the torts
committed by its officers or agents whom it employs, except when
expressly made so by legislative enactment, is well settled. "The
Government," says Justice Story, "does not undertake to guarantee
to any person the fidelity of the officers or agents whom it employs,
since that would involve it in all its operations in endless
embarrassments, difficulties and losses, which would be subversive
of the public interest." (Claussen vs. City of Luverne, 103 Minn., 491,
Page 6 of 41
citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers vs.
States, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to
recover damages from the state for personal injuries received on
account of the negligence of the state officers at the state fair, a
state institution created by the legislature for the purpose of
improving agricultural and kindred industries; to disseminate
information calculated to educate and benefit the industrial classes;
and to advance by such means the material interests of the state,
being objects similar to those sought by the public school system. In
passing upon the question of the state's liability for the negligent
acts of its officers or agents, the court said:
No claim arises against any government is favor of an
individual, by reason of the misfeasance, laches, or
unauthorized exercise of powers by its officers or agents.
(Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State,
86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104
Cal., 690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29;
Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on
Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to
sue the state where the cause of action arises out of either fort or
contract, the rule is stated in 36 Cyc., 915, thus:
By consenting to be sued a state simply waives its
immunity from suit. It does not thereby concede its
liability to plaintiff, or create any cause of action in his
favor, or extend its liability to any cause not previously
recognized. It merely gives a remedy to enforce a
preexisting liability and submits itself to the jurisdiction of
the court, subject to its right to interpose any lawful
defense.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided
April 16, 1915, the Act of 1913, which authorized the bringing of this
suit, read:
SECTION 1. Authority is hereby given to George Apfelbacher,
of the town of Summit, Waukesha County, Wisconsin, to bring
suit in such court or courts and in such form or forms as he
may be advised for the purpose of settling and determining all
controversies which he may now have with the State of
Wisconsin, or its duly authorized officers and agents, relative
to the mill property of said George Apfelbacher, the fish
hatchery of the State of Wisconsin on the Bark River, and the
mill property of Evan Humphrey at the lower end of
Nagawicka Lake, and relative to the use of the waters of said
Bark River and Nagawicka Lake, all in the county of Waukesha,
Wisconsin.
In determining the scope of this act, the court said:
Plaintiff claims that by the enactment of this law the
legislature admitted liability on the part of the state for the
acts of its officers, and that the suit now stands just as it would
stand between private parties. It is difficult to see how the act
does, or was intended to do, more than remove the state's
immunity from suit. It simply gives authority to commence suit
for the purpose of settling plaintiff's controversies with the
estate. Nowhere in the act is there a whisper or suggestion
that the court or courts in the disposition of the suit shall
depart from well established principles of law, or that the
amount of damages is the only question to be settled. The act
opened the door of the court to the plaintiff. It did not pass
upon the question of liability, but left the suit just where it
would be in the absence of the state's immunity from suit. If
the Legislature had intended to change the rule that obtained
in this state so long and to declare liability on the part of the
state, it would not have left so important a matter to mere
inference, but would have done so in express terms. (Murdock
Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L.
R. A., 399.)
In Denning vs. State (123 Cal., 316), the provisions of the Act of
1893, relied upon and considered, are as follows:
All persons who have, or shall hereafter have, claims on
contract or for negligence against the state not allowed by the
state board of examiners, are hereby authorized, on the terms
and conditions herein contained, to bring suit thereon against
the state in any of the courts of this state of competent
jurisdiction, and prosecute the same to final judgment. The
rules of practice in civil cases shall apply to such suits, except
as herein otherwise provided.
And the court said:
This statute has been considered by this court in at least two
cases, arising under different facts, and in both it was held
that said statute did not create any liability or cause of action
against the state where none existed before, but merely gave
an additional remedy to enforce such liability as would have
existed if the statute had not been enacted. (Chapman vs.
State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State, 121
Cal., 16.)
A statute of Massachusetts enacted in 1887 gave to the superior
court "jurisdiction of all claims against the commonwealth, whether
at law or in equity," with an exception not necessary to be here
mentioned. In construing this statute the court, in Murdock Grate
Co. vs. Commonwealth (152 Mass., 28), said:
The statute we are discussing disclose no intention to
create against the state a new and heretofore
unrecognized class of liabilities, but only an intention to
provide a judicial tribunal where well recognized existing
liabilities can be adjudicated.
In Sipple vs. State (99 N. Y., 284), where the board of the canal
claims had, by the terms of the statute of New York, jurisdiction of
claims for damages for injuries in the management of the canals
such as the plaintiff had sustained, Chief Justice Ruger remarks: "It
must be conceded that the state can be made liable for injuries
arising from the negligence of its agents or servants, only by force of
some positive statute assuming such liability."
It being quite clear that Act No. 2457 does not operate to extend the
Government's liability to any cause not previously recognized, we
will now examine the substantive law touching the defendant's
liability for the negligent acts of its officers, agents, and employees.
Paragraph 5 of article 1903 of the Civil Code reads:
The state is liable in this sense when it acts through a special
agent, but not when the damage should have been caused
by the official to whom properly it pertained to do the act
performed, in which case the provisions of the preceding
article shall be applicable.
The supreme court of Spain in defining the scope of this paragraph
said:
That the obligation to indemnify for damages which a third
person causes to another by his fault or negligence is based, as is
evidenced by the same Law 3, Title 15, Partida 7, on that the
person obligated, by his own fault or negligence, takes part in
the act or omission of the third party who caused the damage. It
follows therefrom that the state, by virtue of such provisions of
law, is not responsible for the damages suffered by private
individuals in consequence of acts performed by its employees in
the discharge of the functions pertaining to their office, because
Page 7 of 41
 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.
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.
ANGEL MINISTERIO and ASUNCION SADAYA, vs. THE COURT OF FIRST INSTANCE OF CEBU,
What is before this Court for determination in this appeal
by certiorari to review a decision of the Court of First Instance of
Cebu is the question of whether or not plaintiffs, now petitioners,
seeking the just compensation to which they are entitled under the
Constitution for the expropriation of their property necessary for the
widening of a street, no condemnation proceeding having been filed,
could sue defendants Public Highway Commissioner and the Auditor
General, in their capacity as public officials without thereby violating
the principle of government immunity from suit without its consent.
The lower court, relying on what it considered to be authoritative
precedents, held that they could not and dismissed the suit. The
matter was then elevated to us. After a careful consideration and
with a view to avoiding the grave inconvenience, not to say possible
injustice contrary to the constitutional mandate, that would be the
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."
That according to paragraph 5 of article 1903 of the Civil
Code and the principle laid down in a decision, among
others, of the 18th of May, 1904, in a damage case, the
responsibility of the state is limited to that which it contracts
through a special agent, duly empowered by a definite order
or commission to perform some act or charged with some
definite purpose which gives rise to the claim, and not where
the claim is based on acts or omissions imputable to a public
official charged with some administrative or technical office
who can be held to the proper responsibility in the manner
laid down by the law of civil responsibility. Consequently, the
trial court in not so deciding and in sentencing the said entity
to the payment of damages, caused by an official of the
second class referred to, has by erroneous interpretation
infringed the provisions of articles 1902 and 1903 of the Civil
Code.
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.
 
result if no such suit were permitted, this Court arrives at a different
conclusion, and sustains the right of the plaintiff to file a suit of this
character. Accordingly, we reverse.
Petitioners as plaintiffs in a complaint filed with the Court of First
Instance of Cebu, dated April 13, 1966, sought the payment of just
compensation for a registered lot, containing an area of 1045 square
meters, alleging that in 1927 the National Government through its
authorized representatives took physical and material possession of
it and used it for the widening of the Gorordo Avenue, a national
road, Cebu City, without paying just compensation and without any
agreement, either written or verbal. There was an allegation of
repeated demands for the payment of its price or return of its
possession, but defendants Public Highway Commissioner and the
Auditor General refused to restore its possession. It was further
Page 8 of 41
alleged that on August 25, 1965, the appraisal committee of the City
of Cebu approved Resolution No. 90, appraising the reasonable and
just price of Lot No. 647-B at P50.00 per square meter or a total
price of P52,250.00. Thereafter, the complaint was amended on June
30, 1966 in the sense that the remedy prayed for was in the
alternative, either the restoration of possession or the payment of
the just compensation.
In the answer filed by defendants, now respondents, through the
then Solicitor General, now Associate Justice, Antonio P. Barredo,
the principal defense relied upon was that the suit in reality was one
against the government and therefore should be dismissed, no
consent having been shown. Then on July 11, 1969, the parties
submitted a stipulation of facts to this effect: "That the plaintiffs are
the registered owners of Lot 647-B of the Banilad estate described in
the Survey plan RS-600 GLRO Record No. 5988 and more particularly
described in Transfer Certificate of Title No. RT-5963 containing an
area of 1,045 square meters; That the National Government in 1927
took possession of Lot 647-B Banilad estate, and used the same for
the widening of Gorordo Avenue; That the Appraisal Committee of
Cebu City approved Resolution No. 90, Series of 1965 fixing the price
of Lot No. 647-B at P50.00 per square meter; That Lot No. 647-B is
still in the possession of the National Government the same being
utilized as part of the Gorordo Avenue, Cebu City, and that the
National Government has not as yet paid the value of the land which
is being utilized for public use."
The lower court decision now under review was promulgated on
January 30, 1969. As is evident from the excerpt to be cited, the plea
that the suit was against the government without its consent having
been manifested met with a favorable response. Thus: "It is
uncontroverted that the land in question is used by the National
Government for road purposes. No evidence was presented whether
or not there was an agreement or contract between the government
and the original owner and whether payment was paid or not to the
original owner of the land. It may be presumed that when the land
was taken by the government the payment of its value was made
thereafter and no satisfactory explanation was given why this case
was filed only in 1966. But granting that no compensation was given
to the owner of the land, the case is undoubtedly against the
National Government and there is no showing that the government
has consented to be sued in this case. It may be contended that the
present case is brought against the Public Highway Commissioner
and the Auditor General and not against the National Government.
Considering that the herein defendants are sued in their official
capacity the action is one against the National Government who
should have been made a party in this case, but, as stated before,
with its consent."
Then came this petition for certiorari to review the above decision.
The principal error assigned would impugn the holding that the case
being against the national government which was sued without its
consent should be dismissed, as it was in fact dismissed. As was
indicated in the opening paragraph of this opinion, this assignment
of error is justified. The decision of the lower court cannot stand. We
shall proceed to explain why.
1. The government is immune from suit without its consent, , Nor is it
indispensable that it be the party proceeded against. If it appears
that the action, would in fact hold it liable, the doctrine calls for
application. It follows then that even if the defendants named were
public officials, such a principle could still be an effective bar. This is
clearly so where a litigation would result in a financial responsibility
for the government, whether in the disbursements of funds or loss
of property. Under such circumstances, the liability of the official
sued is not personal. The party that could be adversely affected is
government. Hence the defense of non-suability may be interposed.
So it has been categorically set forth in Syquia v. Almeda
Lopez: "However, and this is important, where the judgment in such
a case would result not only in the recovery of possession of the
property in favor of said citizen but also in a charge against or
financial liability to the Government, then the suit should be
regarded as one against the government itself, and, consequently, it
cannot prosper or be validly entertained by the courts except with
the consent of said Government."
2. It is a different matter where the public official is made to account
in his capacity as such for acts contrary to law and injurious to the
rights of plaintiff. As was clearly set forth by Justice Zaldivar in
Director of the Bureau of Telecommunications v. Aligean: "Inasmuch
as the State authorizes only legal acts by its officers, unauthorized
acts of government officials or officers are not acts of the State, and
an action against the officials or officers by one whose rights have
been invaded or violated by such acts, for the protection of his
rights, is not a suit against the State within the rule of immunity of
the State from suit. In the same tenor, it has been said that an action
at law or suit in equity against a State officer or the director of a
State department on the ground that, while claiming to act for the
State, he violates or invades the personal and property rights of the
plaintiff, under an unconstitutional act or under an assumption of
authority which he does not have, is not a suit against the State
within the constitutional provision that the State may not be sued
without its consent."
3. It would follow then that the prayer in the amended complaint of
petitioners being in the alternative, the lower court, instead of
dismissing the same, could have passed upon the claim of plaintiffs
there, now petitioners, for the recovery of the possession of the
disputed lot, since no proceeding for eminent domain, as required
by the then Code of Civil Procedure, was instituted. However, as
noted in Alfonso v. Pasay City,  this Court speaking through Justice
Montemayor, restoration would be "neither convenient nor feasible
because it is now and has been used for road purposes."  The only
relief, in the opinion of this Court, would be for the government "to
make due compensation, ..."  It was made clear in such decision that
compensation should have been made "as far back as the date of
the taking." Does it result, therefore, that petitioners would be
absolutely remediless since recovery of possession is in effect barred
by the above decision? 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
Page 9 of 41
thought then that the doctrine of immunity from suit could still be
appropriately invoked.  the plaintiff claims the present market value thereof, the rule is that
Accordingly, the lower court decision is reversed so that the court
may proceed with the complaint and determine the compensation
to which petitioners are entitled, taking into account the ruling in
REPUBLIC OF THE PHILIPPINES vs. HONORABLE AMANTE P. PURISIMA
The jurisdictional issued raised by Solicitor General Estelito P.
Mendoza on behalf of the Republic of the Philippines in this
certiorari and prohibition proceeding arose from the failure of
respondent Judge Amante P. Purisima of the Court of First Instance
of Manila to apply the well-known and of-reiterated doctrine of the
non-suability of a State, including its offices and agencies, from suit
without its consent. it was so alleged in a motion to dismiss filed by
defendant Rice and Corn Administration in a pending civil suit in the
sala of respondent Judge for the collection of a money claim arising
from an alleged breach of contract, the plaintiff being private
respondent Yellow Ball Freight Lines, Inc.  Such a motion to dismiss
was filed on September 7, 1972. At that time, the leading case
of Mobil Philippines Exploration, Inc. v. Customs Arrastre
Service, were Justice Bengzon stressed the lack of jurisdiction of a
court to pass on the merits of a claim against any office or entity
acting as part of the machinery of the national government unless
consent be shown, had been applied in 53 other decisions.  There is
thus more than sufficient basis for an allegation of jurisdiction
infirmity against the order of respondent Judge denying the motion
to dismiss dated October 4, 1972.  What is more, the position of the
Republic has been fortified with the explicit affirmation found in this
provision of the present Constitution: "The State may not be sued
without its consent."  principles must prevail if government is to satisfy the public
The merit of the petition for certiorari and prohibition is thus
obvious.
1. There is pertinence to this excerpt from Switzerland General
Insurance Co., Ltd. v. Republic of the Philippines:"The doctrine
of non-suability recognized in this jurisdiction even prior to
the effectivity of the [1935] Constitution is a logical corollary
of the positivist concept of law which, to para-phrase
Holmes, negates the assertion of any legal right as against the
state, in itself the source of the law on which such a right
may be predicated. Nor is this all.lwphl@itç Even if such a
principle does give rise to problems, considering the vastly
expanded role of government enabling it to engage in
business pursuits to promote the general welfare, it is not
obeisance to the analytical school of thought alone that calls
for its continued applicability. Why it must continue to be so,
even if the matter be viewed sociologically, was set forth
in Providence Washington Insurance Co. v. Republic thus:
"Nonetheless, a continued adherence to the doctrine of non-
suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of
governmental efficiency and the obstacle to the performance
of its multifarious functions are far greater if such a
fundamental principle were abandoned and the availability of
judicial remedy were not thus restricted. With the well-
known propensity on the part of our people to go the court,
at the least provocation, the loss of time and energy required
to defend against law suits, in the absence of such a basic
principle that constitutes such an effective obstacle, could
PHILIPPINE NATIONAL RAILWAYS,  vs.INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT, INC.,
the above Alfonso case: "As to the value of the property, although
to determine due compensation for lands appropriated by the
Government, the basis should be the price or value at the time that
it was taken from the owner and appropriated by the Government." 
very well be imagined." It only remains to be added that
under the present Constitution which, as noted, expressly
reaffirmed such a doctrine, the following decisions had been
rendered: Del mar v. The Philippine veterans Administration;
Republic v. Villasor; Sayson v. Singson;  and Director of the
Bureau of Printing v. Francisco. 
2. Equally so, the next paragraph in the above opinion from the
Switzerland General Insurance Company decision is likewise
relevant: "Nor is injustice thereby cause private parties. They
could still proceed to seek collection of their money claims by
pursuing the statutory remedy of having the Auditor General
pass upon them subject to appeal to judicial tribunals for
final adjudication. We could thus correctly conclude as we
did in the cited Provindence Washington Insurance decision:
"Thus the doctrine of non-suability of the government
without its consent, as it has operated in practice, hardly
lends itself to the charge that it could be the fruitful parent of
injustice, considering the vast and ever-widening scope of
state activities at present being undertaken. Whatever
difficulties for private claimants may still exist, is, from an
objective appraisal of all factors, minimal. In the balancing of
interests, so unavoidable in the determination of what
weal, the verdict must be, as it has been these so many years,
for its continuing recognition as a fundamental postulate of
constitutional law." 
3. Apparently respondent Judge was misled by the terms of the
contract between the private respondent, plaintiff in his sala,
and defendant Rice and Corn Administration which,
according to him, anticipated the case of a breach of contract
within the parties and the suits that may thereafter
arise.  The consent, to be effective though, must come from
the State acting through a duly enacted statute as pointed
out by Justice Bengzon in Mobil. Thus, whatever counsel for
defendant Rice and Corn Administration agreed to had no
binding force on the government. That was clearly beyond
the scope of his authority. At any rate, Justice Sanchez, in
Ramos v. Court of Industrial Relations,  was quite categorical
as to its "not [being] possessed of a separate and distinct
corporate existence. On the contrary, by the law of its
creation, it is an office directly 'under the Office of the
President of the Philippines."
WHEREFORE, the petitioner for certiorari is granted and the
resolution of October 4, 1972 denying the motion to dismiss filed by
the Rice and Corn Administration nullified and set aside and the
petitioner for prohibition is likewise granted restraining respondent
Judge from acting on civil Case No. 79082 pending in his sala except
for the purpose of ordering its dismissal for lack of jurisdiction. The
temporary restraining order issued on February 8, 1973 by this Court
is made permanent terminating this case. Costs against Yellow Ball
Freight Lines, Inc.
Page 10 of 41
The imputation of culpa on the part of herein petitioners as a result
of the collision between its strain, bound for Manila from La Union,
with a Baliwag transit bus at the railroad crossing on the road going
to Hagonoy, Bulacan on August l0, 1974, is the subject of the
petition at bar directed against the judgment of affirmance rendered
by respondent court, through the Fourth Civil Cases Division (Sison,
Bidin (P), Veloso, JJ.), vis-a-vis the decretal portion handed down by
the court of origin in:
1. Ordering the defendants, jointly and severally to pay the
plaintiff the amount of P179,511.52 as actual damages.
2. Ordering the defendants jointly and severally to pay the
plaintiff P436,642.03 as reimbursement for the damages
paid by the plaintiff to death, injury and damage claimants.
3. Ordering the defendants jointly and severally to pay
exemplary damages in the amount of P50, 000.00 to the
plaintiff.
4. Ordering the defendants jointly and severally to pay the
plaintiff attorney's fees in the amount of P5, 000.00.
5. Ordering the defendants, jointly and severally to pay the
plaintiff interest at the legal rate on the above amounts due
the plaintiff from August 10, 1974 until fully paid.
6. Ordering the defendants to pay the cost of this suit.
7. Ordering the dismissal of the defendants' counterclaim for
lack of factual and legal basis. (p. 101, Record on Appeal; p.
103. Rollo.)
Culled from the text of the assailed disposition are the facts of the
case at bar which are hereunder adopted verbatim:
The case arose from a collision of a passenger express train
of defendant Philippine National Railways, (PNR) coming
from San Fernando, La Union and bound for Manila and a
passenger bus of Baliwag Transit, Inc. which was on its way
to Hagonoy, Bulacan, from Manila, but upon reaching the
railroad crossing at Barrio Balungao, Calumpit, Bulacan at
about 1:30 in the afternoon of August 10, 1974, got stalled
and was hit by defendant's express train causing damages to
plaintiff's bus and its passengers, eighteen (18) of whom died
and fifty-three (53) others suffered physical injuries. Plaintiff
alleging that the proximate cause of the collision was the
negligence and imprudence of defendant PNR and its
locomotive engineer, Honorio Cirbado, in operating its
passenger train in a busy intersection without any bars,
semaphores, signal lights, flagman or switchman to warn the
public of approaching train that would pass through the
crossing, filed the instant action for Damages against
defendants. The defendants, in their Answer traversed the
material allegation of the Complaint and as affirmative
defense alleged that the collision was caused by the
negligence, imprudence and lack of foresight of plaintiff's
bus driver, Romeo Hughes.
At the pre-trial conference held on June 23, 1976, the parties
agreed on a partial stipulation of facts and issues which as
amplified at the continuation of the pre-trial conference, on
July 12, 1976, are as follows:
1 That plaintiff is a duly constituted corporation
registered with the Securities and Exchange Commission
engaged in the business of transportation and operating
public utility buses for the public with lines covering
Manila, Caloocan City, Quezon City, Malabon, Rizal,
Bulacan, Pampanga and Nueva Ecija, and particularly
from Manila to Hagonoy, Bulacan and return in the
month of August, l974 passing thru the town of Calumpit
Bulacan, temporarily while the bridge at Hagonoy,
Bulacan was under construction;
2 That defendant Philippine National Railways is a purely
government owned and controlled corporation duly
registered and existing virtue of Presidential Decree No.
741, with capacity to sue and be sued, and is likewise
engaged in transporting passengers and cargoes by trains
and buses and that, it operates a train line between San
Fernando, La Union and Manila particularly Passenger
Express Train with Body No. 73, passing along the
intersection of Barrio Balungao, Calumpit, Bulacan, in
going to San Fernando, La Union from Manila and return;
3. That on August 10, 1974, at about 1:20 o'clock in the
afternoon, a Baliuag Transit Bus with Body No. 1066 and
Plate No. XS-929 PUB-Bulacan '74 was driven by its
authorized driver Romeo Hughes and PNR Train No. 73
was operated by Train Engineer Honorio Cabardo alias
Honorio Cirbado and at the railroad intersection at Barrio
Balungao, Calumpit, Bulacan, said passenger train No. 73
hit and bumped the right mid portion of the plaintiff's
passenger bus No. 1066, while the rear portion of said
bus was at the railroad track and its direction was
towards Hagonoy, Bulacan at about 1:30 o'clock in the
afternoon;
4. That at the time of the collision there was a slight
rainfall in the vicinity of the scene of the accident and
that there was at said intersection no bars, semaphores,
and signal lights that would warn the public of the
approaching train that was about to pass through the
intersection and likewise there was no warning devices
to passing trains showing that they were about to pass
an intersection in going to Manila from San Fernando, La
Union and back;
5. That on account of said collision, the Baliuag Transit
Bus with Body No. 1066 driven by Romeo Hughes was
damaged and eighteen (18) of its passengers died and
the rest who were more than fifty three (53) passengers
suffered physical injuries;
6. That after the investigation the Chief of Police of
Calumpit, Bulacan, filed a criminal case of Reckless
Imprudence Causing Multiple Homicide with Multiple
Physical Injuries and Damage to Property against Romeo
Hughes y Parfan, driver of the Baliuag Transit bus
docketed under Crim. Case No. 2392; while the train
Engineer Honorio Cabardo alias Honorio Cirbado was not
included as an accused in said case, although his train
No. 73 was the one that hit and bumped the right rear
portion of the said bus;
7. That immediately after the said accident Major
Manuel A. Macam, Chief of the Municipal Police of
Calumpit, Bulacan, together with some of his policemen
conducted an investigation of the accident;
8. That at the railroad crossing in Calumpit, Bulacan
where the accident took place there is no railroad
crossing bar, however, during the pre-war days there
was a railroad crossing bar at said intersection; that,
however, there was only one sign of railroad crossing
"Stop, Look and Listen" placed on a concrete slab and
attached to a concrete post existing at the approach of
the railroad track from the Highway going towards
Hagonoy, Bulacan and that after the said railroad track
there was a designated jeep parking area at the right
Page 11 of 41
 side in the direction from the Highway to Hagonoy
Bulacan;
9. That the train No. 73 driven by Train Engineer Honorio
Cabardo alias Honorio Cirbado stopped after passing the
railroad crossing at a distance of about 50 meters from
the said intersection after the collision on August, 1974;
10. That the expected time of arrival of said Train No. 73
in Manila was 2:41 P.M. and its departure time from San
Fernando, La Union was 9:00 A.M. and its expected
arrival at Calumpit, Bulacan was 1:41 P.M. with no stop
at Calumpit, Bulacan.
SIMPLIFICATION OF ISSUES
11. That the principal issue in the instant case is who
between the driver Romeo Hughes of Baliuag Transit,
Incorporated and the train engineer Honorio Cabardo
alias Honorio Cirbado of the Philippine National Railways
was negligent or whether or not both are negligent; that
likewise which of said companies was negligent at said
railroad intersection;
12. That another additional issue is whether the Baliuag
Transit Incorporated has exercised the diligence of a
good father of the family in the selection and supervision
of its employees
In addition, respondent court deemed it necessary to reflect the
salient findings of the case for damages as formulated by the trial
court:
Posed for resolution are the following issues: Who between
the driver Romeo Hughes of the Baliuag Transit Incorporated
and Honorio Cabardo, train Engineer of the Philippine
National Railways was negligent in the operation of their
respective vehicles, or whether or both were negligent?
Could either of the companies Baliuag Transit Incorporated
and the Philippine National Railways be held accountable for
the collision because of negligence?
The defendants presented several statements or affidavits of
alleged witnesses to the collision, specifically Exhibits 2, 3, 4,
5, 6, 11, 13, 14, 15, 16, 17, 18 and 19; the Court is at a loss as
to why the persons who gave the said statements were not
presented as witnesses during the trial of the
case, as aptly said, the statements are hearsay evidence
(Azcueta v. Cabangbang, — 45 O.G. 144); at most they be
taken as proof only of the fact that statements of said
persons were taken and that investigation was conducted of
the incident; the Court cannot consider the averments in
said statements as testimonies or evidence of truth.
Defendants endeavored to show that the proximate and
immediate cause of the collision was the negligence of the
bus driver because the driver did not make a stop before
ascending the railtrack; he did not heed the warning or
shoutings of bystanders and passengers and proceeded in
traversing the railtrack at a fast speed; that the bus driver
was in fact violating Section 42(d) of R.A. 4136, otherwise
known as the Land Transportation and Traffic Code for
failure to "stop, look, and listen" at the intersection, before
crossing the railtrack; that it is incumbent upon him to take
the necessary precautions at the intersection because the
railroad track is in itself a warning; and the bus driver
ignored such a warning and must assume the responsibility
for the result of the motion taken by him (U.S. v. Mananquil,
42 Phil. 90)
Except the testimony of the train engineer Cabardo, there is
no admissible evidence to show that indeed, the bus driver
did not take the necessary precaution in traversing the track.
Note that he first noticed the bus when it was only 15
meters away from him; he could not have possibly noticed
the position of the bus before negotiating the track.
On the other hand, it was shown by plaintiff that the bus
driver Romeo Hughes took the necessary precautions in
traversing the track.
The bus driver had stopped before traversing the track and
in fact asked the conductor to alight and made a "Look and
Listen" before proceeding; the conductor had done just that
and made a signal to proceed when he did not see any
oncoming train. (TSN, October 2l, 1976, p. 4); plaintiff's bus
drivers and conductors are enjoined to observe such a
precautionary measure in seminars conducted by the
company.
The evidence disclosed that the train was running fast
because by his own testimony, the train engineer had
testified that before reaching the station of Calumpit the
terrain was downgrade and levelled only after passing the
Calumpit bridge ; the tendency of the train, coming from a
high point is to accelerate as the gravity will necessarily
make it so, especially when it is pulling seven coaches loaded
with goods and passengers.
Moreover, upon impact, the bus loaded with passengers was
dragged and thrown into a ditch several meters away; the
train had stopped only after the engine portion was about
190 meters away from the fallen bus; several passengers
were injured and at least 20 died; such facts conclusively
indicate that the train was speeding, because if it were
moving at moderate speed, it would not run some 190
meters after impact and throw the bus at quite a distance
especially so when it is claimed that the train's emergency
brakes were applied.
Further, the train was an express train; its departure was
9:00 A.M. at San Fernando, La Union and expected in Manila
at 2:41 P.M.; the collision occurred at 1:30 P.M. or 4 1/2
hours after it left La Union; surely, the train could have not
negotiated such a distance in so short a time if it were not
running at fast speed.
It may be argued that a railroad is not subject to the same
restrictions to the speed of its train as a motorists (Mckelvey
v. Delaware L. and W.R. Co. 253 App. D.V. 109, 300 NYS 1263
); but it does not follow that a train will be permitted to run
fast under all conditions at any rate of speed it may choose.
It must regulate its speed with proper regard for the safety
of human life and property (Johnson v. Southern Pacific
Company (Cal. App. 288 p. 81), considering the surrounding
circumstances particularly the nature of the locality
(Atchinson, T. and SFR Co. v. Nicks (Arts) 165 p. 2d 167).
Cabardo's route included the passage over the said
intersection; he could have noticed that it is a very busy
intersection because the crossroad leads to the Calumpit
Poblacion as well as to the neighboring town of Hagonoy;
there was a parking lot by the side of the track whereat
passengers board jeepneys for the neighboring barrios and
towns; stalls abound in the vicinity and bystanders
congregate nearby. A prudent train operator must, under
the circumstances, slacken his speed almost for the
protection of motorists and pedestrians, not only when a
collision is inevitable but even if no hindrance is apparent on
the way;
Page 12 of 41
Moreover, there was an intermittent rain at the time of the
collision (see stipulation of facts and photographs); the
condition of the weather was such that even if for this
reason alone, the train engineer should have foreseen that
danger of collision lurked because of poor visibility of
slippery road; he should have taken extra precaution by
considerably slackening its speed. This he failed to do even if
the nature of his job required him to observe care exercised
by a prudent man.
Contributory negligence may not be ascribed to the bus
driver; it was evident that he had taken the necessary
precautions before passing over the railway track; if the bus
was hit, it was for reasons beyond the control of the bus
driver because he had no place to go; there were vehicles to
his left which prevented him in swerving towards that
direction; his bus stalled in view of the obstructions in his
front where a sand and gravel truck stopped because of a
jeep maneuvering into a garage up front. All the wheels at
the bus have already passed the rail portion of the track and
only the rear portion of the bus' body occupied or covered
the railtrack. This was evident because the part of the bus hit
by the train was the rear since the bus fell on a nearby ditch.
Otherwise, if the bus was really hit in mid-body, the bus
could have been halved into two because of the force of the
impact.
The stipulation of facts between the parties show that there
was no crossing bar at the railroad intersection at Calumpit,
Bulacan at the time of collision (par. 8, Stipulation of Facts);
the plaintiff contended and the defendants did not deny,
that there were no signal lights, semaphores, flagman or
switchman thereat; the absence of such devices, the plaintiff
argues constitute negligence on the part of the Philippine
National Railways.
A railroad is not required to have a gate (crossing bar) or a
flagman, or to maintain signals at every intersection; only at
such places reasonably necessary; what is considered
reasonably necessary will depend on the amount of travel
upon the road, the frequency with which trains pass over it
and the view which could be obtained of trains as they
approach the crossing, and other conditions (Pari v. Los
Angeles, Ry. Corporation (Cal A2d) 128 p2d 563; Swdyk v.
Indiana Harbor Belt R. Co. 148 F. 2d 795, and others).
As has been amply discussed, the crossroad at the
intersection at Calumpit is one which is a busy thoroughfare;
it leads to the Poblacion at Calumpit and other barrios as
well as the town of Hagonoy; the vicinity is utilized as a
parking and waiting area for passengers of jeepneys that ply
between the barrios, clearly, the flow of vehicular traffic
thereat is huge. It can be said also that, since there is no
other railtrack going North except that one passing at
Calumpit, trains pass over it frequently;
A portion of the intersection is being used as a parking area
with stalls and other obstructions present making it difficult,
if not impossible, to see approaching trains
The failure of the Philippine National Railways to put a cross
bar, or signal light, flagman or switchman, or semaphores is
evidence of negligence and disregard of the safety of the
public, even if there is no law or ordinance requiring it,
because public safety demands that said devices or
equipments be installed, in the light of aforesaid
jurisprudence. In the opinion of this Court the X sign or the
presence of "STOP, LOOK, LISTEN" warnings would not be
sufficient protection of the motoring public as well as the
pedestrians, in the said intersection;
The parties likewise have stipulated that during the pre-war
days, there was a railroad crossing bar at the said
intersection (Par-8, Stipulation of Facts). It appears that it
was a self imposed requirement which has been abandoned.
In a case it was held that where the use of a flagman was self
imposed, the abandonment thereof may constitute
negligence. (Fleming v. Missouri and A. Ry. Co. 198 ARDC
290, 128 S.W. 2d 286 and others; cited in Sec. 1082
SCRWARTZ, Vol. 2). Similarly, the abandonment by the PNR
of the use of the crossing bar at the intersection at Calumpit
constitutes negligence, as its installation has become
imperative, because of the prevailing circumstances in the
place.
A railroad company has been adjudged guilty of negligence
and civilly liable for damages when it failed to install
semaphores, or where it does not see to it that its flagman
or switchman comply with their duties faithfully, to motorist
injured by a crossing train as long as he had crossed without
negligence on his part (Lilius vs. MRR, 39 Phil. 758).
On the aspect of whether the Philippine National Railways enjoys
immunity from suit, respondent court initially noted that an
exculpation of this nature that was raised for the first time on appeal
may no longer be entertained in view of the proscription under
Section 2, Rule 9 of the Revised Rules of Court, apart from the fact
that the lawyer of petitioner agreed to stipulate inter alia that the
railroad company had capacity to sue and be sued. This being so,
respondent court continued, PNR was perforce estopped from
disavowing the prejudicial repercussion of an admission in judicio.
Even as the laws governing the creation and rehabilitation of the
PNR were entirely mute on its power to sue and be sued,
respondent court nonetheless opined that such prerogative was
implied from the general power to transact business pertinent or
indispensable to the attainment of the goals of the railroad company
under Section 4 of Republic Act No. 4156 as amended by Republic
Act No. 6366:
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.
in conjunction with Section 2(b) of Presidential Decree No. 741:
(b) To own or operate railroad transways, bus lines, trucklines,
subways, and other kinds of land transportation, vessels, and
pipelines, for the purpose of transporting for consideration,
passengers, mail and property between any points in the
Philippines;
Thus, respondent court utilized the doctrine of implied powers
announced in National Airports Corporation vs. Teodoro, Sr. and
Philippine Airlines, Inc. (91 Phil. 203 [1952]), to the effect that the
power to sue and be sued is implicit from the faculty to transact
private business. At any rate, respondent court characterized the
railroad company as a private entity created not to discharge a
governmental function but, among other things, to operate a
transport service which is essentially a business concern, and thus
barred from invoking immunity from suit.
In brushing aside petitioners' asseveration that the bus driver
outraced the train at the crossing, respondent court observed that
the bus was hit by the train at its rear portion then protruding over
Page 13 of 41
the tracks as the bus could not move because another truck at its
front was equally immobile due to a jeep maneuvering into a nearby
parking area. Under these tight conditions, respondent court blamed
the train engineer who admitted to have seen the maneuvering jeep
at a distance (TSN, July 28, 1976, page 18) and had the last clear
chance to apply the brakes, knowing fully well that the vehicles
following the jeep could not move away from the path of the train.
Apart from these considerations, it was perceived below that the
train was running fast during the entire trip since the train stopped
190 meters from the point of impact and arrived at Calumpit,
Bulacan earlier than its expected time of arrival thereat.
Moreover, respondent court agreed with the conclusion reached by
the trial court that the absence of a crossing bar, signal light,
flagman or switchman to warn the public of an approaching train
constitutes negligence per the pronouncement of this Court in Lilius
vs. Manila Railroad Company  (59 Phil 758 [1934]).
Concerning the exercise of diligence normally expected of an
employer in the selection and supervision of its employees,
respondent court expressed the view that PNR was remiss on this
score since it allowed Honorio Cabardo, who finished only primary
education and became an engineer only through sheer experience,
to operate the locomotive, not to mention the fact that such plea in
avoidance was not asserted in the answer and was thus belatedly
raised on appeal.
Petitioner moved to reconsider, but respondent court was far from
persuaded. Hence, the petition before Us which, in essence,
incorporates similar disputations anent PNR's immunity from suit
and the attempt to toss the burden of negligence from the train
engineer to the bus driver of herein private respondent.
The bone of contention for exculpation is premised on the familiar
maxim in political law that the State, by virtue of its sovereign nature
and as reaffirmed by constitutional precept, is insulated from suits
without its consent (Article 16, Section 3, 1987 Constitution).
However, equally conceded is the legal proposition that the
acquiescence of the State to be sued can be manifested expressly
through a general or special law, or indicated implicitly, as when the
State commences litigation for the purpose of asserting an
affirmative relief or when it enters into a contract (Cruz,Philippine
Political Law, 1991 edition, page 33; Sinco, Philippine Political Law,
Eleventh Edition, 1962, page 34). When the State participates in a
covenant, it is deemed to have descended from its superior position
to the level of an ordinary citizen and thus virtually opens itself to
judicial process. Of course, We realize that this Court qualified this
form of consent only to those contracts concluded in a proprietary
capacity and therefore immunity will attach for those contracts
entered into in a governmental capacity, following the ruling in the
1985 case of United States of America vs. Ruiz (136 SCRA 487 [1985];
cited by Cruz, supra at pages 36-37). But the restrictive
interpretation laid down therein is of no practical worth nor can it
give rise to herein petitioner PNR's exoneration since the case
of Malong vs. Philippine National Railways (138 SCRA 63, [1985]);
3 Padilla, 1987 Constitution with Comments and Cases, 1991 edition,
page 644), decided three months after Ruiz  was promulgated, was
categorical enough to specify that the Philippine National Railways
"is not performing any governmental function" (supra, at page 68).
In Malong, Justice Aquino, speaking for the Court en banc, declared:
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:
Sec. 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 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. 3d 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).
To the pivotal issue of whether the State acted in a sovereign
capacity when it organized the PNR for the purpose of engaging in
transportation, Malong  continued to 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 noncorporate, 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 nongovernmental
capacity are not suits against the State (81 C.J.S. 1319).
Page 14 of 41
Suits against State agencies with relation to matters in
which they have assumed to act in a private or
nongovernmental 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.
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 Highways
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 18l, 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).
We come now to the question of whether respondent court properly
agreed with the trial court in imputing negligence on the part of the
train engineer and his employer.
It was demonstrated beyond cavil in the course of the pre-trial
hearings held for the purpose of stipulating on crucial facts that the
bus was hit on the rear portion thereof after it crossed the railroad
tracks. Then, too the train engineer was frank enough to say that he
saw the jeep maneuvering into a parking area near the crossing
which caused the obstruction in the flow of traffic such that the
gravel and sand truck including the bus of herein private respondent
were not able to move forward or to take the opposite lane due to
other vehicles. The unmindful demeanor of the train engineer in
surging forward despite the obstruction before him is definitely
anathema to the conduct of a prudent person placed under the
same set of perceived danger. Indeed:
When it is apparent, or when in the exercise of reasonable
diligence commensurate with the surroundings it should be
apparent, to the company that a person on its track or to get
on its track is unaware of his danger or cannot get out of the
way, it becomes the duty of the company to use such
precautions, by warnings, applying brakes, or otherwise, as
may be reasonably necessary to avoid injury to him. (65 Am.
Jur., Second Edition. p. 649).
Likewise, it was established that the weather condition was
characterized with intermittent rain which should have prompted
the train engineer to exercise extra precaution. Also, the train
reached Calumpit, Bulacan ahead of scheduled arrival thereat,
indicating that the train was travelling more than the normal speed
of 30 kilometers per hour. If the train were really running at 30
kilometers per hour when it was approaching the intersection, it
would probably not have travelled 190 meters more from the place
of the accident (page 10, Brief for Petitioners). All of these factors,
taken collectively, engendered the concrete and yes, correct
conclusion that the train engineer was negligent who, moreover,
despite the last opportunity within his hands vis-a-vis the weather
condition including the presence of people near the intersection,
could have obviated the impending collision had he slackened his
speed and applied the brakes (Picart vs. Smith, 37 Phil. 809
[1918]).Withal, these considerations were addressed to the trial
judge who, unlike appellate magistrates, was in a better position to
assign weight on factual questions. Having resolved the question of
negligence between the train engineer and the bus driver after
collating the mass of evidence, the conclusion reached thereafter
thus commands great respect especially so in this case where
Page 15 of 41
respondent court gave its nod of approval to the findings of the
court of origin (Co vs. Court of Appeals, 193 SCRA 198; 206
[1991]); Amigo vs. Teves, 50 O.G. 5799; Regalado, Remedial Law
Compendium, Fifth edition, page 353).
What exacerbates against petitioners' contention is the authority in
this jurisdiction to the effect that the failure of a railroad company to
install a semaphore or at the very least, to post a flagman or
watchman to warn the public of the passing train amounts to
negligence (Lilius vs. Manila Railroad Company, 59 Phil. 758 [1934]).
WHEREFORE, the petition is hereby DISMISSED and the decision of
respondent court AFFIRMED.
Page 16 of 41
 G.R. No. 159402               February 23, 2011
AIR TRANSPORTATION OFFICE,  vs. SPOUSES DAVID* ELISEA RAMOS,
Spouses David and Elisea Ramos (respondents) discovered that a
portion of their land registered under Transfer Certificate of Title No.
T-58894 of the Baguio City land records with an area of 985 square
meters, more or less, was being used as part of the runway and
running shoulder of the Loakan Airport being operated by petitioner
Air Transportation Office (ATO). On August 11, 1995, the
respondents agreed after negotiations to convey the affected
portion by deed of sale to the ATO in consideration of the amount of
₱778,150.00. However, the ATO failed to pay despite repeated
verbal and written demands.
Thus, on April 29, 1998, the respondents filed an action for collection
against the ATO and some of its officials in the RTC (docketed as Civil
Case No. 4017-R and entitled Spouses David and Elisea Ramos v. Air
Transportation Office, Capt. Panfilo Villaruel, Gen. Carlos Tanega,
and Mr. Cesar de Jesus).
In their answer, the ATO and its co-defendants invoked as an
affirmative defense the issuance of Proclamation No. 1358, whereby
President Marcos had reserved certain parcels of land that included
the respondents’ affected portion for use of the Loakan Airport.
They asserted that the RTC had no jurisdiction to entertain the
action without the State’s consent considering that the deed of sale
had been entered into in the performance of governmental
functions.
On November 10, 1998, the RTC denied the ATO’s motion for a
preliminary hearing of the affirmative defense.
After the RTC likewise denied the ATO’s motion for reconsideration
on December 10, 1998, the ATO commenced a special civil action for
certiorari in the CA to assail the RTC’s orders. The CA dismissed the
petition for certiorari, however, upon its finding that the assailed
orders were not tainted with grave abuse of discretion.
Subsequently, February 21, 2001, the RTC rendered its decision on
the merits, disposing:
WHEREFORE, the judgment is rendered ORDERING the defendant Air
Transportation Office to pay the plaintiffs DAVID and ELISEA RAMOS
the following: (1) The amount of ₱778,150.00 being the value of the
parcel of land appropriated by the defendant ATO as embodied in
the Deed of Sale, plus an annual interest of 12% from August 11,
1995, the date of the Deed of Sale until fully paid; (2) The amount of
₱150,000.00 by way of moral damages and ₱150,000.00 as
exemplary damages; (3) the amount of ₱50,000.00 by way of
attorney’s fees plus ₱15,000.00 representing the 10, more or less,
court appearances of plaintiff’s counsel; (4) The costs of this suit.
SO ORDERED.
In due course, the ATO appealed to the CA, which affirmed the RTC’s
decision on May 14, 2003, viz:
IN VIEW OF ALL THE FOREGOING, the appealed decision is
hereby AFFIRMED, with MODIFICATION that the awarded cost
therein is deleted, while that of moral and exemplary damages is
reduced to ₱30,000.00 each, and attorney’s fees is lowered to
₱10,000.00. No cost. SO ORDERED.
Hence, this appeal by petition for review on certiorari.
Issue
The only issue presented for resolution is whether the ATO could be
sued without the State’s consent.
Ruling
The petition for review has no merit.
The immunity of the State from suit, known also as the doctrine of
sovereign immunity or non-suability of the State, is expressly
provided in Article XVI of the 1987 Constitution, viz:
Section 3. The State may not be sued without its consent.
The immunity from suit is based on the political truism that the
State, as a sovereign, can do no wrong. Moreover, as the eminent
Justice Holmes said in Kawananakoa v. Polyblank:
The territory [of Hawaii], of course, could waive its exemption (Smith
v. Reeves, 178 US 436, 44 L ed 1140, 20 Sup. Ct. Rep. 919), and it
took no objection to the proceedings in the cases cited if it could
have done so. xxx But in the case at bar it did object, and the
question raised is whether the plaintiffs were bound to yield. Some
doubts have been expressed as to the source of the immunity of a
sovereign power from suit without its own permission, but the
answer has been public property since before the days of Hobbes.
Leviathan, chap. 26, 2. 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. "Car on
peut bien recevoir loy d'autruy, mais il est impossible par nature de
se donner loy." Bodin, Republique, 1, chap. 8, ed. 1629, p. 132; Sir
John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur
necessitative. Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol.
51b, ed. 1539, fol. 61.
Practical considerations dictate the establishment of an immunity
from suit in favor of the State. Otherwise, and the State is suable at
the instance of every other individual, government service may be
severely obstructed and public safety endangered because of the
number of suits that the State has to defend against. Several
justifications have been offered to support the adoption of the
doctrine in the Philippines, but that offered in Providence
Washington Insurance Co. v. Republic of the Philippine is "the most
acceptable explanation," according to Father Bernas, a recognized
commentator on Constitutional Law, to wit:
[A] continued adherence to the doctrine of non-suability is not to be
deplored for as against the inconvenience that may be caused
private parties, the loss of governmental efficiency and the obstacle
to the performance of its multifarious functions are far greater if
such a fundamental principle were abandoned and the availability of
judicial remedy were not thus restricted. With the well-known
propensity on the part of our people to go to court, at the least
provocation, the loss of time and energy required to defend against
law suits, in the absence of such a basic principle that constitutes
such an effective obstacle, could very well be imagined.
An unincorporated government agency without any separate
juridical personality of its own enjoys immunity from suit because it
is invested with an inherent power of sovereignty. Accordingly, a
claim for damages against the agency cannot prosper; otherwise,
the doctrine of sovereign immunity is violated. However, the need to
distinguish between an unincorporated government agency
performing governmental function and one performing proprietary
functions has arisen. The immunity has been upheld in favor of the
former because its function is governmental or incidental to such
function; it has not been upheld in favor of the latter whose function
was not in pursuit of a necessary function of government but was
essentially a business.
Should the doctrine of sovereignty immunity or non-suability of the
State be extended to the ATO?
In its challenged decision, the CA answered in the negative, holding:
On the first assignment of error, appellants seek to impress upon Us
that the subject contract of sale partook of a governmental
character. Apropos, the lower court erred in applying the High
Court’s ruling in National Airports Corporation vs. Teodoro (91 Phil.
Page 17 of 41
203  [1952]), arguing that in Teodoro, the matter involved the
collection of landing and parking fees which is a proprietary
function, while the case at bar involves the maintenance and
operation of aircraft and air navigational facilities and services which
are governmental functions.
We are not persuaded.
Contrary to appellants’ conclusions, it was not merely the collection
of landing and parking fees which was declared as proprietary in
nature by the High Court in Teodoro, but management and
maintenance of airport operations as a whole, as well. Thus, in the
much later case of Civil Aeronautics Administration vs. Court of
Appeals (167 SCRA 28 [1988]), the Supreme Court, reiterating the
pronouncements laid down in Teodoro, declared that the CAA
(predecessor of ATO) is an agency not immune from suit, it being
engaged in functions pertaining to a private entity. It went on to
explain in this wise:
xxx
The Civil Aeronautics Administration comes under the category of a
private entity. Although not a body corporate it was created, like the
National Airports Corporation, not to maintain a necessary function
of government, but to run what is essentially a business, even if
revenues be not its prime objective but rather the promotion of
travel and the convenience of the travelling public. It is engaged in
an enterprise which, far from being the exclusive prerogative of
state, may, more than the construction of public roads, be
undertaken by private concerns. [National Airports Corp. v.
Teodoro,  supra, p. 207.]
xxx
True, the law prevailing in 1952 when the Teodoro case was
promulgated was Exec. Order 365 (Reorganizing the Civil
Aeronautics Administration and Abolishing the National Airports
Corporation). Republic Act No. 776 (Civil Aeronautics Act of the
Philippines), subsequently enacted on June 20, 1952, did not alter
the character of the CAA’s objectives under Exec. Order 365. The
pertinent provisions cited in the Teodoro case, particularly Secs. 3
and 4 of Exec. Order 365, which led the Court to consider the CAA in
the category of a private entity were retained substantially in
Republic Act 776, Sec. 32(24) and (25). Said Act provides:
Sec. 32. Powers and Duties of the Administrator. – Subject to the
general control and supervision of the Department Head, the
Administrator shall have among others, the following powers and
duties:
xxx
(24) To administer, operate, manage, control, maintain and develop
the Manila International Airport and all government-owned
aerodromes except those controlled or operated by the Armed
Forces of the Philippines including such powers and duties as: (a) to
plan, design, construct, equip, expand, improve, repair or alter
aerodromes or such structures, improvement or air navigation
facilities; (b) to enter into, make and execute contracts of any kind
with any person, firm, or public or private corporation or entity; …
(25) To determine, fix, impose, collect and receive landing fees,
parking space fees, royalties on sales or deliveries, direct or indirect,
to any aircraft for its use of aviation gasoline, oil and lubricants,
spare parts, accessories and supplies, tools, other royalties, fees or
rentals for the use of any of the property under its management and
control.
xxx
From the foregoing, it can be seen that the CAA is tasked with
private or non-governmental functions which operate to remove it
from the purview of the rule on State immunity from suit. For the
correct rule as set forth in the Teodorocase states:
xxx
Not all government entities, whether corporate or non-corporate,
are immune from suits. Immunity from suits is determined by the
character of the objects for which the entity was organized. The rule
is thus stated in Corpus Juris:
Suits against State agencies with relation to matters in which they
have assumed to act in 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. The
latter is true, although the state may own 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 implication consents to suits against the corporation. (59 C.J.,
313) [National Airports Corporation v. Teodoro, supra, pp. 206-207;
Italics supplied.]
This doctrine has been reaffirmed in the recent case of Malong v.
Philippine National Railways [G.R. No. L-49930, August 7, 1985, 138
SCRA 63], where it was held that the Philippine National Railways,
although owned and operated by the government, was not immune
from suit as it does not exercise sovereign but purely proprietary
and business functions. Accordingly, as the CAA was created to
undertake the management of airport operations which primarily
involve proprietary functions, it cannot avail of the immunity from
suit accorded to government agencies performing strictly
governmental functions.
In our view, the CA thereby correctly appreciated the juridical
character of the ATO as an agency of the Government not
performing a purely governmental or sovereign function, but was
instead involved in the management and maintenance of the Loakan
Airport, an activity that was not the exclusive prerogative of the
State in its sovereign capacity. Hence, the ATO had no claim to the
State’s immunity from suit. We uphold the CA’s aforequoted
holding.
We further observe the doctrine of sovereign immunity cannot be
successfully invoked to defeat a valid claim for compensation arising
from the taking without just compensation and without the proper
expropriation proceedings being first resorted to of the plaintiffs’
property. Thus, in De los Santos v. Intermediate Appellate Court, the
trial court’s dismissal based on the doctrine of non-suability of the
State of two cases (one of which was for damages) filed by owners
of property where a road 9 meters wide and 128.70 meters long
occupying a total area of 1,165 square meters and an artificial creek
23.20 meters wide and 128.69 meters long occupying an area of
2,906 square meters had been constructed by the provincial
engineer of Rizal and a private contractor without the owners’
knowledge and consent was reversed and the cases remanded for
trial on the merits. The Supreme Court ruled that the doctrine of
sovereign immunity was not an instrument for perpetrating any
injustice on a citizen. In exercising the right of eminent domain, the
Court explained, the State exercised its jus imperii, as distinguished
from its proprietary rights, or jus gestionis; yet, even in that area,
where private property had been taken in expropriation without just
compensation being paid, the defense of immunity from suit could
not be set up by the State against an action for payment by the
owners.
Lastly, the issue of whether or not the ATO could be sued without
the State’s consent has been rendered moot by the passage of
Republic Act No. 9497, otherwise known as the Civil Aviation
Authority Act of 2008.
R.A. No. 9497 abolished the ATO, to wit:
Page 18 of 41
Section 4. Creation of the Authority. – There is hereby created an
independent regulatory body with quasi-judicial and quasi-legislative
powers and possessing corporate attributes to be known as the Civil
Aviation Authority of the Philippines (CAAP), herein after referred to
as the "Authority" attached to the Department of Transportation
and Communications (DOTC) for the purpose of policy
coordination. For this purpose, the existing Air transportation
Office created under the provisions of Republic Act No. 776, as
amended is hereby abolished.
xxx
Under its Transitory Provisions, R.A. No. 9497 established in place of
the ATO the Civil Aviation Authority of the Philippines (CAAP), which
thereby assumed all of the ATO’s powers, duties and rights, assets,
real and personal properties, funds, and revenues, viz:
CHAPTER XII
TRANSITORTY PROVISIONS
Section 85. Abolition of the Air Transportation Office. – The Air
Transportation Office (ATO) created under Republic Act No. 776, a
sectoral office of the Department of Transportation and
Communications (DOTC), is hereby abolished.1avvphi1
G.R. No. 171182               August 23, 2012
UNIVERSITY OF THE PHILIPPINES vs. HON. AGUSTIN S. DIZON
Trial judges should not immediately issue writs of execution or
garnishment against the Government or any of its subdivisions,
agencies and instrumentalities to enforce money judgments.They
should bear in mind that the primary jurisdiction to examine, audit
and settle all claims of any sort due from the Government or any of
its subdivisions, agencies and instrumentalities pertains to the
Commission on Audit (COA) pursuant to Presidential Decree No.
1445 (Government Auditing Code of the Philippines).
The Case
On appeal by the University of the Philippines and its then
incumbent officials (collectively, the UP) is the decision promulgated
on September 16, 2005, whereby the Court of Appeals (CA) upheld
the order of the Regional Trial Court (RTC), Branch 80, in Quezon City
that directed the garnishment of public funds amounting to ₱
16,370,191.74 belonging to the UP to satisfy the writ of execution
issued to enforce the already final and executory judgment against
the UP.
Antecedents
On August 30, 1990, the UP, through its then President Jose V.
Abueva, entered into a General Construction Agreement with
respondent Stern Builders Corporation (Stern Builders), represented
by its President and General Manager Servillano dela Cruz, for the
construction of the extension building and the renovation of the
College of Arts and Sciences Building in the campus of the University
of the Philippines in Los Baños (UPLB).
In the course of the implementation of the contract, Stern Builders
submitted three progress billings corresponding to the work
accomplished, but the UP paid only two of the billings. The third
billing worth ₱ 273,729.47 was not paid due to its disallowance by
the Commission on Audit (COA). Despite the lifting of the
disallowance, the UP failed to pay the billing, prompting Stern
Builders and dela Cruz to sue the UP and its co-respondent officials
to collect the unpaid billing and to recover various damages. The
suit, entitled Stern Builders Corporation and Servillano R. Dela Cruz
v. University of the Philippines Systems, Jose V. Abueva, Raul P. de
Guzman, Ruben P. Aspiras, Emmanuel P. Bello, Wilfredo P. David,
Casiano S. Abrigo, and Josefina R. Licuanan, was docketed as Civil
Case No. Q-93-14971 of the Regional Trial Court in Quezon City
(RTC).
All powers, duties and rights vested by law and exercised by the
ATO is hereby transferred to the Authority.
All assets, real and personal properties, funds and revenues owned
by or vested in the different offices of the ATO are transferred to
the Authority. All contracts, records and documents relating to the
operations of the abolished agency and its offices and branches are
likewise transferred to the Authority. Any real property owned by
the national government or government-owned corporation or
authority which is being used and utilized as office or facility by the
ATO shall be transferred and titled in favor of the Authority.
Section 23 of R.A. No. 9497 enumerates the corporate powers
vested in the CAAP, including the power to sue and be sued, to enter
into contracts of every class, kind and description, to construct,
acquire, own, hold, operate, maintain, administer and lease personal
and real properties, and to settle, under such terms and conditions
most advantageous to it, any claim by or against it.
With the CAAP having legally succeeded the ATO pursuant to R.A.
No. 9497, the obligations that the ATO had incurred by virtue of the
deed of sale with the Ramos spouses might now be enforced against
After trial, on November 28, 2001, the RTC rendered its decision in
favor of the plaintiffs, viz:
Wherefore, in the light of the foregoing, judgment is hereby
rendered in favor of the plaintiff and against the defendants
ordering the latter to pay plaintiff, jointly and severally, the
following, to wit:
1. ₱ 503,462.74 amount of the third billing, additional
accomplished work and retention money
2. ₱ 5,716,729.00 in actual damages
3. ₱ 10,000,000.00 in moral damages
4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as
attorney’s fees; and
5. Costs of suit. SO ORDERED.
Following the RTC’s denial of its motion for reconsideration on May
7, 2002, the UP filed a notice of appeal on June 3, 2002. Stern
Builders and dela Cruz opposed the notice of appeal on the ground
of its filing being belated, and moved for the execution of the
decision. The UP countered that the notice of appeal was filed within
the reglementary period because the UP’s Office of Legal Affairs
(OLS) in Diliman, Quezon City received the order of denial only on
May 31, 2002. On September 26, 2002, the RTC denied due course
to the notice of appeal for having been filed out of time and granted
the private respondents’ motion for execution.
The RTC issued the writ of execution on October 4, 2002, and the
sheriff of the RTC served the writ of execution and notice of demand
upon the UP, through its counsel, on October 9, 2002. The UP filed
an urgent motion to reconsider the order dated September 26,
2002, to quash the writ of execution dated October 4, 2002, and to
restrain the proceedings. However, the RTC denied the urgent
motion on April 1, 2003.
On June 24, 2003, the UP assailed the denial of due course to its
appeal through a petition for certiorari in the Court of Appeals (CA),
docketed as CA-G.R. No. 77395.
On February 24, 2004, the CA dismissed the petition
for certiorari upon finding that the UP’s notice of appeal had been
filed late, stating:
Records clearly show that petitioners received a copy of the Decision
dated November 28, 2001 and January 7, 2002, thus, they had until
January 22, 2002 within which to file their appeal. On January 16,
Page 19 of 41
2002 or after the lapse of nine (9) days, petitioners through their
counsel Atty. Nolasco filed a Motion for Reconsideration of the
aforesaid decision, hence, pursuant to the rules, petitioners still had
six (6) remaining days to file their appeal. As admitted by the
petitioners in their petition (Rollo, p. 25), Atty. Nolasco received a
copy of the Order denying their motion for reconsideration on May
17, 2002, thus, petitioners still has until May 23, 2002 (the remaining
six (6) days) within which to file their appeal. Obviously, petitioners
were not able to file their Notice of Appeal on May 23, 2002 as it
was only filed on June 3, 2002.
In view of the said circumstances, We are of the belief and so holds
that the Notice of Appeal filed by the petitioners was really filed out
of time, the same having been filed seventeen (17) days late of the
reglementary period. By reason of which, the decision dated
November 28, 2001 had already become final and executory.
"Settled is the rule that the perfection of an appeal in the manner
and within the period permitted by law is not only mandatory but
jurisdictional, and failure to perfect that appeal renders the
challenged judgment final and executory. This is not an empty
procedural rule but is grounded on fundamental considerations of
public policy and sound practice." (Ram’s Studio and Photographic
Equipment, Inc. vs. Court of Appeals, 346 SCRA 691, 696). Indeed,
Atty. Nolasco received the order of denial of the Motion for
Reconsideration on May 17, 2002 but filed a Notice of Appeal only
on June 3, 3003. As such, the decision of the lower court ipso
facto became final when no appeal was perfected after the lapse of
the reglementary period. This procedural caveat cannot be trifled
with, not even by the High Court.
The UP sought a reconsideration, but the CA denied the UP’s motion
for reconsideration on April 19, 2004.
On May 11, 2004, the UP appealed to the Court by petition for
review on certiorari (G.R. No. 163501).
On June 23, 2004, the Court denied the petition for review. The UP
moved for the reconsideration of the denial of its petition for review
on August 29, 2004, but the Court denied the motion on October 6,
2004 The denial became final and executory on November 12, 2004
In the meanwhile that the UP was exhausting the available remedies
to overturn the denial of due course to the appeal and the issuance
of the writ of execution, Stern Builders and dela Cruz filed in the RTC
their motions for execution despite their previous motion having
already been granted and despite the writ of execution having
already issued. On June 11, 2003, the RTC granted another motion
for execution filed on May 9, 2003 (although the RTC had already
issued the writ of execution on October 4, 2002).
On June 23, 2003 and July 25, 2003, respectively, the sheriff served
notices of garnishment on the UP’s depository banks, namely: Land
Bank of the Philippines (Buendia Branch) and the Development Bank
of the Philippines (DBP), Commonwealth Branch.  The UP assailed the
garnishment through an urgent motion to quash the notices of
garnishment and a motion to quash the writ of execution dated May
9, 2003.
On their part, Stern Builders and dela Cruz filed their ex parte
motion for issuance of a release order.
On October 14, 2003, the RTC denied the UP’s urgent motion to
quash, and granted Stern Builders and dela Cruz’s ex parte motion
for issuance of a release order.
The UP moved for the reconsideration of the order of October 14,
2003, but the RTC denied the motion on November 7, 2003.
On January 12, 2004, Stern Builders and dela Cruz again sought the
release of the garnished funds. Despite the UP’s opposition, the RTC
granted the motion to release the garnished funds on March 16,
2004. On April 20, 2004, however, the RTC held in abeyance the
enforcement of the writs of execution issued on October 4, 2002
and June 3, 2003 and all the ensuing notices of garnishment, citing
Section 4, Rule 52, Rules of Court, which provided that the pendency
of a timely motion for reconsideration stayed the execution of the
judgment.
On December 21, 2004, the RTC, through respondent Judge Agustin
S. Dizon, authorized the release of the garnished funds of the UP, to
wit:
WHEREFORE, premises considered, there being no more legal
impediment for the release of the garnished amount in satisfaction
of the judgment award in the instant case, let the amount garnished
be immediately released by the Development Bank of the
Philippines, Commonwealth Branch, Quezon City in favor of the
plaintiff. SO ORDERED.
The UP was served on January 3, 2005 with the order of December
21, 2004 directing DBP to release the garnished funds.
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP
in direct contempt of court for its non-compliance with the order of
release.
Thereupon, on January 10, 2005, the UP brought a petition
for certiorari in the CA to challenge the jurisdiction of the RTC in
issuing the order of December 21, 2004 (CA-G.R. CV No. 88125).
Aside from raising the denial of due process, the UP averred that the
RTC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in ruling that there was no longer any legal
impediment to the release of the garnished funds. The UP argued
that government funds and properties could not be seized by virtue
of writs of execution or garnishment, as held in Department of
Agriculture v. National Labor Relations Commission, and citing
Section 84 of Presidential Decree No. 1445 to the effect that
"revenue funds shall not be paid out of any public treasury or
depository except in pursuance of an appropriation law or other
specific statutory authority;" and that the order of garnishment
clashed with the ruling in University of the Philippines Board of
Regents v. Ligot-Tela  to the effect that the funds belonging to the UP
were public funds.
On January 19, 2005, the CA issued a temporary restraining order
(TRO) upon application by the UP.
On March 22, 2005, Stern Builders and dela Cruz filed in the RTC
their amended motion for sheriff’s assistance to implement the
release order dated December 21, 2004, stating that the 60-day
period of the TRO of the CA had already lapsed. The UP opposed the
amended motion and countered that the implementation of the
release order be suspended.
On May 3, 2005, the RTC granted the amended motion for sheriff’s
assistance and directed the sheriff to proceed to the DBP to receive
the check in satisfaction of the judgment.
The UP sought the reconsideration of the order of May 3, 2005.
On May 16, 2005, DBP filed a motion to consign the check
representing the judgment award and to dismiss the motion to cite
its officials in contempt of court.
On May 23, 2005, the UP presented a motion to withhold the
release of the payment of the judgment award.
On July 8, 2005, the RTC resolved all the pending matters,  noting that
the DBP had already delivered to the sheriff Manager’s Check No.
811941 for ₱ 16,370,191.74 representing the garnished funds
payable to the order of Stern Builders and dela Cruz as its
compliance with the RTC’s order dated December 21, 2004.
However, the RTC directed in the same order that Stern Builders and
dela Cruz should not encash the check or withdraw its amount
pending the final resolution of the UP’s petition for certiorari, to wit:
Page 20 of 41
To enable the money represented in the check in question (No.
00008119411) to earn interest during the pendency of the
defendant University of the Philippines application for a writ of
injunction with the Court of Appeals the same may now be
deposited by the plaintiff at the garnishee Bank (Development Bank
of the Philippines), the disposition of the amount represented
therein being subject to the final outcome of the case of the
University of the Philippines et al., vs. Hon. Agustin S. Dizon et al.,
(CA G.R. 88125) before the Court of Appeals.
Let it be stated herein that the plaintiff is not authorized to encash
and withdraw the amount represented in the check in question and
enjoy the same in the fashion of an owner during the pendency of
the case between the parties before the Court of Appeals which may
or may not be resolved in plaintiff’s favor.
With the end in view of seeing to it that the check in question is
deposited by the plaintiff at the Development Bank of the
Philippines (garnishee bank), Branch Sheriff Herlan Velasco is
directed to accompany and/or escort the plaintiff in making the
deposit of the check in question.SO ORDERED.
On September 16, 2005, the CA promulgated its assailed decision
dismissing the UP’s petition for certiorari, ruling that the UP had
been given ample opportunity to contest the motion to direct the
DBP to deposit the check in the name of Stern Builders and dela
Cruz; and that the garnished funds could be the proper subject of
garnishment because they had been already earmarked for the
project, with the UP holding the funds only in a fiduciary
capacity, viz:
Petitioners next argue that the UP funds may not be seized for
execution or garnishment to satisfy the judgment award. Citing
Department of Agriculture vs. NLRC, University of the Philippines
Board of Regents vs. Hon. Ligot-Telan, petitioners contend that UP
deposits at Land Bank and the Development Bank of the Philippines,
being government funds, may not be released absent an
appropriations bill from Congress.
The argument is specious. UP entered into a contract with private
respondents for the expansion and renovation of the Arts and
Sciences Building of its campus in Los Baños, Laguna. Decidedly,
there was already an appropriations earmarked for the said project.
The said funds are retained by UP, in a fiduciary capacity, pending
completion of the construction project.
We agree with the trial Court [sic] observation on this score:
"4. Executive Order No. 109 (Directing all National Government
Agencies to Revert Certain Accounts Payable to the Cumulative
Result of Operations of the National Government and for Other
Purposes) Section 9. Reversion of Accounts Payable, provides
that, all 1995 and prior years documented accounts payable and
all undocumented accounts regardless of the year they were
incurred shall be reverted to the Cumulative Result of
Operations of the National Government (CROU). This shall apply
to accounts payable of all funds, except fiduciary funds, as long
as the purpose for which the funds were created have not been
accomplished and accounts payable under foreign assisted
projects for the duration of the said project. In this regard, the
Department of Budget and Management issued Joint-Circular
No. 99-6 4.0 (4.3) Procedural Guidelines which provides that all
accounts payable that reverted to the CROU may be considered
for payment upon determination thru administrative process, of
the existence, validity and legality of the claim. Thus, the
allegation of the defendants that considering no appropriation
for the payment of any amount awarded to plaintiffs appellee
the funds of defendant-appellants may not be seized pursuant
to a writ of execution issued by the regular court is misplaced.
Surely when the defendants and the plaintiff entered into the
General Construction of Agreement there is an amount already
allocated by the latter for the said project which is no longer
subject of future appropriation."
After the CA denied their motion for reconsideration on December
23, 2005, the petitioners appealed by petition for review.
Matters Arising During the Pendency of the Petition
On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied
Stern Builders and dela Cruz’s motion to withdraw the deposit, in
consideration of the UP’s intention to appeal to the CA, stating:
Since it appears that the defendants are intending to file a petition
for review of the Court of Appeals resolution in CA-G.R. No. 88125
within the reglementary period of fifteen (15) days from receipt of
resolution, the Court agrees with the defendants stand that the
granting of plaintiffs’ subject motion is premature.
Let it be stated that what the Court meant by its Order dated July 8,
2005 which states in part that the "disposition of the amount
represented therein being subject to the final outcome of the case
of the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon
et al., (CA G.R. No. 88125 before the Court of Appeals) is that the
judgment or resolution of said court has to be final and executory,
for if the same will still be elevated to the Supreme Court, it will not
attain finality yet until the highest court has rendered its own final
judgment or resolution.
However, on January 22, 2007, the UP filed an Urgent Application
for A Temporary Restraining Order and/or A Writ of Preliminary
Injunction averring that on January 3, 2007, Judge Maria Theresa
dela Torre-Yadao (who had meanwhile replaced Judge Dizon upon
the latter’s appointment to the CA) had issued another order
allowing Stern Builders and dela Cruz to withdraw the deposit,  to
wit:
It bears stressing that defendants’ liability for the payment of the
judgment obligation has become indubitable due to the final and
executory nature of the Decision dated November 28, 2001. Insofar
as the payment of the [sic] judgment obligation is concerned, the
Court believes that there is nothing more the defendant can do to
escape liability. It is observed that there is nothing more the
defendant can do to escape liability. It is observed that defendant
U.P. System had already exhausted all its legal remedies to overturn,
set aside or modify the decision (dated November 28,
2001( rendered against it. The way the Court sees it, defendant U.P.
System’s petition before the Supreme Court concerns only with the
manner by which said judgment award should be satisfied. It has
nothing to do with the legality or propriety thereof, although it prays
for the deletion of [sic] reduction of the award of moral damages.
It must be emphasized that this Court’s finding, i.e., that there was
sufficient appropriation earmarked for the project, was upheld by
the Court of Appeals in its decision dated September 16, 2005. Being
a finding of fact, the Supreme Court will, ordinarily, not disturb the
same was said Court is not a trier of fact. Such being the case,
defendants’ arguments that there was no sufficient appropriation
for the payment of the judgment obligation must fail.
While it is true that the former Presiding Judge of this Court in its
Order dated January 30, 2006 had stated that:
Let it be stated that what the Court meant by its Order dated July 8,
2005 which states in part that the "disposition of the amount
represented therein being subject to the final outcome of the case
of the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon
et al., (CA G.R. No. 88125 before the Court of Appeals) is that the
judgment or resolution of said court has to be final and executory,
for if the same will still be elevated to the Supreme Court, it will not
Page 21 of 41
attain finality yet until the highest court has rendered its own final
judgment or resolution.
it should be noted that neither the Court of Appeals nor the
Supreme Court issued a preliminary injunction enjoining the release
or withdrawal of the garnished amount. In fact, in its present
petition for review before the Supreme Court, U.P. System has not
prayed for the issuance of a writ of preliminary injunction. Thus, the
Court doubts whether such writ is forthcoming.
The Court honestly believes that if defendants’ petition assailing the
Order of this Court dated December 31, 2004 granting the motion
for the release of the garnished amount was meritorious, the Court
of Appeals would have issued a writ of injunction enjoining the
same. Instead, said appellate court not only refused to issue a wit of
preliminary injunction prayed for by U.P. System but denied the
petition, as well.
The UP contended that Judge Yadao thereby effectively reversed the
January 30, 2006 order of Judge Dizon disallowing the withdrawal of
the garnished amount until after the decision in the case would have
become final and executory.
Although the Court issued a TRO on January 24, 2007 to enjoin Judge
Yadao and all persons acting pursuant to her authority from
enforcing her order of January 3, 2007, it appears that on January 16,
2007, or prior to the issuance of the TRO, she had already directed
the DBP to forthwith release the garnished amount to Stern Builders
and dela Cruz and that DBP had forthwith complied with the order
on January 17, 2007 upon the sheriff’s service of the order of Judge
Yadao.
These intervening developments impelled the UP to file in this Court
a supplemental petition on January 26, 2007 alleging that the RTC
(Judge Yadao) gravely erred in ordering the immediate release of the
garnished amount despite the pendency of the petition for review in
this Court.
The UP filed a second supplemental petition after the RTC (Judge
Yadao) denied the UP’s motion for the redeposit of the withdrawn
amount on April 10, 2007, o wit:
This resolves defendant U.P. System’s Urgent Motion to Redeposit
Judgment Award praying that plaintiffs be directed to redeposit the
judgment award to DBP pursuant to the Temporary Restraining
Order issued by the Supreme Court. Plaintiffs opposed the motion
and countered that the Temporary Restraining Order issued by the
Supreme Court has become moot and academic considering that the
act sought to be restrained by it has already been performed. They
also alleged that the redeposit of the judgment award was no longer
feasible as they have already spent the same.
It bears stressing, if only to set the record straight, that this Court
did not – in its Order dated January 3, 2007 (the implementation of
which was restrained by the Supreme Court in its Resolution dated
January 24, 2002) – direct that that garnished amount "be deposited
with the garnishee bank (Development Bank of the Philippines)". In
the first place, there was no need to order DBP to make such
deposit, as the garnished amount was already deposited in the
account of plaintiffs with the DBP as early as May 13, 2005. What the
Court granted in its Order dated January 3, 2007 was plaintiff’s
motion to allow the release of said deposit. It must be recalled that
the Court found plaintiff’s motion meritorious and, at that time,
there was no restraining order or preliminary injunction from either
the Court of Appeals or the Supreme Court which could have
enjoined the release of plaintiffs’ deposit. The Court also took into
account the following factors:
a) the Decision in this case had long been final and executory
after it was rendered on November 28, 2001;
b) the propriety of the dismissal of U.P. System’s appeal was
upheld by the Supreme Court;
c) a writ of execution had been issued;
d) defendant U.P. System’s deposit with DBP was garnished
pursuant to a lawful writ of execution issued by the Court;
and
e) the garnished amount had already been turned over to the
plaintiffs and deposited in their account with DBP.
The garnished amount, as discussed in the Order dated January 16,
2007, was already owned by the plaintiffs, having been delivered to
them by the Deputy Sheriff of this Court pursuant to par. (c), Section
9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the
judgment obligation has already been fully satisfied as per Report of
the Deputy Sheriff.
Anent the Temporary Restraining Order issued by the Supreme
Court, the same has become functus oficio, having been issued after
the garnished amount had been released to the plaintiffs. The
judgment debt was released to the plaintiffs on January 17, 2007,
while the Temporary Restraining Order issued by the Supreme Court
was received by this Court on February 2, 2007. At the time of the
issuance of the Restraining Order, the act sought to be restrained
had already been done, thereby rendering the said Order ineffectual.
After a careful and thorough study of the arguments advanced by
the parties, the Court is of the considered opinion that there is no
legal basis to grant defendant U.P. System’s motion to redeposit the
judgment amount. Granting said motion is not only contrary to law,
but it will also render this Court’s final executory judgment nugatory.
Litigation must end and terminate sometime and somewhere, and it
is essential to an effective administration of justice that once a
judgment has become final the issue or cause involved therein
should be laid to rest. This doctrine of finality of judgment is
grounded on fundamental considerations of public policy and sound
practice. In fact, nothing is more settled in law than that once a
judgment attains finality it thereby becomes immutable and
unalterable. It may no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the
modification is attempted to be made by the court rendering it or by
the highest court of the land.
WHEREFORE, premises considered, finding defendant U.P. System’s
Urgent Motion to Redeposit Judgment Award devoid of merit, the
same is hereby DENIED. SO ORDERED.
Issues
The UP now submits that:
The UP argues that the amount earmarked for the construction
project had been purposely set aside only for the aborted project
and did not include incidental matters like the awards of actual
damages, moral damages and attorney’s fees. In support of its
argument, the UP cited Article 12.2 of the General Construction
Agreement, which stipulated that no deductions would be allowed
for the payment of claims, damages, losses and expenses, including
attorney’s fees, in case of any litigation arising out of the
performance of the work. The UP insists that the CA decision was
inconsistent with the rulings in Commissioner of Public Highways v.
San Diego and Department of Agriculture v. NLRC to the effect that
government funds and properties could not be seized under writs of
execution or garnishment to satisfy judgment awards.
Furthermore, the UP contends that the CA contravened Section 5,
Article XIV of the Constitution by allowing the garnishment of UP
funds, because the garnishment resulted in a substantial reduction
of the UP’s limited budget allocated for the remuneration, job
satisfaction and fulfillment of the best available teachers; that Judge
Page 22 of 41
Yadao should have exhibited judicial courtesy towards the Court due
to the pendency of the UP’s petition for review; and that she should
have also desisted from declaring that the TRO issued by this Court
had become functus officio.
Lastly, the UP states that the awards of actual damages of ₱
5,716,729.00 and moral damages of ₱ 10 million should be reduced,
if not entirely deleted, due to its being unconscionable, inequitable
and detrimental to public service.
In contrast, Stern Builders and dela Cruz aver that the petition for
review was fatally defective for its failure to mention the other cases
upon the same issues pending between the parties (i.e., CA-G.R. No.
77395 and G.R No. 163501); that the UP was evidently resorting to
forum shopping, and to delaying the satisfaction of the final
judgment by the filing of its petition for review; that the ruling in
Commissioner of Public Works v. San Diego had no application
because there was an appropriation for the project; that the UP
retained the funds allotted for the project only in a fiduciary
capacity; that the contract price had been meanwhile adjusted to ₱
22,338,553.25, an amount already more than sufficient to cover the
judgment award; that the UP’s prayer to reduce or delete the award
of damages had no factual basis, because they had been gravely
wronged, had been deprived of their source of income, and had
sufered untold miseries, discomfort, humiliation and sleepless years;
that dela Cruz had even been constrained to sell his house, his
equipment and the implements of his trade, and together with his
family had been forced to live miserably because of the wrongful
actuations of the UP; and that the RTC correctly declared the Court’s
TRO to be already functus officio by reason of the withdrawal of the
garnished amount from the DBP.
The decisive issues to be considered and passed upon are, therefore:
(a) whether the funds of the UP were the proper subject of
garnishment in order to satisfy the judgment award; and (b) whether
the UP’s prayer for the deletion of the awards of actual damages of
₱ 5,716,729.00, moral damages of ₱ 10,000,000.00 and attorney’s
fees of ₱ 150,000.00 plus ₱ 1,500.00 per appearance could be
granted despite the finality of the judgment of the RTC.
Ruling: The petition for review is meritorious.
‘I. UP’s funds, being government funds, are not subject to
garnishment
The UP was founded on June 18, 1908 through Act 1870 to provide
advanced instruction in literature, philosophy, the sciences, and arts,
and to give professional and technical training to deserving students.
Despite its establishment as a body corporate, the UP remains to be
a "chartered institution" performing a legitimate government
function. It is an institution of higher learning, not a corporation
established for profit and declaring any dividends.In enacting
Republic Act No. 9500 (The University of the Philippines Charter of
2008), Congress has declared the UP as the national
university"dedicated to the search for truth and knowledge as well
as the development of future leaders."
Irrefragably, the UP is a government instrumentality, performing the
State’s constitutional mandate of promoting quality and accessible
education. As a government instrumentality, the UP administers
special funds sourced from the fees and income enumerated under
Act No. 1870 and Section 1 of Executive Order No. 714, and from the
yearly appropriations, to achieve the purposes laid down by Section
2 of Act 1870, as expanded in Republic Act No. 9500. All the funds
going into the possession of the UP, including any interest accruing
from the deposit of such funds in any banking institution, constitute
a "special trust fund," the disbursement of which should always be
aligned with the UP’s mission and purpose, and should always be
subject to auditing by the COA.
Presidential Decree No. 1445 defines a "trust fund" as a fund that
officially comes in the possession of an agency of the government or
of a public officer as trustee, agent or administrator, or that is
received for the fulfillment of some obligation. A trust fund may be
utilized only for the "specific purpose for which the trust was
created or the funds received."
The funds of the UP are government funds that are public in
character. They include the income accruing from the use of real
property ceded to the UP that may be spent only for the attainment
of its institutional objectives. Hence, the funds subject of this action
could not be validly made the subject of the RTC’s writ of execution
or garnishment. The adverse judgment rendered against the UP in a
suit to which it had impliedly consented was not immediately
enforceable by execution against the UP because suability of the
State did not necessarily mean its liability.
A marked distinction exists between suability of the State and its
liability. As the Court succinctly stated in Municipality of San
Fernando, La Union v. Firme:
A distinction should first be made between suability and liability.
"Suability depends on the consent of the state to be sued, liability on
the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the
other hand, it can never be held liable if it does not first consent to
be sued. Liability is not conceded by the mere fact that the state has
allowed itself to be sued. When the state does waive its sovereign
immunity, it is only giving the plaintiff the chance to prove, if it can,
that the defendant is liable.
Also, in Republic v. Villasor, where the issuance of an alias writ of
execution directed against the funds of the Armed Forces of the
Philippines to satisfy a final and executory judgment was nullified,
the Court said:
xxx The universal rule that where the State gives its consent to be
sued by private parties either by general or special law, it may limit
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 of execution or
garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must
be covered by the corresponding appropriation as required by law.
The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects, as appropriated by law.
The UP correctly submits here that the garnishment of its funds to
satisfy the judgment awards of actual and moral damages (including
attorney’s fees) was not validly made if there was no special
appropriation by Congress to cover the liability. It was, therefore,
legally unwarranted for the CA to agree with the RTC’s holding in the
order issued on April 1, 2003 that no appropriation by Congress to
allocate and set aside the payment of the judgment awards was
necessary because "there (were) already an appropriations (sic)
earmarked for the said project." The CA and the RTC thereby
unjustifiably ignored the legal restriction imposed on the trust funds
of the Government and its agencies and instrumentalities to be used
exclusively to fulfill the purposes for which the trusts were created
or for which the funds were received except upon express
authorization by Congress or by the head of a government agency in
control of the funds, and subject to pertinent budgetary laws, rules
and regulations.
Indeed, an appropriation by Congress was required before the
judgment that rendered the UP liable for moral and actual damages
(including attorney’s fees) would be satisfied considering that such
Page 23 of 41
monetary liabilities were not covered by the "appropriations
earmarked for the said project." The Constitution strictly mandated
that "(n)o money shall be paid out of the Treasury except in
pursuance of an appropriation made by law."
‘II. COA must adjudicate private respondents’ claim before
execution should proceed
The execution of the monetary judgment against the UP was within
the primary jurisdiction of the COA. This was expressly provided in
Section 26 of Presidential Decree No. 1445, to wit:
Section 26. General jurisdiction. - The authority and powers of the
Commission shall extend to and comprehend all matters relating to
auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers
pertaining thereto for a period of ten years, the examination and
inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all
persons respecting funds or property received or held by them in an
accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to
the Government or any of its subdivisions, agencies and
instrumentalities. The said jurisdiction extends to all government-
owned or controlled corporations, including their subsidiaries, and
other self-governing boards, commissions, or agencies of the
Government, and as herein prescribed, including non governmental
entities subsidized by the government, those funded by donations
through the government, those required to pay levies or
government share, and those for which the government has put up a
counterpart fund or those partly funded by the government.
It was of no moment that a final and executory decision already
validated the claim against the UP. The settlement of the monetary
claim was still subject to the primary jurisdiction of the COA despite
the final decision of the RTC having already validated the claim. As
such, Stern Builders and dela Cruz as the claimants had no
alternative except to first seek the approval of the COA of their
monetary claim.
On its part, the RTC should have exercised utmost caution, prudence
and judiciousness in dealing with the motions for execution against
the UP and the garnishment of the UP’s funds. The RTC had no
authority to direct the immediate withdrawal of any portion of the
garnished funds from the depository banks of the UP. By eschewing
utmost caution, prudence and judiciousness in dealing with the
execution and garnishment, and by authorizing the withdrawal of
the garnished funds of the UP, the RTC acted beyond its jurisdiction,
and all its orders and issuances thereon were void and of no legal
effect, specifically: (a) the order Judge Yadao issued on January 3,
2007 allowing Stern Builders and dela Cruz to withdraw the
deposited garnished amount; (b) the order Judge Yadao issued on
January 16, 2007 directing DBP to forthwith release the garnish
amount to Stern Builders and dela Cruz; (c) the sheriff’s report of
January 17, 2007 manifesting the full satisfaction of the writ of
execution; and (d) the order of April 10, 2007 deying the UP’s
motion for the redeposit of the withdrawn amount. Hence, such
orders and issuances should be struck down without exception.
Nothing extenuated Judge Yadao’s successive violations of
Presidential Decree No. 1445. She was aware of Presidential Decree
No. 1445, considering that the Court circulated to all judges its
Administrative Circular No. 10-2000, issued on October 25, 2000,
enjoining them "to observe utmost caution, prudence and
judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government
units" precisely in order to prevent the circumvention of Presidential
Decree No. 1445, as well as of the rules and procedures of the COA,
to wit:
In order to prevent possible circumvention of the rules and
procedures of the Commission on Audit, judges are hereby
enjoined to observe utmost caution, prudence and judiciousness in
the issuance of writs of execution to satisfy money judgments
against government agencies and local government units.
Judges should bear in mind that in Commissioner of Public Highways
v. San Diego (31 SCRA 617, 625 1970), this Court explicitly stated:
"The universal rule that where the State gives its consent to be sued
by private parties either by general or special law, it may limit
claimant’s action ‘only up to the completion of proceedings anterior
to the stage of execution’ and that the power of the Court ends
when the judgment is rendered, since government funds and
properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must
be covered by the corresponding appropriation as required by law.
The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects, as appropriated by law.
Moreover, it is settled jurisprudence that upon determination of
State liability, the prosecution, enforcement or satisfaction thereof
must still be pursued in accordance with the rules and procedures
laid down in P.D. No. 1445, otherwise known as the Government
Auditing Code of the Philippines (Department of Agriculture v.
NLRC, 227 SCRA 693, 701-02 1993 citing Republic vs. Villasor, 54
SCRA 84 1973). All money claims against the Government must first
be filed with the Commission on Audit which must act upon it
within sixty days. Rejection of the claim will authorize the claimant
to elevate the matter to the Supreme Court on certiorari and in
effect, sue the State thereby (P.D. 1445, Sections 49-50).
However, notwithstanding the rule that government properties are
not subject to levy and execution unless otherwise provided for by
statute (Republic v. Palacio, 23 SCRA 899 1968; Commissioner of
Public Highways v. San Diego, supra) or municipal ordinance
(Municipality of Makati v. Court of Appeals, 190 SCRA 206 1990), the
Court has, in various instances, distinguished between government
funds and properties for public use and those not held for public
use. Thus, in Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil
52 1926, the Court ruled that "where property of a municipal or
other public corporation is sought to be subjected to execution to
satisfy judgments recovered against such corporation, the question
as to whether such property is leviable or not is to be determined by
the usage and purposes for which it is held." The following can be
culled from Viuda de Tan Toco v. Municipal Council of Iloilo:
1. Properties held for public uses – and generally everything held
for governmental purposes – are not subject to levy and sale under
execution against such corporation. The same rule applies to funds
in the hands of a public officer and taxes due to a municipal
corporation.
2. Where a municipal corporation owns in its proprietary capacity, as
distinguished from its public or government capacity, property not
used or used for a public purpose but for quasi-private purposes, it is
the general rule that such property may be seized and sold under
execution against the corporation.
3. Property held for public purposes is not subject to execution
merely because it is temporarily used for private purposes. If the
public use is wholly abandoned, such property becomes subject to
execution.
This Administrative Circular shall take effect immediately and the
Court Administrator shall see to it that it is faithfully implemented.
Page 24 of 41
Although Judge Yadao pointed out that neither the CA nor the Court
had issued as of then any writ of preliminary injunction to enjoin the
release or withdrawal of the garnished amount, she did not need
any writ of injunction from a superior court to compel her obedience
to the law. The Court is disturbed that an experienced judge like her
should look at public laws like Presidential Decree No. 1445
dismissively instead of loyally following and unquestioningly
implementing them. That she did so turned her court into an
oppressive bastion of mindless tyranny instead of having it as a true
haven for the seekers of justice like the UP.
‘III. Period of appeal did not start without effective service of
decision upon counsel of record; Fresh-period rule announced in
Neypes v. Court of Appeals can be given retroactive application
The UP next pleads that the Court gives due course to its petition for
review in the name of equity in order to reverse or modify the
adverse judgment against it despite its finality. At stake in the UP’s
plea for equity was the return of the amount of ₱ 16,370,191.74
illegally garnished from its trust funds. Obstructing the plea is the
finality of the judgment based on the supposed tardiness of UP’s
appeal, which the RTC declared on September 26, 2002. The CA
upheld the declaration of finality on February 24, 2004, and the
Court itself denied the UP’s petition for review on that issue on May
11, 2004 (G.R. No. 163501). The denial became final on November
12, 2004.
It is true that a decision that has attained finality becomes
immutable and unalterable, and cannot be modified in any respect,
even if the modification is meant to correct erroneous conclusions of
fact and law, and whether the modification is made by the court that
rendered it or by this Court as the highest court of the land. Public
policy dictates that once a judgment becomes final, executory and
unappealable, the prevailing party should not be deprived of the
fruits of victory by some subterfuge devised by the losing party.
Unjustified delay in the enforcement of such judgment sets at
naught the role and purpose of the courts to resolve justiciable
controversies with finality. Indeed, all litigations must at some time
end, even at the risk of occasional errors.
But the doctrine of immutability of a final judgment has not been
absolute, and has admitted several exceptions, among them: (a) the
correction of clerical errors; (b) the so-called nunc pro tunc entries
that cause no prejudice to any party; (c) void judgments; and (d)
whenever circumstances transpire after the finality of the decision
that render its execution unjust and inequitable. Moreover, in Heirs
of Maura So v. Obliosca, we stated that despite the absence of the
preceding circumstances, the Court is not precluded from brushing
aside procedural norms if only to serve the higher interests of justice
and equity. Also, in Gumaru v. Quirino State College, the Court
nullified the proceedings and the writ of execution issued by the RTC
for the reason that respondent state college had not been
represented in the litigation by the Office of the Solicitor General.
We rule that the UP’s plea for equity warrants the Court’s exercise
of the exceptional power to disregard the declaration of finality of
the judgment of the RTC for being in clear violation of the UP’s right
to due process.
Both the CA and the RTC found the filing on June 3, 2002 by the UP
of the notice of appeal to be tardy. They based their finding on the
fact that only six days remained of the UP’s reglementary 15-day
period within which to file the notice of appeal because the UP had
filed a motion for reconsideration on January 16, 2002 vis-à-vis the
RTC’s decision the UP received on January 7, 2002; and that because
the denial of the motion for reconsideration had been served upon
Atty. Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002,
the UP had only until May 23, 2002 within which to file the notice of
appeal.
The UP counters that the service of the denial of the motion for
reconsideration upon Atty. Nolasco was defective considering that
its counsel of record was not Atty. Nolasco of the UPLB Legal Office
but the OLS in Diliman, Quezon City; and that the period of appeal
should be reckoned from May 31, 2002, the date when the OLS
received the order. The UP submits that the filing of the notice of
appeal on June 3, 2002 was well within the reglementary period to
appeal.
We agree with the submission of the UP.
Firstly, the service of the denial of the motion for reconsideration
upon Atty. Nolasco of the UPLB Legal Office was invalid and
ineffectual because he was admittedly not the counsel of record of
the UP. The rule is that it is on the counsel and not the client that
the service should be made.
That counsel was the OLS in Diliman, Quezon City, which was served
with the denial only on May 31, 2002. As such, the running of the
remaining period of six days resumed only on June 1,
2002, rendering the filing of the UP’s notice of appeal on June 3,
2002 timely and well within the remaining days of the UP’s period to
appeal.
Verily, the service of the denial of the motion for reconsideration
could only be validly made upon the OLS in Diliman, and no other.
The fact that Atty. Nolasco was in the employ of the UP at the UPLB
Legal Office did not render the service upon him effective. It is
settled that where a party has appeared by counsel, service must be
made upon such counsel. Service on the party or the party’s
employee is not effective because such notice is not notice in law.
This is clear enough from Section 2, second paragraph, of Rule 13,
Rules of Court, which explicitly states that: "If any party has
appeared by counsel, service upon him shall be made upon his
counsel or one of them, unless service upon the party himself is
ordered by the court. Where one counsel appears for several
parties, he shall only be entitled to one copy of any paper served
upon him by the opposite side." As such, the period to appeal
resumed only on June 1, 2002, the date following the service on May
31, 2002 upon the OLS in Diliman of the copy of the decision of the
RTC, not from the date when the UP was notified.
Accordingly, the declaration of finality of the judgment of the RTC,
being devoid of factual and legal bases, is set aside.
Secondly, even assuming that the service upon Atty. Nolasco was
valid and effective, such that the remaining period for the UP to take
a timely appeal would end by May 23, 2002, it would still not be
correct to find that the judgment of the RTC became final and
immutable thereafter due to the notice of appeal being filed too late
on June 3, 2002.
In so declaring the judgment of the RTC as final against the UP, the
CA and the RTC applied the rule contained in the second paragraph
of Section 3, Rule 41 of the Rules of Court to the effect that the filing
of a motion for reconsideration interrupted the running of the
period for filing the appeal; and that the period resumed upon
notice of the denial of the motion for reconsideration. For that
reason, the CA and the RTC might not be taken to task for strictly
adhering to the rule then prevailing.
However, equity calls for the retroactive application in the UP’s favor
of the fresh-period rule that the Court first announced in mid-
September of 2005 through its ruling in Neypes v. Court of Appeals,
viz:
To standardize the appeal periods provided in the Rules and to
afford litigants fair opportunity to appeal their cases, the Court
deems it practical to allow a fresh period of 15 days within which to
Page 25 of 41
file the notice of appeal in the Regional Trial Court, counted from
receipt of the order dismissing a motion for a new trial or motion for
reconsideration.
The retroactive application of the fresh-period rule, a procedural law
that aims "to regiment or make the appeal period uniform, to be
counted from receipt of the order denying the motion for new trial,
motion for reconsideration (whether full or partial) or any final order
or resolution," is impervious to any serious challenge. This is because
there are no vested rights in rules of procedure. A law or regulation
is procedural when it prescribes rules and forms of procedure in
order that courts may be able to administer justice. It does not come
within the legal conception of a retroactive law, or is not subject of
the general rule prohibiting the retroactive operation of statues, but
is given retroactive effect in actions pending and undetermined at
the time of its passage without violating any right of a person who
may feel that he is adversely affected.
We have further said that a procedural rule that is amended for the
benefit of litigants in furtherance of the administration of justice
shall be retroactively applied to likewise favor actions then pending,
as equity delights in equality. We may even relax stringent
procedural rules in order to serve substantial justice and in the
exercise of this Court’s equity jurisdiction.  Equity jurisdiction aims to
do complete justice in cases where a court of law is unable to adapt
its judgments to the special circumstances of a case because of the
inflexibility of its statutory or legal jurisdiction.
It is cogent to add in this regard that to deny the benefit of the
fresh-period rule to the UP would amount to injustice and absurdity
– injustice, because the judgment in question was issued on
November 28, 2001 as compared to the judgment in Neypes that
was rendered in 1998; absurdity, because parties receiving notices
of judgment and final orders issued in the year 1998 would enjoy the
benefit of the fresh-period rule but the later rulings of the lower
courts like that herein would not.
Consequently, even if the reckoning started from May 17, 2002,
when Atty. Nolasco received the denial, the UP’s filing on June 3,
2002 of the notice of appeal was not tardy within the context of the
fresh-period rule. For the UP, the fresh period of 15-days counted
from service of the denial of the motion for reconsideration would
end on June 1, 2002, which was a Saturday. Hence, the UP had until
the next working day, or June 3, 2002, a Monday, within which to
appeal, conformably with Section 1 of Rule 22, Rules of Court, which
holds that: "If the last day of the period, as thus computed, falls on a
Saturday, a Sunday, or a legal holiday in the place where the court
sits, the time shall not run until the next working day."
‘IV. Awards of monetary damages, being devoid of factual and legal
bases,did not attain finality and should be deleted
Section 14 of Article VIII of the Constitution prescribes that express
findings of fact and of law should be made in the decision rendered
by any court, to wit:
Section 14. No decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law on
which it is based.
No petition for review or motion for reconsideration of a decision of
the court shall be refused due course or denied without stating the
legal basis therefor.
Implementing the constitutional provision in civil actions is Section 1
of Rule 36, Rules of Court, viz:
Section 1. Rendition of judgments and final orders. — A judgment or
final order determining the merits of the case shall be in writing
personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him,
and filed with the clerk of the court. (1a)
The Constitution and the Rules of Court apparently delineate two
main essential parts of a judgment, namely: the body and the
decretal portion. Although the latter is the controlling part, the
importance of the former is not to be lightly regarded because it is
there where the court clearly and distinctly states its findings of fact
and of law on which the decision is based. To state it differently, one
without the other is ineffectual and useless. The omission of either
inevitably results in a judgment that violates the letter and the spirit
of the Constitution and the Rules of Court.
The term findings of fact that must be found in the body of the
decision refers to statements of fact, not to conclusions of law.
Unlike in pleadings where ultimate facts alone need to be stated, the
Constitution and the Rules of Court require not only that a decision
should state the ultimate facts but also that it should specify the
supporting evidentiary facts, for they are what are called the findings
of fact.
The importance of the findings of fact and of law cannot be
overstated. The reason and purpose of the Constitution and the
Rules of Court in that regard are obviously to inform the parties why
they win or lose, and what their rights and obligations are. Only
thereby is the demand of due process met as to the parties. As
Justice Isagani A. Cruz explained in Nicos Industrial Corporation v.
Court of Appeals:
It is a requirement of due process that the parties to a litigation be
informed of how it was decided, with an explanation of the factual
and legal reasons that led to the conclusions of the court. The court
cannot simply say that judgment is rendered in favor of X and
against Y and just leave it at that without any justification
whatsoever for its action. The losing party is entitled to know why he
lost, so he may appeal to a higher court, if permitted, should he
believe that the decision should be reversed. A decision that does
not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark as to how it was reached and is
especially prejudicial to the losing party, who is unable to pinpoint
the possible errors of the court for review by a higher tribunal.
Here, the decision of the RTC justified the grant of actual and moral
damages, and attorney’s fees in the following terse manner, viz:
xxx The Court is not unmindful that due to defendants’ unjustified
refusal to pay their outstanding obligation to plaintiff, the same
suffered losses and incurred expenses as he was forced to re-
mortgage his house and lot located in Quezon City to Metrobank
and BPI Bank just to pay its monetary obligations in the form of
interest and penalties incurred in the course of the construction of
the subject project.
The statement that "due to defendants’ unjustified refusal to pay
their outstanding obligation to plaintiff, the same suffered losses and
incurred expenses as he was forced to re-mortgage his house and lot
located in Quezon City to Metrobank and BPI Bank just to pay its
monetary obligations in the form of interest and penalties incurred
in the course of the construction of the subject project" was only a
conclusion of fact and law that did not comply with the
constitutional and statutory prescription. The statement specified no
detailed expenses or losses constituting the ₱ 5,716,729.00 actual
damages sustained by Stern Builders in relation to the construction
project or to other pecuniary hardships. The omission of such
expenses or losses directly indicated that Stern Builders did not
prove them at all, which then contravened Article 2199, Civil Code,
the statutory basis for the award of actual damages, which entitled a
person to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. As such, the actual damages
allowed by the RTC, being bereft of factual support, were speculative
and whimsical. Without the clear and distinct findings of fact and
Page 26 of 41
law, the award amounted only to an ipse dixit on the part of the
RTC, and did not attain finality.
There was also no clear and distinct statement of the factual and
legal support for the award of moral damages in the substantial
amount of ₱ 10,000,000.00. The award was thus also speculative
and whimsical. Like the actual damages, the moral damages
constituted another judicial ipse dixit, the inevitable consequence of
which was to render the award of moral damages incapable of
attaining finality. In addition, the grant of moral damages in that
manner contravened the law that permitted the recovery of moral
damages as the means to assuage "physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury." The
contravention of the law was manifest considering that Stern
Builders, as an artificial person, was incapable of experiencing pain
and moral sufferings. Assuming that in granting the substantial
amount of ₱ 10,000,000.00 as moral damages, the RTC might have
had in mind that dela Cruz had himself suffered mental anguish and
anxiety. If that was the case, then the RTC obviously disregarded his
separate and distinct personality from that of Stern
Builders. Moreover, his moral and emotional sufferings as the
President of Stern Builders were not the sufferings of Stern Builders.
Lastly, the RTC violated the basic principle that moral damages were
not intended to enrich the plaintiff at the expense of the defendant,
but to restore the plaintiff to his status quo ante as much as
possible. Taken together, therefore, all these considerations
exposed the substantial amount of ₱ 10,000,000.00 allowed as
moral damages not only to be factually baseless and legally
indefensible, but also to be unconscionable, inequitable and
unreasonable.
Like the actual and moral damages, the ₱ 150,000.00, plus ₱
1,500.00 per appearance, granted as attorney’s fees were factually
unwarranted and devoid of legal basis. The general rule is that a
successful litigant cannot recover attorney’s fees as part of the
damages to be assessed against the losing party because of the
policy that no premium should be placed on the right to litigate.
Prior to the effectivity of the present Civil Code, indeed, such fees
could be recovered only when there was a stipulation to that effect.
It was only under the present Civil Code that the right to collect
attorney’s fees in the cases mentioned in Article 2208of the Civil
Code came to be recognized. Nonetheless, with attorney’s fees
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS),  vs.GROUP MANAGEMENT CORPORATION (GMC)
At bar are two consolidated Petitions for Review on Certiorari
concerning 78 parcels of land located in Barrio Marigondon, Lapu-
Lapu City. The parties in both cases have been in litigation over these
lots for the last two decades in what seems to be an endless exercise
of filing repetitious suits before the Court of Appeals and even this
Court, questioning the various decisions and resolutions issued by
the two separate trial courts involved. With this decision, it is
intended that all legal disputes among the parties concerned,
particularly over all the issues involved in these cases, will finally
come to an end
In the Petition in G.R. No. 167000, the Government Service
Insurance System (GSIS) seeks to reverse and set aside the
November 25, 2004 Decisionand January 20, 2005 Resolution of the
Twentieth Division of the Court of Appeals in CA-G.R. SP No. 85096
and to annul and set aside the March 11, 2004 and May 7,
2004 Orders of the Regional Trial Court (RTC) of Lapu-Lapu City
(Lapu-Lapu RTC) in Civil Case No. 2203-L.
being allowed in the concept of actual damages, their amounts must
be factually and legally justified in the body of the decision and not
stated for the first time in the decretal portion. Stating the amounts
only in the dispositive portion of the judgment is not enough;  a
rendition of the factual and legal justifications for them must also be
laid out in the body of the decision.
That the attorney’s fees granted to the private respondents did not
satisfy the foregoing requirement suffices for the Court to undo
them. The grant was ineffectual for being contrary to law and public
policy, it being clear that the express findings of fact and law were
intended to bring the case within the exception and thereby justify
the award of the attorney’s fees. Devoid of such express findings,
the award was a conclusion without a premise, its basis being
improperly left to speculation and conjecture.
Nonetheless, the absence of findings of fact and of any statement of
the law and jurisprudence on which the awards of actual and moral
damages, as well as of attorney’s fees, were based was a fatal flaw
that invalidated the decision of the RTC only as to such awards. As
the Court declared in Velarde v. Social Justice Society, the failure to
comply with the constitutional requirement for a clear and distinct
statement of the supporting facts and law "is a grave abuse of
discretion amounting to lack or excess of jurisdiction" and that
"(d)ecisions or orders issued in careless disregard of the
constitutional mandate are a patent nullity and must be struck down
as void." The other item granted by the RTC (i.e., ₱ 503,462.74) shall
stand, subject to the action of the COA as stated herein.
WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES and SETS ASIDE the decision of the Court of
Appeals under review; ANNULS the orders for the garnishment of
the funds of the University of the Philippines and for the release of
the garnished amount to Stern Builders Corporation and Servillano
dela Cruz; and DELETES from the decision of the Regional Trial Court
dated November 28, 2001 for being void only the awards of actual
damages of ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00, and
attorney's fees of ₱ 150,000.00, plus ₱ 1,500.00 per appearance, in
favor of Stern Builders Corporation and Servillano dela Cruz. The
Court ORDERS Stem Builders Corporation and Servillano dela Cruz to
redeposit the amount of ₱ 16,370,191.74 within 10 days from
receipt of this decision. Costs of suit to be paid by the private
respondents.
In the Petition in G.R. No. 169971, Group Management Corporation
(GMC) seeks to reverse and set aside the September 23, 2005
Decision in CA-G.R. SP No. 84382 wherein the Special Nineteenth
Division of the Court of Appeals annulled and set aside the March
11, 2004 Order of the Lapu-Lapu RTC in Civil Case No. 2203-L.
Both these cases stem from the same undisputed factual
antecedents as follows:
Lapu-Lapu Development & Housing Corporation (LLDHC) was the
registered owner of seventy-eight (78) lots (subject lots), situated in
Barrio Marigondon, Lapu-Lapu City.
On February 4, 1974, LLDHC and the GSIS entered into a Project and
Loan Agreement for the development of the subject lots. GSIS
agreed to extend a Twenty-Five Million Peso-loan (₱25,000,000.00)
to LLDHC, and in return, LLDHC will develop, subdivide, and sell its
lots to GSIS members. To secure the payment of the loan, LLDHC
executed a real estate mortgage over the subject lots in favor of
GSIS.
Page 27 of 41
For LLDHC’s failure to fulfill its obligations, GSIS foreclosed the
mortgage. As the lone bidder in the public auction sale, GSIS
acquired the subject lots, and eventually was able to consolidate its
ownership over the subject lots with the corresponding transfer
certificates of title (TCTs) issued in its name.
On November 19, 1979, GMC offered to purchase on installments
the subject lots from GSIS for a total price of One Million One
Hundred Thousand Pesos (₱1,100,000.00), with the aggregate area
specified as 423,177 square meters. GSIS accepted the offer and on
February 26, 1980, executed a Deed of Conditional Sale over the
subject lots. However, when GMC discovered that the total area of
the subject lots was only 298,504 square meters, it wrote GSIS and
proposed to proportionately reduce the purchase price to conform
to the actual total area of the subject lots. GSIS approved this
proposal and an Amendment to the Deed of Conditional Sale was
executed to reflect the final sales agreement between GSIS and
GMC.
On April 23, 1980, LLDHC filed a complaint for Annulment of
Foreclosure with Writ of Mandatory Injunction against GSIS before
the RTC of Manila (Manila RTC). This became Civil Case No. R-82-
3429 and was assigned to Branch 38.
On November 3, 1989, GMC filed its own complaint against GSIS for
Specific Performance with Damages before the Lapu-Lapu RTC. The
complaint was docketed as Civil Case No. 2203-L and it sought to
compel GSIS to execute a Final Deed of Sale over the subject lots
since the purchase price had already been fully paid by GMC. GSIS, in
defense, submitted to the court a Commission on Audit (COA)
Memorandum dated April 3, 1989, purportedly disallowing in audit
the sale of the subject lots for "apparent inherent irregularities," the
sale price to GMC being lower than GSIS’s purchase price at the
public auction. LLDHC, having been allowed to intervene, filed a
Motion to Dismiss GMC’s complaint. When this motion was denied,
LLDHC filed its Answer-in-Intervention and participated in the
ensuing proceedings as an intervenor.
GMC, on February 1, 1992, filed its own Motion to Intervene with a
Complaint-in-Intervention in Civil Case No. R-82-3429. This was
dismissed on February 17, 1992 and finally denied on March 23,
1992 by the Manila RTC on the ground that GMC can protect its
interest in another proceeding.
On February 24, 1992, after a full-blown trial, the Lapu-Lapu RTC
rendered its Decision9 in Civil Case No. 2203-L, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendant to:
1. Execute the final deed of absolute sale and deliver
the seventy-eight (78) certificates of title covering
said seventy-eight (78) parcels of land to the [Group
Management Corporation (GMC)];
2. Pay [GMC] actual damages, plus attorney’s fees and
expenses of litigation, in the amount of ₱285,638.88
and ₱100,000.00 exemplary damages;
3. [D]ismissing in toto intervenor’s complaint-in-
intervention for lack of evidence of legal standing
and legal interest in the suit, as well as failure to
substantiate any cause of action against either
[GMC] or [GSIS].
In deciding in favor of GMC, the Lapu-Lapu RTC held that there
existed a valid and binding sales contract between GSIS and GMC,
which GSIS could not continue to ignore without any justifiable
reason especially since GMC had already fully complied with its
obligations.  matter and of the parties in Civil Case No. 2309 [2203-L], petitioner
The Lapu-Lapu RTC found GSIS’s invocation of COA’s alleged
disapproval of the sale belated and self-serving. The Lapu-Lapu RTC
said that COA, in disapproving GSIS’s sale of the subject lots to GMC,
violated its own circular which excludes the disposal by a
government owned and/or controlled corporation of its "acquired
assets" (e.g., foreclosed assets or collaterals acquired in the regular
course of business). The Lapu-Lapu RTC also held that COA may not
intrude into GSIS’s charter-granted power to dispose of its acquired
assets within five years from acquisition by "preventing/aborting the
sale in question by refusing to pass it in audit. Moreover, the Lapu-
Lapu RTC held that the GSIS-proferred COA Memorandum was
inadmissible in evidence not only because as a mere photocopy it
failed to measure up to the "best evidence" rule under the Revised
Rules of Court, but also because no one from COA, not even the
auditor who supposedly prepared it, was ever presented to testify to
the veracity of its contents or its due execution.
In dismissing LLDHC’s complaint-in-intervention, the Lapu-Lapu RTC
held that LLDHC failed to prove its legal personality as a party-
intervenor and all it was able to establish was a "suggestion of right
for [GSIS] to renege [on] the sale for reasons peculiar to [GSIS] but
not transmissible nor subject to invocation by [LLDHC]."
LLDHC and GSIS filed their separate Notices of Appeal but these
were dismissed by the Lapu-Lapu RTC on December 6, 1993.
On May 10, 1994, the Manila RTC rendered a Decision in Civil Case
No. R-82-3429. The Manila RTC held that GSIS was unable to prove
the alleged violations committed by LLDHC to warrant the
foreclosure of the mortgage over the subject lots. Thus, the Manila
RTC annulled the foreclosure made by GSIS and ordered LLDHC to
pay GSIS the balance of its loan with interest, to wit:
WHEREFORE, judgment is hereby rendered:
1. ANNULLING the foreclosure by the defendant GSIS of
the mortgage over the seventy-eight (78) parcels of land
here involved:
2. CANCELLING the consolidated certificates of [title]
issued in the name of GSIS and directing the Register of
Deeds of Lapu-Lapu City to issue new certificates of [title]
over those seventy-eight (78) parcels of land in the name
of the plaintiff, in exactly the same condition as they were
before the foreclosure;
3. ORDERING the plaintiff to pay the GSIS the amount of
₱9,200,000.00 with interest thereon at the rate of twelve
(12%) percent per annum commencing from October 12,
1989 until fully paid; and
4. ORDERING defendant GSIS to execute a properly
registrable release of discharge of mortgage over the
parcels of land here involved after full payment of such
amount by the plaintiff.
All claims and counterclaims by the parties as against each other are
hereby dismissed.
No pronouncement as to costs.
Armed with the Manila RTC decision, LLDHC, on July 27, 1994, filed
before the Court of Appeals a Petition for Annulment of Judgment of
the Lapu-Lapu RTC Decision in Civil Case No. 2203-L. LLDHC alleged
that the Manila RTC decision nullified the sale of the subject lots to
GMC and consequently, the Lapu-Lapu RTC decision was also
nullified.
This petition, docketed as CA-G.R. SP No. 34696, was dismissed by
the Court of Appeals on December 29, 1994. The Court of Appeals,
in finding that the grounds LLDHC relied on were without merit, said:
In fine, there being no showing from the allegations of the petition
that the respondent court is without jurisdiction over the subject
has no cause of action for the annulment of judgment. The
complaint must allege ultimate facts for the annulment of the
Page 28 of 41
decision (Avendana v. Bautista, 142 SCRA 41). We find none in this
case.
No appeal having been taken by LLDHC, the decision of the Court of
Appeals in CA-G.R. SP No. 34696 became final and executory on
January 28, 1995, as stated in the Entry of Final Judgment dated
August 18, 1995.
On February 2, 1995, LLDHC filed before this Court a Petition for
Certiorar docketed as G.R. No. 118633. LLDHC, in seeking to annul
the February 24, 1992 Decision of the Lapu-Lapu RTC, again alleged
that the Manila RTC Decision nullified the Lapu-Lapu RTC Decision.
Finding the petition a mere reproduction of the Petition for
Annulment filed before the Court of Appeals in CA-G.R. SP No.
34696, this Court, in a Resolution dated September 6, 1996,
dismissed the petition in this wise:
In a last ditch attempt to annul the February 24, 1992 Decision of the
respondent court, this petition was brought before us on February 2,
1995.
Dismissal of this petition is inevitable.
The instant petition which is captioned, For: Certiorari With
Preliminary Injunction, is actually another Petition for Annulment of
Judgment of the February 24, 1992 Decision of the respondent
Regional Trial Court of Lapu-lapu City, Branch 27 in Civil Case No.
2203-L. A close perusal of this petition as well as the Petition for
Annulment of Judgment brought by the petitioner before the Court
of Appeals in CA-G.R. SP No. 34696 reveals that the instant petition
is a mere reproduction of the petition/complaint filed before the
appellate tribunal for annulment of judgment. Paragraphs two (2) to
eighteen (18) of this petition were copied verbatim from the Petition
for Annulment of Judgment earlier filed in the court a quo, except
for the designation of the parties thereto, i.e., plaintiff was changed
to petitioner, defendant to respondent. In fact, even the prayer in
this petition is the same prayer in the Petition for Annulment of
Judgment dismissed by the Court of Appeals, x x x.
xxxx
Under Section 9(2) of Batas Pambansa Blg. 129, otherwise known as
"The Judiciary Reorganization Act of 1980," it is the Court of Appeals
(then the Intermediate Appellate Court), and not this Court, which
has jurisdiction to annul judgments of Regional Trial Courts, viz:
SEC. 9. Jurisdiction -- The Intermediate Appellate Court shall
exercise:
xxxx
(2) Exclusive original jurisdiction over actions for annulment of
judgments of Regional Trial Courts; and
xxxx
Thus, this Court apparently has no jurisdiction to entertain a petition
which is evidently another petition to annul the February 24, 1992
Decision of the respondent Branch 27, Regional Trial Court of Lapu-
lapu City, it appearing that jurisdiction thereto properly pertains to
the Court of Appeals. Such a petition was brought before the
appellate court, but due to petitioner’s failure to nullify Judge Risos’
Decision in said forum, LLDHC, apparently at a loss as to what legal
remedy to take, brought the instant petition under the guise of a
petition for certiorari under Rule 65 seeking once again to annul the
judgment of Branch 27.
Instead of filing this petition for certiorari under Rule 65, which is
essentially another Petition to Annul Judgment, petitioner LLDHC
should have filed a timely Petition for Review under Rule 45 of the
Revised Rules of Court of the decision of the Court of Appeals, dated
December 29, 1994, dismissing the Petition for Annulment of
Judgment filed by the petitioner LLDHC before the court a quo. But,
this is all academic now. The appellate court’s decision had become
final and executory on January 28, 1995.
Despite such pronouncements, this Court, nevertheless, passed
upon the merits of LLDHC’s Petition for Certiorari in G.R. No. 118633.
This Court said that the petition, "which was truly for annulment of
judgment," cannot prosper because the two grounds on which a
judgment may be annulled were not present in the case. Going
further, this Court held that even if the petition were to be given due
course as a petition for certiorari under Rule 65 of the Revised Rules
of Court, it would still be dismissible for not being brought within a
reasonable period of time as it took LLDHC almost three years from
the time it received the February 24, 1992 decision until the time it
brought this action.
LLDHC’s motion for reconsideration was denied with finality on
November 18, 1996, and on February 18, 1997, an Entry of
Judgmen was made certifying that the September 6, 1996 Resolution
of this Court in G.R. No. 118633 had become final and executory on
December 23, 1996.
Consequently, on November 28, 1996, the Lapu-Lapu RTC issued an
Order directing the execution of the judgment in Civil Case No. 2203-
L. A corresponding Writ of Execution was issued on December 17,
1996. The Motions to Stay Execution filed by LLDHC and GSIS were
denied by the Lapu-Lapu RTC on February 19, 1997.
Meanwhile, on December 27, 1996, the Court of Appeals rendered a
Decision in the separate appeals taken by GSIS and LLDHC from the
May 10, 1994 Manila RTC Decision in Civil Case No. R-82-3429. This
case, docketed as CA-G.R. CV No. 49117, affirmed the Manila RTC
decision with modification insofar as awarding LLDHC attorney’s fees
and litigation expenses.
On March 3, 1997, GSIS came to this Court on a Petition for Review
of the Court of Appeals’ decision in CA-G.R. CV No. 49117. This was
docketed as G.R. No. 127732 and was dismissed on April 14,
1997 due to late filing, the due date being January 31, 1997. This
dismissal became final and executory on May 30, 1997.
On March 8, 1997, LLDHC filed a Petition for Certiorari with
preliminary injunction before the Court of Appeals, praying that
GMC and the Lapu-Lapu RTC be ordered to cease and desist from
proceeding with the execution of its Decision in Civil Case No. 2203-
L, on the theory that the Manila RTC decision was a supervening
event which made it mandatory for the Lapu-Lapu RTC to stop the
execution of its decision. This case was docketed as CA-G.R. SP No.
44052. On July 16, 1997, the Court of Appeals issued an Order
temporarily restraining the Lapu-Lapu RTC and GMC from executing
the February 24, 1992 decision in Civil Case No. 2203-L so as not to
render the resolution of the case moot and academic.
On July 21, 1997, because of GSIS’s continued refusal to implement
the December 17, 1996 Writ of Execution, the Lapu-Lapu RTC, upon
GMC’s motion, issued an Order redirecting its instructions to the
Register of Deeds of Lapu-Lapu City, to wit:
WHEREFORE, the defendant GSIS having refused to implement the
Order of this Court dated December 17, 1996 the Court in
accordance with Rule 39, Sec. 10-a of the 1997 Rules of Procedure,
hereby directs the Register of Deeds of Lapu-lapu City to cancel the
Transfer Certificate of Titles of the properties involved in this case
and to issue new ones in the name of the plaintiff and to deliver the
same to the latter within ten (10) days after this Order shall have
become final.
While the TRO issued by the Court of Appeals in CA-G.R. SP No.
44052 was in effect, the Manila RTC, on August 1, 1997, issued a
Writ of Execution of its judgment in Civil Case No. R-82-3429. On
August 7, 1997, the Sheriff implemented the Writ and ordered the
Register of Deeds of Lapu-Lapu City to cancel the consolidated
certificates of title issued in the name of GSIS and to issue new ones
in favor of LLDHC. In conformity with the TRO, the Lapu-Lapu RTC on
Page 29 of 41
August 19, 1997, ordered the suspension of its July 21, 1997 Order.
With no similar restraining order against the execution of the Manila
RTC Decision, a Writ of Possession was issued on August 21, 1997 to
cause GSIS and all persons claiming rights under it to vacate the
properties in question and to place LLDHC in peaceful possession
thereof.
On October 23, 1997, the Lapu-Lapu RTC, being aware of the events
that have taken place while the TRO was in effect, issued an
Order reiterating its previous Orders of November 28, 1996,
December 17, 1996, and July 21, 1997. The Lapu-Lapu RTC held that
since the restraining order issued by the Court of Appeals in CA-G.R.
SP No. 44052 had already lapsed by operation of law, and the
February 24, 1992 Decision in Civil Case No. 2203-L had not only
become final and executory but had been affirmed and upheld by
both the Court of Appeals and this Court, the inescapable mandate
was to give due course to the efficacy of its decision. The Lapu-Lapu
RTC thus directed the Register of Deeds of Lapu-Lapu City to effect
the transfer of the titles to the subject lots in favor of GMC and
declared "any and all acts done by the Register of Deeds of Lapu-
Lapu City null and void starting with the surreptitious issuance of the
new certificates of title in the name of [LLDHC], contrary" to its
decision and orders.
On November 13, 1997, LLDHC filed before the Court of Appeals
another Petition for Certiorari with preliminary injunction and
motion to consolidate with CA-G.R. SP No. 44052. This case was
docketed as CA-G.R. SP No. 45946, but was dismissed on November
20, 1997 for LLDHC’s failure to comply with Section 1, Rule 65 of the
1997 Rules of Civil Procedure which requires the petition to be
accompanied by, among others, "copies of all pleadings and
documents relevant and pertinent thereto."
The petition in CA-G.R. SP No. 44052 would likewise be dismissed by
the Court of Appeals on January 9, 1998, but this time, on the
merits, to wit:
The validity of the decision of the respondent judge in Civil Case No.
2303-L has thus been brought both before this Court and to the
Supreme Court by the petitioner. In both instances the respondent
judge has been upheld. The instant petition is petitioner’s latest
attempt to resist the implementation or execution of that decision
using as a shield a decision of a Regional Trial Court in the National
Capital Region. We are not prepared to allow it. The applicable rule
and jurisprudence are clear. The prevailing party is entitled as a
matter of right to a writ of execution, and the issuance thereof is a
ministerial duty compellable by mandamus. We do not believe that
there exists in this instance a supervening event which would justify
a deviation from this rule.
Prior to this, however, on November 28, 1997, the Lapu-Lapu RTC,
acting on GMC’s Omnibus Motion, made the following orders: for
LLDHC to show cause why it should not be declared in contempt; for
a writ of preliminary prohibitory injunction to be issued to restrain
all persons acting on LLDHC’s orders from carrying out such orders in
defiance of its final and executory judgment; and for a writ of
preliminary mandatory injunction to be issued to direct the ouster of
LLDHC. The Lapu-Lapu RTC also declared the Register of Deeds of
Lapu-Lapu City in contempt and directed the Office of the City Sheriff
to implement the above orders and to immediately detain and
confine the Register of Deeds of Lapu-Lapu City at the City Jail if he
continues to refuse to transfer the titles of the subject lots after ten
days from receipt of this order.
On December 22, 1997, the Lapu-Lapu RTC denied the motion for
reconsideration filed by the Register of Deeds of Lapu-Lapu City. In
separate motions, LLDHC, and again the Register of Deeds of Lapu-
Lapu City, sought the reconsideration of the November 28, 1997 and
December 22, 1997 Orders. On May 27, 1998, the Lapu-Lapu RTC,
acting under a new judge, granted both motions and accordingly set
aside the November 28, 1997 and December 22, 1997 Orders.
With the denia of its motion for reconsideration on August 4, 1998,
GMC came to this Court on a Petition for Certiorari, Prohibition and
Mandamus, seeking to set aside the May 27, 1998 Order of the
Lapu-Lapu RTC in Civil Case No. 2203-L. The Petition was referred to
the Court of Appeals, which under Batas Pambansa Blg. 129,
exercises original jurisdiction to issue such writs. This was docketed
as CA-G.R. SP No. 50650.
On April 30, 1999, the Court of Appeals rendered its Decision in CA-
G.R. SP No. 50650, the dispositive portion of which reads:
WHEREFORE, the petition being partly meritorious, the Court hereby
resolves as follows:
(1) To AFFIRM the Orders of May 28, 1998 and August 4,
1998 in Civil Case No. 2203-L insofar as they set aside the
order holding respondent Register of Deeds guilty of
indirect contempt of court and to NULLIFY said orders in so
far as they set aside the directives contained in paragraphs
(a) and (b) and (c) of the order dated November 28, 1997.
(2) To DECLARE without FORCE and EFFECT insofar as
petitioner Group Management Corporation is concerned
the decision in Civil Case No. R-82-3429 as well as the
orders and writs issued for its execution and enforcement:
and
(3) To ENJOIN respondent Lapu-Lapu Development and
Housing Corporation, along with its agents and
representatives and/or persons/public officials/employees
acting in its interest, specifically respondent Regional Trial
Court of Manila Branch 38, and respondent Register of
Deeds of Lapu-Lapu City, from obstructing, interfering with
or in any manner delaying the implementation/execution/
enforcement by the Lapu-Lapu City RTC of its order and
writ of execution in Civil Case No. 2203-L.
For lack of sufficient basis the charge of contempt of court against
respondent Lapu-Lapu Development and Housing Corporation and
the public respondents is hereby DISMISSED.
With the denial of LLDHC’s motion for reconsideration on December
29, 1999, LLDHC, on January 26, 2000, filed before this Court a
Petition for Review on Certiorari assailing the April 30, 1999 decision
of the Court of Appeals in CA-G.R. SP No. 50650. This petition was
docketed as G.R. No. 141407.
This Court dismissed LLDHC’s petition and upheld the decision of the
Court of Appeals in CA-G.R. SP No. 50650 in its decision dated
September 9, 2002. LLDHC’s Motion for Reconsideration and Second
Motion for Reconsideration were also denied on November 13,
2002 and February 3, 2003 respectively.
The September 9, 2002 decision of this Court in G.R. No. 141407
became final on March 10, 2003.
On March 11, 2004, the Lapu-Lapu RTC, acting on GMC’s Motion for
Execution, issued an Order the dispositive portion of which reads:
WHEREFORE, in light of the foregoing considerations, plaintiff Group
Management Corporation’s motion is GRANTED, while defendant
GSIS’ motion to stay the issuance of a writ of execution is denied for
lack of merit. Consequently, the Sheriff of this Court is directed to
proceed with the immediate implementation of this Court’s decision
dated February 24, 1992, by enforcing completely this Court’s Order
of Execution dated November 28, 1996, the writ of execution dated
December 17, 1996, the Order dated July 21, 1997, the Order dated
October 23 1997, the Order dated November 28, 1997 and the
Order dated December 22, 1997.
Page 30 of 41
On May 7, 2004, the Lapu-Lapu RTC denied the motions for
reconsideration filed by LLDHC and GSIS.
On May 27, 2004, LLDHC filed before the Court of Appeals a Petition
for Certiorari, Prohibition and Mandamus against the Lapu-Lapu RTC
for having issued the Orders of March 11, 2004 and May 7, 2004
(assailed Orders). This petition docketed as CA-G.R. SP No. 84382,
sought the annulment of the assailed Orders and for the Court of
Appeals to command the Lapu-Lapu RTC to desist from further
proceeding in Civil Case No. 2203-L, to dismiss GMC’s Motion for
Execution, and for the issuance of a Temporary Restraining Order
(TRO)/Writ of Preliminary Injunction against the Lapu-Lapu RTC and
GMC.
On July 6, 2004, GSIS filed its own Petition for Certiorari and
Prohibition with Preliminary Injunction and Temporary Restraining
Order before the Court of Appeals to annul the assailed Orders of
the Lapu-Lapu RTC, to prohibit the judge therein and the Register of
Deeds of Lapu-Lapu City from implementing such assailed Orders,
and for the issuance of a TRO and writ of preliminary injunction to
maintain the status quo while the case is under litigation. This
petition was docketed as CA-G.R. SP No. 85096.
The Court of Appeals initially dismissed outright LLDHC’s petition for
failure to attach the Required Secretary’s Certificate/Board
Resolution authorizing petitioner to initiate the petition, but in a
Resolution dated August 2, 2004, after having found the explanation
for the mistake satisfactory, the Court of Appeals, "on equitable
consideration and for the purpose of preserving the status quo
during the pendency of the appeal," issued a TRO against the Lapu-
Lapu RTC from enforcing its jurisdiction and judgment/order in Civil
Case No. 2203-L until further orders. In its August 30, 2004
Resolution, the Court of Appeals, without resolving the case on its
merits, also issued a Writ of Preliminary Injunction, commanding the
Lapu-Lapu RTC to cease and desist from implementing the assailed
Orders in Civil Case No. 2203-L, until further orders.
On November 25, 2004, the Twentieth Division of the Court of
Appeals promulgated its decision in CA-G.R. SP No. 85096. It
dismissed GSIS’s petition and affirmed the assailed Orders of March
11, 2004 and May 7, 2004. The Court of Appeals found no merit in
GSIS’s petition since the judgment in Civil Case No. 2203-L, which
was decided way back on February 24, 1992, had long become final
and executory, which meant that the Lapu-Lapu RTC had no legal
obstacle to cause said judgment to be executed and enforced. The
Court of Appeals quoted in full, portions of this Court’s Decision in
G.R. No. 141407 to underscore the fact that no less than the
Supreme Court had declared that the decision in Civil Case No. 2203-
L was valid and binding and had become final and executory a long
time ago and had not been in any way nullified by the decision
rendered by the Manila RTC on May 10, 1994 in Civil Case No. R-82-
3429. On January 20, 2005, the Court of Appeals upheld its decision
and denied GSIS’s Motion for Reconsideration.
However, on September 23, 2005, the Special Nineteenth Division of
the Court of Appeals came out with its own decision in CA-G.R. SP
No. 84382. It granted LLDHC’s petition, contrary to the Court of
Appeals’ decision in CA-G.R. SP No. 85096, and annulled and set
aside the March 11, 2004 Order of the Lapu-Lapu RTC in this wise:
WHEREFORE, finding merit in the instant Petition for Certiorari,
Prohibition and Mandamus, the same is hereby GRANTED, and the
assailed Order, dated March 11, 2004, of the Regional Trial Court,
7th Judicial Region, Branch 27, Lapulapu City, in Civil Case No. 2203-L
is ANNULLED AND SET ASIDE.
Accordingly, respondent Judge Benedicto Cobarde is hereby
ORDERED:
a) to DESIST from further proceeding in Civil Case No.
2203-L; and
b) to DISMISS GMC’s Motion for Execution in the
abovementioned case;
Meanwhile, the Writ of Preliminary Injunction earlier issued is
hereby declared PERMANENT. No pronouncement as to costs. 72
GSIS73 and GMC74 are now before this Court, with their separate
Petitions for Review on Certiorari, assailing the decisions of the
Court of Appeals in CA-G.R. SP No. 85096 and CA-G.R. SP No. 84382,
respectively.
G.R. No. 167000
In G.R. No. 167000, GSIS is assailing the Orders issued by the Lapu-
Lapu RTC on March 11, 2004 and May 7, 2004 for being legally
unenforceable on GSIS because the titles of the 78 lots in
Marigondon, Lapu-Lapu City were already in LLDHC’s name, due to
the final and executory judgment rendered by the Manila RTC in Civil
Case No. R-82-3429. GSIS contends that it is legally and physically
impossible for it to comply with the assailed Orders as the "subject
matter to be delivered or performed have already been taken away
from"  GSIS. GSIS asserts that the circumstances which have arisen,
from the judgment of the Manila RTC to the cancellation of GSIS’s
titles, are "supervening events" which should be considered as an
exception to the doctrine of finality of judgments because they
render the execution of the final and executory judgment of the
Lapu-Lapu RTC in Civil Case No. 2203-L unjust and inequitable. GSIS
further claims that it should not be made to pay damages of any kind
because its funds and properties are exempt from execution,
garnishment, and other legal processes under Section 39 of Republic
Act No. 8291.
LLDHC, in its Compliance, believes that it was impleaded in this case
as a mere nominal party since it filed its own Petition
for Certiorari before the Court of Appeals, which was granted in CA-
G.R. SP No. 84382. LLDHC essentially agrees with GSIS that the
implementation of the assailed Orders have become legally
impossible due to the fully implemented Writ of Execution issued by
the Manila RTC in Civil Case No. R-82-3429. LLDHC alleges that
because of this "supervening event," GSIS cannot be compelled to
execute a final deed of sale in GMC’s favor, and "LLDHC cannot be
divested of its titles, ownership and possession" of the subject
properties.
GMC in its comment argues that GSIS has no legal standing to
institute this petition because it has no more interest in the subject
lots, since it is no longer in possession and the titles thereto have
already been registered in LLDHC’s name. GMC claims that the
decision of the Special Nineteenth Division of the Court of Appeals is
barred by res judicata, and that LLDHC is guilty of forum shopping
for filing several petitions before the Court of Appeals and this Court
with the same issues and arguments. GMC also asserts that the
judgment in Civil Case No. R-82-3429 is enforceable only between
GSIS and LLDHC as GMC was not a party to the case, and that the
Manila RTC cannot overrule the Lapu-Lapu RTC, they being co-equal
courts.
G.R. No. 169971
In G.R. No. 169971, GMC is praying that the decision of the Special
Nineteenth Division of the Court of Appeals in CA-G.R. SP No. 84382
be reversed and set aside. GMC is claiming that the Court of
Appeals, in rendering the said decision, committed a palpable legal
error by overruling several final decisions rendered by the Lapu-Lapu
RTC, the Court of Appeals, and this Court. GMC claims that the Lapu-
Lapu RTC’s duty to continue with the implementation of its orders is
purely ministerial as the judgment has not only become final and
executory, but has been affirmed by both the Court of Appeals and
Page 31 of 41
the Supreme Court in several equally final and executory
decisions. GMC, repeating its arguments in G.R. No. 167000,
maintains that the petition is barred by res judicata, that there is
forum shopping, and that the Manila RTC decision is not binding on
GMC.
LLDHC in its comment insists that there is a supervening event which
rendered it necessary to stay the execution of the judgment of the
Lapu-Lapu RTC. LLDHC also asserts that, as correctly found by the
Court of Appeals in CA-G.R. SP No. 84382, the Lapu-Lapu RTC
decision in Civil Case No. 2203-L was not affirmed with finality by the
Court of Appeals and the Supreme Court as the decision was not
reviewed on the merits.
SUMMARY OF THE ISSUES
The present case is peculiar in the sense that it involves two
conflicting final and executory decisions of two different trial courts.
Moreover, one of the RTC decisions had been fully executed and
implemented. To complicate things further, the parties have
previously filed several petitions, which have reached not only the
Court of Appeals but also this Court. Upon consolidation of the two
petitions, this Court has narrowed down the issues to the following:
1. Whether or not the decision of the Manila RTC in Civil
Case No. R-82-3429 constitutes a supervening event,
which should be admitted as an exception to the doctrine
of finality of judgments.
2. Whether or not the September 23, 2005 Decision of the
Special Nineteenth Division of the Court of Appeals in CA-
G.R. SP No. 84382 and GSIS’s Petition in G.R. No. 167000
are barred by res judicata.
3. Whether or not there is a legal and physical impossibility
for GSIS to comply with the March 11, 2004 and May 7,
2004 Orders of the Lapu-Lapu RTC in Civil Case No. 2203-L.
4. Whether or not LLDHC and GSIS are guilty of forum
shopping.
First Issue:
Supervening Event
It is well-settled that once a judgment attains finality, it becomes
immutable and unalterable. It may not be changed, altered or
modified in any way even if the modification were for the purpose of
correcting an erroneous conclusion of fact or law. This is referred to
as the "doctrine of finality of judgments," and this doctrine applies
even to the highest court of the land. This Court explained its
rationale in this wise:
The doctrine of finality of judgment is grounded on fundamental
considerations of public policy and sound practice, and that, at the
risk of occasional errors, the judgments or orders of courts must
become final at some definite time fixed by law; otherwise, there
would be no end to litigations, thus setting to naught the main role
of courts of justice which is to assist in the enforcement of the rule
of law and the maintenance of peace and order by settling justiciable
controversies with finality.
This Court has, on several occasions, ruled that the doctrine of
finality of judgments admits of certain exceptions, namely: "the
correction of clerical errors, the so-called nunc pro tunc entries
which cause no prejudice to any party, void judgments, and
whenever circumstances transpire after the finality of the decision
which render its execution unjust and inequitable."
Both GSIS and LLDHC claim that the execution of the decision and
orders in Civil Case No. 2203-L should be stayed because of the
occurrence of "supervening events" which render the execution of
the judgment "impossible, unfair, unjust and inequitable." However,
in order for an event to be considered a supervening event to justify
the alteration or modification of a final judgment, the event must
have transpired after the judgment has become final and executory,
to wit:
Supervening events refer to facts which transpire after judgment has
become final and executory or to new circumstances which
developed after the judgment has acquired finality, including
matters which the parties were not aware of prior to or during the
trial as they were not yet in existence at that time.
The Lapu-Lapu RTC Decision in Civil Case No. 2203-L was
promulgated on February 24, 1992, while the Manila RTC Decision in
Civil Case No. R-82-3429 was promulgated on May 10, 1994. As early
as December 6, 1993, both GSIS’s and LLDHC’s appeals of the Lapu-
Lapu RTC Decision were dismissed by the said RTC. Only GSIS moved
to reconsider this dismissal, which was denied on July 6,
1994. Strictly speaking, the Lapu Lapu RTC Decision should have
attained finality at that stage; however, LLDHC filed with the Court of
Appeals its Petition for Annulment of Judgment (CA-G.R. SP No.
34696) on July 27, 1994 and it used therein the Manila RTC Decision
as its main ground for annulment of the Lapu-Lapu RTC decision.
The Court of Appeals nonetheless dismissed LLDHC’s Petition for
Annulment of Judgment, in CA-G.R. SP No. 34696, and that became
final and executory on January 28, 1995, after LLDHC interposed no
appeal. The entry of judgment in this case was issued on August 18,
1995. Moreover, the similar petition of LLDHC before this Court in
G.R. No. 118633 was decided on September 6, 1996 and became
final and executory on December 23, 1996. Therefore, the ruling by
the Manila RTC is evidently not a supervening event. It was already
in existence even before the decision in Civil Case No. 2203-L
attained finality.
Just as LLDHC and GSIS, as the losing parties, had the right to file
their respective appeals within the prescribed period, GMC, as the
winning party in Civil Case No. 2203-L, equally had the correlative
right to benefit from the finality of the resolution of its case, to wit:
A final judgment vests in the prevailing party a right recognized and
protected by law under the due process clause of the Constitution. A
final judgment is "a vested interest which it is right and equitable
that the government should recognize and protect, and of which the
individual could not be deprived arbitrarily without injustice."
Since the Manila RTC decision does not constitute a supervening
event, there is therefore neither reason nor justification to alter,
modify or annul the Lapu-Lapu RTC Decision and Orders, which have
long become final and executory. Thus, in the present case, GMC
must not be deprived of its right to enjoy the fruits of a final verdict.
It is settled in jurisprudence that to stay execution of a final
judgment, a supervening event "must create a substantial change in
the rights or relations of the parties which would render execution
of a final judgment unjust, impossible or inequitable making it
imperative to stay immediate execution in the interest of justice." 94
However, what would be unjust and inequitable is for the Court to
accord preference to the Manila RTC Decision on this occasion when
in the past, the Court of Appeals and this Court have repeatedly,
consistently, and with finality rejected LLDHC’s moves to use the
Manila RTC Decision as a ground to annul, and/or to bar the
execution of, the Lapu Lapu RTC Decision. To be sure, in the Decision
dated September 9, 2002 in G.R. No. 141407, penned by former
Chief Justice Artemio V. Panganiban, the Court already passed upon
the lack of effect of the Manila RTC Decision on the finality of the
Lapu Lapu RTC decision in this wise:
The records of the case clearly show that the Lapulapu Decision has
become final and executory and is thus valid and binding upon the
parties. Obviously, petitioner [LLDHC] is again trying another
backdoor attempt to annul the final and executory Decision of the
Lapulapu RTC.
Page 32 of 41
First, it was petitioner that filed on March 11, 1992 a Notice of
Appeal contesting the Lapulapu RTC Judgment in Civil Case No.
2203-L rendered on February 24, 1992. The Notice was however
rejected by the said RTC for being frivolous and dilatory. Since
petitioner had done nothing thereafter, the Decision clearly became
final and executory.
However, upon receipt of the Manila RTC Decision, petitioner found
a new tool to evade the already final Lapulapu Decision by seeking
the annulment of the latter in a Petition with the CA. However, the
appellate court dismissed the action, because petitioner had been
unable to prove any of the grounds for annulment; namely lack of
jurisdiction or extrinsic fraud. Because no appeal had been taken by
petitioner, the ruling of the CA also became final and executory.
Second, the Supreme Court likewise recognized the finality of the CA
Decision when it threw out LLDHC’s Petition for Certiorari in GR No.
118633. This Court ruled thus:
"Instead of filing this petition for certiorari under Rule 65, which is
essentially another Petition to Annul Judgment, petitioner LLDHC
should have filed a timely Petition for Review under Rule 45 of the
Revised Rules of Court of the decision of the Court of Appeals, dated
December 29, 1994, dismissing the Petition for Annulment of
Judgment filed by the petitioner LLDHC before the court a quo. But
this is all academic now. The appellate court’s decision had become
final and executory on January 28, 1995."
Jurisprudence mandates that when a decision becomes final and
executory, it becomes valid and binding upon the parties and their
successors in interest. Such decision or order can no longer be
disturbed or reopened no matter how erroneous it may have been.
Petitioner’s failure to file an appeal within the reglementary period
renders the judgment final and executory. The perfection of an
appeal in the manner and within the period prescribed by law is
mandatory. Failure to conform to the rules regarding appeal will
render the judgment final and executory and, hence, unappealable.
Therefore, since the Lapulapu Decision has become final and
executory, its execution has become mandatory and ministerial on
the part of the judge.
The CA correctly ruled that the Lapulapu Judgment is binding upon
petitioner [LLDHC] which, by its own motion, participated as an
intervenor. In fact, the latter filed an Answer in Intervention and
thereafter actively took part in the trial. Thus, having had an
opportunity to be heard and to seek a reconsideration of the action
or ruling it complained of, it cannot claim that it was denied due
process of law. What the law prohibits is the absolute absence of the
opportunity to be heard. Jurisprudence teaches that a party cannot
feign denial of due process if it has been afforded the opportunity to
present its side.
Petitioner likewise claims that Private Respondent GMC cannot
escape the adverse effects of the final and executory judgment of
the Manila RTC.
Again, we do not agree. A trial court has no power to stop an act
that has been authorized by another trial court of equal rank. As
correctly stated by the CA, the Decision rendered by the Manila RTC
-- while final and executory -- cannot bind herein private respondent
[GMC], which was not a party to the case before the said RTC. A
personal judgment is binding only upon the parties, their agents,
representatives and successors in interest.1avvphi1
Third, petitioner grievously errs in insisting that the judgment of the
Manila RTC nullified that of the Lapulapu RTC. As already adverted to
earlier, courts of coequal and coordinate jurisdiction may not
interfere with or pass upon each other’s orders or processes, since
they have the same power and jurisdiction. Except in extreme
situations authorized by law, they are proscribed from doing so.
It likewise does not escape the attention of this Court that the only
reason the Manila RTC Decision was implemented ahead of the Lapu
Lapu RTC Decision was that LLDHC successfully secured a TRO from
the Court of Appeals through its petition for certiorari docketed as
CA-G.R. SP No. 44052, which was eventually dismissed by the
appellate court. The Court of Appeals ruled that the Manila RTC
Decision did not constitute a supervening event that would forestall
the execution of the Lapu Lapu RTC Decision. This decision of the
Court of Appeals likewise became final and executory in 1998.
It bears repeating that the issue of whether or not the Manila RTC
Decision could nullify or render unenforceable the Lapu Lapu RTC
Decision has been litigated many times over in different fora. It
would be the height of inequity if the Court were to now reverse the
Court of Appeals’ and its own final and executory rulings and allow
GSIS to prevent the execution of the Lapu Lapu RTC Decision on the
same legal grounds previously discredited by the courts.
Second Issue:
Res Judicata
GMC asserts that the September 23, 2005 Decision of the Special
Nineteenth Division of the Court of Appeals in CA-G.R. SP No. 84382
and the petition herein by GSIS in G.R. No. 167000 are barred by res
judicata as the issues involved had been fully resolved not only by
the lower courts but by this Court as well. GSIS and LLDHC both insist
that res judicata does not apply as this Court "has not yet rendered a
decision involving the same or any similar petition." The petitions by
LLDHC before the Court of Appeals and GSIS before this Court both
prayed for the annulment of the March 11, 2004 and May 7, 2004
Orders of the Lapu-Lapu RTC in Civil Case No. 2203-L. These assailed
Orders were both issued to resolve the parties’ motions and to have
the February 24, 1992 judgment implemented and executed.
In Republic of the Philippines (Civil Aeronautics Administration) v.
Yu,  this Court expounded on the concept of res judicata and
explained it in this wise:
Res judicata literally means "a matter adjudged; a thing judicially
acted upon or decided; a thing or matter settled by judgment." Res
judicata lays the rule that an existing final judgment or decree
rendered on the merits, and without fraud or collusion, by a court of
competent jurisdiction, upon any matter within its jurisdiction, is
conclusive of the rights of the parties or their privies, in all other
actions or suits in the same or any other judicial tribunal of
concurrent jurisdiction on the points and matters in issue in the first
suit.
In Villanueva v. Court of Appeals, we enumerated the elements of
res judicata as follows:
a) The former judgment or order must be final;
b) It must be a judgment or order on the merits, that is, it
was rendered after a consideration of the evidence or
stipulations submitted by the parties at the trial of the
case;
c) It must have been rendered by a court having jurisdiction
over the subject matter and the parties; and
d) There must be, between the first and second actions,
identity of parties, of subject matter and of cause of
action. This requisite is satisfied if the two (2) actions are
substantially between the same parties.
All three parties herein are in agreement with the facts that led to
the petitions in this case. However, not all of them agree that the
matters involved in this case have already been judicially settled.
While GMC contends that GSIS’s petition is barred by res judicata,
both GSIS and LLDHC assert that this Court has not yet decided any
similar petition, thus disputing the claim of res judicata.
Page 33 of 41
Res judicata has two concepts: (1) "bar by prior judgment" as
enunciated in Rule 39, Section 47(b) of the 1997 Rules of Civil
Procedure; and (2) "conclusiveness of judgment" in Rule 39, Section
47(c), which reads as follows:
(b) In other cases, the judgment or final order is, with
respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto,
conclusive between the parties and their successors in
interest by title subsequent to the commencement of the
action or special proceeding, litigating for the same thing
and under the same title and in the same capacity; and
(c) In any other litigation between the same parties or
their successors in interest, that only is deemed to have
been adjudged in a former judgment or final order which
appears upon its face to have been so adjudged, or which
was actually and necessarily included therein or necessary
thereto.
In explaining the two concepts of res judicata, this Court held that:
There is "bar by prior judgment" when, as between the first case
where the judgment was rendered, and the second case that is
sought to be barred, there is identity of parties, subject matter, and
causes of action. But where there is identity of parties and subject
matter in the first and second cases, but no identity of causes of
action, the first judgment is conclusive only as to those matters
actually and directly controverted and determined and not as to
matters merely involved therein. This is "conclusiveness of
judgment." Under the doctrine of conclusiveness of judgment, facts
and issues actually and directly resolved in a former suit cannot
again be raised in any future case between the same parties, even if
the latter suit may involve a different claim or cause of action. The
identity of causes of action is not required but merely identity of
issues.
In Peñalosa v. Tuason, we laid down the test in determining whether
or not the causes of action in the first and second cases are identical:
Would the same evidence support and establish both the present
and former cause of action? If so, the former recovery is a bar; if
otherwise, it does not stand in the way of the former action.
Res judicata clearly exists in G.R. No. 167000 and in CA-G.R. SP No.
84382 because both GSIS’s and LLDHC’s actions put in issue the
validity of the Lapu-Lapu RTC Decision and were based on the
assumption that it has either been modified, altered or nullified by
the Manila RTC Decision.
In CA-G.R. SP No. 84382, LLDHC sought to annul the assailed Orders
of the Lapu-Lapu RTC and to order the judge therein to desist from
further proceeding in Civil Case No. 2203-L. LLDHC sought for the
same reliefs in its Petition for Annulment of Judgment in CA-G.R. SP
No. 34696 and G.R. No. 118633, in its Petition for Certiorari in CA-
G.R. SP No. 44052, and in its Petition for Review on Certiorari in G.R.
No. 141407, all of which have been decided with finality.
In G.R. No. 167000, GSIS is praying for the reversal of the November
25, 2004 Decision and January 20, 2005 Resolution in CA-G.R. SP No.
85096, wherein the Court of Appeals affirmed the assailed Orders.
The validity of these assailed Orders hinges on the validity of the
Lapu-Lapu RTC Decision, which issue had already been decided with
finality by both the Court of Appeals and this Court.
Notwithstanding the difference in the forms of actions GSIS and
LLDHC filed, the doctrine of res judicata still applies considering that
the parties were litigating the same thing, i.e., the 78 lots in
Marigondon, Lapu-Lapu City, and more importantly, the same
contentions and evidence were used in all causes of action. As this
Court held in Mendiola v. Court of Appeals:
The test of identity of causes of action lies not in the form of an
action but on whether the same evidence would support and
establish the former and the present causes of action. The difference
of actions in the aforesaid cases is of no moment. x x x.
The doctrine of res judicata makes a final judgment on the merits
rendered by a court of competent jurisdiction conclusive as to the
rights of the parties and their privies and amounts to an absolute bar
to subsequent actions involving the same claim, demand, or cause of
action. Even a finding of conclusiveness of judgment operates as
estoppel with respect to matters in issue or points controverted, on
the determination of which the finding or judgment was anchored.
Evidently, this Court could dispose of this case simply upon the
application of the principle of res judicata. It is clear that GSIS’s
petition in G.R. No. 167000 and LLDHC’s petition in CA-G.R. SP No.
84382 should have never reached those stages for having been
barred by a final and executory judgment on their claims. However,
considering the nature of the case before us, this Court is compelled
to make a final determination of the issues in the interest of
substantial justice and to end the wasteful use of our courts’ time
and resources.
Third Issue:
GSIS’s Compliance with the
Lapu-Lapu RTC Judgment and Orders
GSIS asserts that the assailed Orders cannot be enforced upon it
given the physical and legal impossibility for it to comply as the titles
over the subject properties were transferred to LLDHC under the
Manila RTC writ of execution.
A closer perusal of the March 11, 2004 and May 7, 2004 Orders
shows that GSIS’s argument holds no water. The May 7, 2004 Order
denied GSIS’s and LLDHC’s motions for reconsideration of the March
11, 2004 Order. The March 11, 2004 Order resolved GMC’s urgent
manifestation and motion to proceed with the implementation of
the February 24, 1992 final and executory decision and GSIS’s and
LLDHC’s opposition thereto, as well as GSIS’s motion to stay the
issuance of a writ of execution against it. The dispositive portion of
the Order reads:
WHEREFORE, in the light of the foregoing considerations, plaintiff
Group Management Corporation’s motion is GRANTED, while
defendant GSIS’ motion to stay the issuance of a writ of execution is
denied for lack of merit. Consequently, the Sheriff of this Court is
directed to proceed with the immediate implementation of this
Court’s decision dated February 24, 1992, by enforcing completely
this Court’s Order of Execution dated November 28, 1996, the writ
of execution dated December 17, 1996, the Order dated July 21,
1997, the Order dated October 23, 1997, the Order dated November
28, 1997 and the Order dated December 22, 1997.
While the previous orders and writs of execution issued by the Lapu-
Lapu RTC required the GSIS to execute the final deed of sale and to
deliver the subject properties, the Lapu-Lapu RTC, in its subsequent
Orders, modified this by directing its order to the Register of Deeds
of Lapu-Lapu City. In its July 21, 1997 Order, the Lapu-Lapu RTC,
seeing GSIS’s obstinate refusal to implement the court’s previous
orders, directed the Register of Deeds of Lapu-Lapu City to cancel
the Transfer Certificates of Title of the subject properties and to
issue new ones in the name of GMC, and to deliver the same to
GMC. Moreover, in its October 23, 1997 Order, the Lapu-Lapu RTC,
noting the implemented judgment of the Manila RTC, declared the
issuance of new titles to LLDHC null and void for being contrary to
the court’s February 24, 1992 decision and directed the Register of
Deeds to effect the transfer of the titles to GMC.
Considering that the assailed Orders merely directed the Lapu-Lapu
RTC’s Sheriff to proceed with the implementation of the court’s
Page 34 of 41
previous orders, that is, to make sure that the Register of Deeds of
Lapu-Lapu City complied with the orders, GSIS had nothing to
comply with insofar as the titles to, and possession of, the subject
properties were concerned, the Orders being clearly directed
towards the Sheriff of the Lapu-Lapu RTC and the Register of Deeds
of Lapu-Lapu City. Hence, GSIS’s argument of legal and physical
impossibility of compliance with the assailed Orders is baseless.
GSIS also argues that it cannot be the "subject [of any] execution
including [the] payment of any damage and other monetary
judgments because all GSIS funds and properties are absolutely and
expressly exempt from execution and other legal processes under
Section 39 of Republic Act No. 8291."
Section 39 of Republic Act No. 8291 provides:
SECTION 39. Exemption from Tax, Legal Process and Lien. —It is
hereby declared to be the policy of the State that the actuarial
solvency of the funds of the GSIS shall be preserved and maintained
at all times and that contribution rates necessary to sustain the
benefits under this Act shall be kept as low as possible in order not
to burden the members of the GSIS and their employers. Taxes
imposed on the GSIS tend to impair the actuarial solvency of its
funds and increase the contribution rate necessary to sustain the
benefits of this Act. Accordingly, notwithstanding any laws to the
contrary, the GSIS, its assets, revenues including all accruals thereto,
and benefits paid, shall be exempt from all taxes, assessments, fees,
charges or duties of all kinds. These exemptions shall continue
unless expressly and specifically revoked and any assessment against
the GSIS as of the approval of this Act are hereby considered paid.
Consequently, all laws, ordinances, regulations, issuances, opinions
or jurisprudence contrary to or in derogation of this provision are
hereby deemed repealed, superseded and rendered ineffective and
without legal force and effect.
xxxx
The funds and/or the properties referred to herein as well as the
benefits, sums or monies corresponding to the benefits under this
Act shall be exempt from attachment, garnishment, execution, levy
or other processes issued by the courts, quasi judicial agencies or
administrative bodies including Commission on Audit (COA)
disallowances and from all financial obligations of the members,
including his pecuniary accountability arising from or caused or
occasioned by his exercise or performance of his official functions or
duties, or incurred relative to or in connection with his position or
work except when his monetary liability, contractual or otherwise, is
in favor of the GSIS.
This Court, in Rubia v. Government Service Insurance System, held
that the exemption of GSIS is not absolute and does not encompass
all of its funds, to wit:
In so far as Section 39 of the GSIS charter exempts the GSIS from
execution, suffice it to say that such exemption is not absolute and
does not encompass all the GSIS funds. By way of illustration and as
may be gleaned from the Implementing Rules and Regulation of the
GSIS Act of 1997, one exemption refers to social security benefits
and other benefits of GSIS members under Republic Act No. 8291 in
connection with financial obligations of the members to other
parties. The pertinent GSIS Rule provides:
Rule XV. Funds of the GSIS
Section 15.7 Exemption of Benefits of Members from Tax,
Attachment, Execution, Levy or other Legal Processes. – The social
security benefits and other benefits of GSIS members under R.A.
8291 shall be exempt from tax, attachment, garnishment, execution,
levy or other processes issued by the courts, quasi-judicial agencies
or administrative bodies in connection with all financial obligations
of the member, including his pecuniary accountability arising from
or caused or occasioned by his exercise or performance of his official
functions or duties or incurred in connection with his position or
work, as well as COA disallowances. Monetary liability in favor of the
GSIS, however, may be deducted from the benefits of the member.
[Emphasis supplied]
The processual exemption of the GSIS funds and properties under
Section 39 of the GSIS Charter, in our view, should be read
consistently with its avowed principal purpose: to maintain actuarial
solvency of the GSIS in the protection of assets which are to be used
to finance the retirement, disability and life insurance benefits of its
members. Clearly, the exemption should be limited to the purposes
and objects covered. Any interpretation that would give it an
expansive construction to exempt all GSIS assets from legal
processes absolutely would be unwarranted.
Furthermore, the declared policy of the State in Section 39 of the
GSIS Charter granting GSIS an exemption from tax, lien, attachment,
levy, execution, and other legal processes should be read together
with the grant of power to the GSIS to invest its "excess funds"
under Section 36 of the same Act. Under Section 36, the GSIS is
granted the ancillary power to invest in business and other ventures
for the benefit of the employees, by using its excess funds for
investment purposes. In the exercise of such function and power,
the GSIS is allowed to assume a character similar to a private
corporation. Thus, it may sue and be sued, as also, explicitly granted
by its charter. Needless to say, where proper, under Section 36, the
GSIS may be held liable for the contracts it has entered into in the
course of its business investments. For GSIS cannot claim a special
immunity from liability in regard to its business ventures under said
Section. Nor can it deny contracting parties, in our view, the right of
redress and the enforcement of a claim, particularly as it arises from
a purely contractual relationship, of a private character between an
individual and the GSIS.
This ruling has been reiterated in the more recent case of
Government Service Insurance System v. Regional Trial Court of
Pasig City, Branch 71, wherein GSIS, which was also the petitioner in
that case, asked to reverse this Court’s findings in Rubia and grant
GSIS absolute immunity. This Court rejected that plea and held that
GSIS should not be allowed to hide behind such immunity especially
since its obligation arose from its own wrongful action in a business
transaction.
In this case, the monetary judgments against GSIS arose from its
failure to comply with its private and contractual obligation to GMC.
As such, GSIS cannot claim immunity from the enforcement of the
final and executory judgment against it
Fourth Issue:
Forum Shopping
On the issue of forum shopping, this Court already found LLDHC
guilty of forum shopping and was adjudged to pay treble costs way
back in 2002 in G.R. No. 141407:
There is forum shopping whenever, as a result of an adverse opinion
in one forum, a party seeks a favorable opinion (other than by
appeal or certiorari) from another. In Gatmaytan v. CA, the
petitioner therein repeatedly availed itself of several judicial
remedies in different courts, simultaneously or successively. All
those remedies were substantially founded on the same transactions
and the same essential facts and circumstances; and all raised
substantially the same issues either pending in, or already resolved
adversely by, some other court. This Court held that therein
petitioner was trying to increase his chances of obtaining a favorable
decision by filing multiple suits in several courts. Hence, he was
found guilty of forum shopping.
Page 35 of 41
In the present case, after the Lapulapu RTC had rendered its Decision
in favor of private respondent, petitioner filed several petitions
before this Court and the CA essentially seeking the annulment
thereof. True, petitioner had filed its Complaint in the Manila RTC
before private respondent filed its own suit in the Lapulapu RTC.
Records, however, show that private respondent learned of the
Manila case only when petitioner filed its Motion for Intervention in
the Lapulapu RTC. When GMC filed its own Motion to Intervene in
the Manila RTC, it was promptly rebuffed by the judge therein. On
the other hand, petitioner was able to present its side and to
participate fully in the proceedings before the Lapulapu RTC.
On July 27, 1994, almost two years after the dismissal of its appeal
by the Lapulapu RTC, petitioner filed in the CA a suit for the
annulment of that RTC judgment. On December 29, 1994, this suit
was rejected by the CA in a Decision which became final and
executory on January 28, 1995, after no appeal was taken by
petitioner. However, this action did not stop petitioner. On February
2, 1995, it filed with this Court another Petition deceptively cloaked
as certiorari, but which in reality sought the annulment of the
Lapulapu Decision. This Court dismissed the Petition on September
6, 1996. Petitioner’s Motion for Reconsideration was denied with
finality on November 18, 1996.
On November 28, 1996, Judge Risos of the Lapulapu RTC directed
the execution of the judgment in the case filed before it. The Motion
to Stay Execution filed by petitioner was denied on February 19,
1997. Undaunted, it filed in this Court another Petition for Certiorari,
Prohibition and Mandamus. On September 21, 1998, we referred
the Petition to the CA for appropriate action. This new Petition again
essentially sought to annul the final and executory Decision
rendered by the Lapulapu RTC. Needless to say, the new suit was
unsuccessful. Still, this rejection did not stop petitioner. It brought
before this Court the present Petition for Review
on Certiorari alleging the same facts and circumstances and raising
the same issues already decided by this Court in G.R. No. 118633.
First Philippine International Bank v. CA stresses that what is truly
important to consider in determining whether forum shopping exists
is the vexation caused the courts and the parties-litigants by one
who asks different courts and/or administrative agencies to rule on
the same or related facts and causes and/or to grant the same or
substantially the same relief, in the process creating the possibility of
conflicting rulings and decisions.
Petitioner in the present case sued twice before the CA and thrice
before this Court, alleging substantially the same facts and
circumstances, raising essentially the same issues, and praying for
almost identical reliefs for the annulment of the Decision rendered
by the Lapulapu RTC. This insidious practice of repeatedly bringing
essentially the same action -- albeit disguised in various
nomenclatures -- before different courts at different times is forum
shopping no less. Because of petitioner’s actions, the execution of
the Lapulapu Decision has been needlessly delayed and several
courts vexed.
There is forum shopping when two or more actions or proceedings,
other than appeal or certiorari, involving the same parties for the
same cause of action, are instituted either simultaneously or
successively to obtain a more favorable decision. This Court, in
Spouses De la Cruz v. Joaquin, explained why forum shopping is
disapproved of:
Forum shopping trifles with the courts, abuses their processes,
degrades the administration of justice, and congests court dockets.
Willful and deliberate violation of the rule against it is a ground for
the summary dismissal of the case; it may also constitute direct
contempt of court
It is undeniable that both LLDHC and GSIS are guilty of forum
shopping, for having gone through several actions and proceedings
from the lowest court to this Court in the hopes that they will obtain
a decision favorable to them. In all those actions, only one issue was
in contention: the ownership of the subject lots. In the process, the
parties degraded the administration of justice, congested our court
dockets, and abused our judicial system. Moreover, the
simultaneous and successive actions filed below have resulted in
conflicting decisions rendered by not only the trial courts but also by
different divisions of the Court of Appeals.
The very purpose of the rule against forum shopping was to stamp
out the abominable practice of trifling with the administration of
justice. It is evident from the history of this case that not only were
the parties and the courts vexed, but more importantly, justice was
delayed. As this Court held in the earlier case of LLDHC against GMC:
"[The] insidious practice of repeatedly bringing essentially the same
action – albeit disguised in various nomenclatures – before different
courts at different times is forum shopping no less."
Conclusion
Nonetheless, like we said, substantial justice requires the resolution
of this controversy on its merits. It is the duty of this Court to put an
end to this long-delayed litigation and render a decision, which will
bind all parties with finality.
Although it is settled that the Lapu-Lapu RTC Decision was not in any
way nullified by the Manila RTC Decision, it is this Court’s duty to
resolve the legal implications of having two conflicting, final, and
executory decisions in existence. In Collantes v. Court of
Appeals, this Court, faced with the similar issue of having two
conflicting, final and executory decisions before it, offered three
options to solve the dilemma: "the first is for the parties to assert
their claims anew, the second is to determine which judgment came
first, and the third is to determine which of the judgments had been
rendered by a court of last resort."
In Collantes, this Court applied the first option and resolved the
conflicting issues anew. However, resorting to the first solution in
the case at bar would entail disregarding not only the final and
executory decisions of the Lapu-Lapu RTC and the Manila RTC, but
also the final and executory decisions of the Court of Appeals and
this Court. Moreover, it would negate two decades’ worth of
litigating. Thus, we find it more equitable and practicable to apply
the second and third options consequently maintaining the finality
of one of the conflicting judgments. The primary criterion under the
second option is the time when the decision was rendered and
became final and executory, such that earlier decisions should
prevail over the current ones since final and executory decisions vest
rights in the winning party. In the third solution, the main criterion is
the determination of which court or tribunal rendered the decision.
Decisions of this Court should be accorded more respect than those
made by the lower courts.
Applying these criteria to the case at bar, the February 24, 1992
Decision of the Lapu-Lapu RTC in Civil Case No. 2203-L was not only
promulgated first; it also attained finality on January 28, 1995,
before the Manila RTC’s May 10, 1994 Decision in Civil Case No. R-
82-3429 became final on May 30, 1997. It is especially noteworthy
that months after the Lapu-Lapu RTC issued its writ of execution on
December 17, 1996, the Manila RTC issued its own writ of execution
on August 1, 1997. To recall, the Manila RTC writ was only satisfied
first because the Court of Appeals in CA-G.R. SP No. 44052 deemed it
appropriate to issue a temporary restraining order against the
execution of the Lapu-Lapu RTC Decision, pending the case before it.
Hence, the fact that the Manila RTC Decision was implemented and
executed first does not negate the fact that the Lapu-Lapu RTC
Page 36 of 41
Decision was not only rendered earlier, but had also attained finality
earlier. Furthermore, while both judgments reached the Court of
Appeals, only Civil Case No. 2203-L was passed upon on the merits
by this Court. In G.R. No. 141407, this Court resolved LLDHC’s
petition for review on certiorari seeking to annul the Court of
Appeals’ Decision in CA-G.R. SP No. 50650. This Court, in dismissing
the petition, upheld the validity of the Lapu-Lapu RTC Decision and
declared that the Manila RTC Decision cannot bind GMC. That
decision became final and executory way back on March 10, 2003.
While this Court cannot blame the parties for exhausting all available
remedies to obtain a favorable judgment, the issues involved in this
case should have been resolved upon the finality of this Court’s
decision in G.R. No. 141407. As pronounced by this Court in
Villanueva v. Court of Appeals:
The interest of the judicial system in preventing relitigation of the
same dispute recognizes that judicial resources are finite and the
number of cases that can be heard by the court is limited. Every
dispute that is reheard means that another will be delayed. In
modern times when court dockets are filled to overflowing, this
concern is of critical importance. x x x.
G.R. Nos. 89898-99 October 1, 1990
MUNICIPALITY OF MAKATI vs. THE HONORABLE COURT OF APPEALS
The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private respondent Admiral Finance
Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and improvements thereon located at
Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-5499.
It appears that the action for eminent domain was filed on May 20,
1986, docketed as Civil Case No. 13699. Attached to petitioner's
complaint was a certification that a bank account (Account No. S/A
265-537154-3) had been opened with the PNB Buendia Branch
under petitioner's name containing the sum of P417,510.00, made
pursuant to the provisions of Pres. Decree No. 42. After due hearing
where the parties presented their respective appraisal reports
regarding the value of the property, respondent RTC judge rendered
a decision on June 4, 1987, fixing the appraised value of the property
at P5,291,666.00, and ordering petitioner to pay this amount minus
the advanced payment of P338,160.00 which was earlier released to
private respondent.
After this decision became final and executory, private respondent
moved for the issuance of a writ of execution. This motion was
granted by respondent RTC judge. After issuance of the writ of
execution, a Notice of Garnishment dated January 14, 1988 was
served by respondent sheriff Silvino R. Pastrana upon the manager
of the PNB Buendia Branch. However, respondent sheriff was
informed that a "hold code" was placed on the account of petitioner.
As a result of this, private respondent filed a motion dated January
27, 1988 praying that an order be issued directing the bank to
deliver to respondent sheriff the amount equivalent to the unpaid
balance due under the RTC decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that
the manner of payment of the expropriation amount should be done
in installments which the respondent RTC judge failed to state in his
decision. Private respondent filed its opposition to the motion.
Pending resolution of the above motions, petitioner filed on July 20,
1988 a "Manifestation" informing the court that private respondent
was no longer the true and lawful owner of the subject property
because a new title over the property had been registered in the
name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge
In summary, this Court finds the execution of the Lapu-Lapu RTC
Decision in Civil Case No. 2203-L to be in order. We affirm the
assailed Orders of March 11, 2004 and May 7, 2004, which reiterate,
among others, the October 23, 1997 Order issued by the Lapu-Lapu
RTC, directing the Register of Deeds of Lapu-Lapu City to cancel the
certificates of title of LLDHC and to issue new ones in GMC’s name.
Whatever rights are due LLDHC from GSIS as a result of the final
judgment of the Manila RTC in Civil Case No. R-82-3429, which we
have previously held to be binding between GSIS and LLDHC, may be
threshed out in an appropriate proceeding. Such proceeding shall
not further delay the execution of the Lapu-Lapu RTC Decision.
WHEREFORE, in view of the foregoing, the petition in G.R. No.
167000 is DENIED and the Decision dated November 25, 2004 and
Resolution dated January 20, 2005 of the Twentieth Division of the
Court of Appeals are AFFIRMED. The petition in G.R. No. 169971 is
GRANTED and the Decision dated September 23, 2005 of the Special
Nineteenth Division of the Court of Appeals is hereby REVERSED
AND SET ASIDE.
issued an order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and the PNB
Buendia Branch to reveal the amount in petitioner's account which
was garnished by respondent sheriff. In compliance with this order,
PSB filed a manifestation informing the court that it had
consolidated its ownership over the property as
mortgagee/purchaser at an extrajudicial foreclosure sale held on
April 20, 1987. After several conferences, PSB and private
respondent entered into a compromise agreement whereby they
agreed to divide between themselves the compensation due from
the expropriation proceedings.
Respondent trial judge subsequently issued an order dated
September 8, 1988 which: (1) approved the compromise agreement;
(2) ordered PNB Buendia Branch to immediately release to PSB the
sum of P4,953,506.45 which corresponds to the balance of the
appraised value of the subject property under the RTC decision
dated June 4, 1987, from the garnished account of petitioner; and,
(3) ordered PSB and private respondent to execute the necessary
deed of conveyance over the subject property in favor of petitioner.
Petitioner's motion to lift the garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly
opposed by private respondent. On the other hand, for failure of the
manager of the PNB Buendia Branch to comply with the order dated
September 8, 1988, private respondent filed two succeeding
motions to require the bank manager to show cause why he should
not be held in contempt of court. During the hearings conducted for
the above motions, the general manager of the PNB Buendia Branch,
a Mr. Antonio Bautista, informed the court that he was still waiting
for proper authorization from the PNB head office enabling him to
make a disbursement for the amount so ordered. For its part,
petitioner contended that its funds at the PNB Buendia Branch could
neither be garnished nor levied upon execution, for to do so would
Page 37 of 41
result in the disbursement of public funds without the proper
appropriation required under the law, citing the case of Republic of
the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA
899].
Respondent trial judge issued an order dated December 21, 1988
denying petitioner's motion for reconsideration on the ground that
the doctrine enunciated in Republic v. Palacio  did not apply to the
case because petitioner's PNB Account No. S/A 265-537154-3 was an
account specifically opened for the expropriation proceedings of the
subject property pursuant to Pres. Decree No. 42. Respondent RTC
judge likewise declared Mr. Antonio Bautista guilty of contempt of
court for his inexcusable refusal to obey the order dated September
8, 1988, and thus ordered his arrest and detention until his
compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed
separate petitions for certiorari with the Court of Appeals, which
were eventually consolidated. In a decision promulgated on June 28,
1989, the Court of Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the funds
contained in petitioner's PNB Account No. 265-537154-3, and
affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of
Appeals, petitioner now files the present petition for review with
prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary
restraining order enjoining respondent RTC judge, respondent
sheriff, and their representatives, from enforcing and/or carrying out
the RTC order dated December 21, 1988 and the writ of garnishment
issued pursuant thereto. Private respondent then filed its comment
to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition
before the Court of Appeals, but also alleges for the first time that it
has actually two accounts with the PNB Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3 — exclusively for the
expropriation of the subject property, with an outstanding
balance of P99,743.94.
(2) Account No. S/A 263-530850-7 — for statutory obligations
and other purposes of the municipal government, with a
balance of P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this Court the
existence of two bank accounts, it may fairly be asked whether the
second account was opened only for the purpose of undermining
the legal basis of the assailed orders of respondent RTC judge and
the decision of the Court of Appeals, and strengthening its reliance
on the doctrine that public funds are exempted from garnishment or
execution as enunciated in Republic v. Palacio [supra.] At any rate,
the Court will give petitioner the benefit of the doubt, and proceed
to resolve the principal issues presented based on the factual
circumstances thus alleged by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was
specifically opened for expropriation proceedings it had initiated
over the subject property, petitioner poses no objection to the
garnishment or the levy under execution of the funds deposited
therein amounting to P99,743.94. However, it is petitioner's main
contention that inasmuch as the assailed orders of respondent RTC
judge involved the net amount of P4,965,506.45, the funds
garnished by respondent sheriff in excess of P99,743.94, which are
public funds earmarked for the municipal government's other
statutory obligations, are exempted from execution without the
proper appropriation required under the law.
There is merit in this contention. The funds deposited in the second
PNB Account No. S/A 263-530850-7 are public funds of the
municipal government. In this jurisdiction, well-settled is the rule
that public funds are not subject to levy and execution, unless
otherwise provided for by statute [Republic v. Palacio, supra.; The
Commissioner of Public Highways v. San Diego, G.R. No. L-30098,
February 18, 1970, 31 SCRA 616]. More particularly, the properties
of a municipality, whether real or personal, which are necessary for
public use cannot be attached and sold at execution sale to satisfy a
money judgment against the municipality. Municipal revenues
derived from taxes, licenses and market fees, and which are
intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are
exempt from execution [See Viuda De Tan Toco v. The Municipal
Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, Ilocos
Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel,
Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56].
The foregoing rule finds application in the case at bar. Absent a
showing that the municipal council of Makati has passed an
ordinance appropriating from its public funds an amount
corresponding to the balance due under the RTC decision dated June
4, 1987, less the sum of P99,743.94 deposited in Account No. S/A
265-537154-3, no levy under execution may be validly effected on
the public funds of petitioner deposited in Account No. S/A 263-
530850-7.
Nevertheless, this is not to say that private respondent and PSB are
left with no legal recourse. Where a municipality fails or refuses,
without justifiable reason, to effect payment of a final money
judgment rendered against it, the claimant may avail of the remedy
of mandamus in order to compel the enactment and approval of the
necessary appropriation ordinance, and the corresponding
disbursement of municipal funds therefor [See Viuda De Tan Toco v.
The Municipal Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099
(1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].
In the case at bar, the validity of the RTC decision dated June 4, 1987
is not disputed by petitioner. No appeal was taken therefrom. For
three years now, petitioner has enjoyed possession and use of the
subject property notwithstanding its inexcusable failure to comply
with its legal obligation to pay just compensation. Petitioner has
benefited from its possession of the property since the same has
been the site of Makati West High School since the school year
1986-1987. This Court will not condone petitioner's blatant refusal
to settle its legal obligation arising from expropriation proceedings it
had in fact initiated. It cannot be over-emphasized that, within the
context of the State's inherent power of eminent domain,
. . . [j]ust compensation means not only the correct
determination of the amount to be paid to the owner of the
land but also the payment of the land within a reasonable
time from its taking. Without prompt payment, compensation
cannot be considered "just" for the property owner is made
to suffer the consequence of being immediately deprived of
his land while being made to wait for a decade or more
before actually receiving the amount necessary to cope with
his loss [Cosculluela v. The Honorable Court of Appeals, G.R.
No. 77765, August 15, 1988, 164 SCRA 393, 400. See also
Provincial Government of Sorsogon v. Vda. de Villaroya, G.R.
No. 64037, August 27, 1987, 153 SCRA 291].
The State's power of eminent domain should be exercised within the
bounds of fair play and justice. In the case at bar, considering that
valuable property has been taken, the compensation to be paid fixed
Page 38 of 41
and the municipality is in full possession and utilizing the property
for public purpose, for three (3) years, the Court finds that the
municipality has had more than reasonable time to pay full
compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality
of Makati to immediately pay Philippine Savings Bank, Inc. and
private respondent the amount of P4,953,506.45. Petitioner is
hereby required to submit to this Court a report of its compliance
with the foregoing order within a non-extendible period of SIXTY
(60) DAYS from the date of receipt of this resolution.
G.R. No. 168289               March 22, 2010
THE MUNICIPALITY OF HAGONOY vs. HON. SIMEON P. DUMDUM, JR
This is a Joint Petition under Rule 45 of the Rules of Court brought by
the Municipality of Hagonoy, Bulacan and its former chief executive,
Mayor Felix V. Ople in his official and personal capacity, from the
January 31, 2005 Decision and the May 23, 2005 Resolution of the
Court of Appeals in CA-G.R. SP No. 81888. The assailed decision
affirmed the October 20, 2003 Order issued by the Regional Trial
Court of Cebu City, Branch 7 in Civil Case No. CEB-28587 denying
petitioners’ motion to dismiss and motion to discharge/dissolve the
writ of preliminary attachment previously issued in the case. The
assailed resolution denied reconsideration.
The case stems from a Complaint filed by herein private respondent
Emily Rose Go Ko Lim Chao against herein petitioners, the
Municipality of Hagonoy, Bulacan and its chief executive, Felix V.
Ople (Ople) for collection of a sum of money and damages. It was
alleged that sometime in the middle of the year 2000, respondent,
doing business as KD Surplus and as such engaged in buying and
selling surplus trucks, heavy equipment, machinery, spare parts and
related supplies, was contacted by petitioner Ople. Respondent had
entered into an agreement with petitioner municipality through
Ople for the delivery of motor vehicles, which supposedly were
needed to carry out certain developmental undertakings in the
municipality. Respondent claimed that because of Ople’s earnest
representation that funds had already been allocated for the project,
she agreed to deliver from her principal place of business in Cebu
City twenty-one motor vehicles whose value totaled ₱5,820,000.00.
To prove this, she attached to the complaint copies of the bills of
lading showing that the items were consigned, delivered to and
received by petitioner municipality on different dates. However,
despite having made several deliveries, Ople allegedly did not heed
respondent’s claim for payment. As of the filing of the complaint,
the total obligation of petitioner had already totaled ₱10,026,060.13
exclusive of penalties and damages. Thus, respondent prayed for full
payment of the said amount, with interest at not less than 2% per
month, plus ₱500,000.00 as damages for business losses,
₱500,000.00 as exemplary damages, attorney’s fees of ₱100,000.00
and the costs of the suit.
On February 13, 2003, the trial court issued an Order granting
respondent’s prayer for a writ of preliminary attachment
conditioned upon the posting of a bond equivalent to the amount of
the claim. On March 20, 2003, the trial court issued the Writ of
Preliminary Attachment directing the sheriff "to attach the estate,
real and personal properties" of petitioners.
Instead of addressing private respondent’s allegations, petitioners
filed a Motion to Dismiss on the ground that the claim on which the
action had been brought was unenforceable under the statute of
frauds, pointing out that there was no written contract or document
that would evince the supposed agreement they entered into with
respondent. They averred that contracts of this nature, before being
undertaken by the municipality, would ordinarily be subject to
The order of respondent RTC judge dated December 21, 1988, which
was rendered in Civil Case No. 13699, is SET ASIDE and the
temporary restraining order issued by the Court on November 20,
1989 is MADE PERMANENT. SO ORDERED.
several preconditions such as a public bidding and prior approval of
the municipal council which, in this case, did not obtain. From this,
petitioners impress upon us the notion that no contract was ever
entered into by the local government with respondent. To address
the claim that respondent had made the deliveries under the
agreement, they advanced that the bills of lading attached to the
complaint were hardly probative, inasmuch as these documents had
been accomplished and handled exclusively by respondent herself as
well as by her employees and agents.
Petitioners also filed a Motion to Dissolve and/or Discharge the Writ
of Preliminary Attachment Already Issued, invoking immunity of the
state from suit, unenforceability of the contract, and failure to
substantiate the allegation of fraud.
On October 20, 2003, the trial court issued an Order denying the two
motions. Petitioners moved for reconsideration, but they were
denied in an Order dated December 29, 2003.
Believing that the trial court had committed grave abuse of
discretion in issuing the two orders, petitioners elevated the matter
to the Court of Appeals via a petition for certiorari under Rule 65. In
it, they faulted the trial court for not dismissing the complaint
despite the fact that the alleged contract was unenforceable under
the statute of frauds, as well as for ordering the filing of an answer
and in effect allowing private respondent to prove that she did make
several deliveries of the subject motor vehicles. Additionally, it was
likewise asserted that the trial court committed grave abuse of
discretion in not discharging/dissolving the writ of preliminary
attachment, as prayed for in the motion, and in effect disregarding
the rule that the local government is immune from suit.
On January 31, 2005, following assessment of the parties’
arguments, the Court of Appeals, finding no merit in the petition,
upheld private respondent’s claim and affirmed the trial court’s
order. Petitioners moved for reconsideration, but the same was
likewise denied for lack of merit and for being a mere scrap of paper
for having been filed by an unauthorized counsel. Hence, this
petition.
In their present recourse, which raises no matter different from
those passed upon by the Court of Appeals, petitioners ascribe error
to the Court of Appeals for dismissing their challenge against the
trial court’s October 20 and December 29, 2003 Orders. Again, they
reason that the complaint should have been dismissed at the first
instance based on unenforceability and that the motion to
dissolve/discharge the preliminary attachment should have been
granted.
Commenting on the petition, private respondent notes that with
respect to the Court of Appeals’ denial of the certiorari petition, the
same was rightly done, as the fact of delivery may be properly and
adequately addressed at the trial of the case on the merits; and that
the dissolution of the writ of preliminary attachment was not proper
under the premises inasmuch as the application for the writ
Page 39 of 41
sufficiently alleged fraud on the part of petitioners. In the same
breath, respondent laments that the denial of petitioners’ motion
for reconsideration was rightly done by the Court of Appeals,
because it raised no new matter that had not yet been addressed.
After the filing of the parties’ respective memoranda, the case was
deemed submitted for decision.
We now rule on the petition.
To begin with, the Statute of Frauds found in paragraph (2), Article
1403 of the Civil Code, requires for enforceability certain contracts
enumerated therein to be evidenced by some note or
memorandum. The term "Statute of Frauds" is descriptive of
statutes that require certain classes of contracts to be in writing; and
that do not deprive the parties of the right to contract with respect
to the matters therein involved, but merely regulate the formalities
of the contract necessary to render it enforceable.
In other words, the Statute of Frauds only lays down the method by
which the enumerated contracts may be proved. But it does not
declare them invalid because they are not reduced to writing
inasmuch as, by law, contracts are obligatory in whatever form they
may have been entered into, provided all the essential requisites for
their validity are present. The object is to prevent fraud and perjury
in the enforcement of obligations depending, for evidence thereof,
on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged. The effect of noncompliance with
this requirement is simply that no action can be enforced under the
given contracts. If an action is nevertheless filed in court, it shall
warrant a dismissal under Section 1(i), Rule 16 of the Rules of Court,
unless there has been, among others, total or partial performance of
the obligation on the part of either party.
It has been private respondent’s consistent stand, since the
inception of the instant case that she has entered into a contract
with petitioners. As far as she is concerned, she has already
performed her part of the obligation under the agreement by
undertaking the delivery of the 21 motor vehicles contracted for by
Ople in the name of petitioner municipality. This claim is well
substantiated — at least for the initial purpose of setting out a valid
cause of action against petitioners — by copies of the bills of lading
attached to the complaint, naming petitioner municipality as
consignee of the shipment. Petitioners have not at any time
expressly denied this allegation and, hence, the same is binding on
the trial court for the purpose of ruling on the motion to dismiss. In
other words, since there exists an indication by way of allegation
that there has been performance of the obligation on the part of
respondent, the case is excluded from the coverage of the rule on
dismissals based on unenforceability under the statute of frauds,
and either party may then enforce its claims against the other.
No other principle in remedial law is more settled than that when a
motion to dismiss is filed, the material allegations of the complaint
are deemed to be hypothetically admitted. This hypothetical
admission, according to Viewmaster Construction Corporation v.
Roxas and Navoa v. Court of Appeals, extends not only to the
relevant and material facts well pleaded in the complaint, but also to
inferences that may be fairly deduced from them. Thus, where it
appears that the allegations in the complaint furnish sufficient basis
on which the complaint can be maintained, the same should not be
dismissed regardless of the defenses that may be raised by the
defendants. Stated differently, where the motion to dismiss is
predicated on grounds that are not indubitable, the better policy is
to deny the motion without prejudice to taking such measures as
may be proper to assure that the ends of justice may be served.
It is interesting to note at this point that in their bid to have the case
dismissed, petitioners theorize that there could not have been a
contract by which the municipality agreed to be bound, because it
was not shown that there had been compliance with the required
bidding or that the municipal council had approved the contract. The
argument is flawed. By invoking unenforceability under the Statute
of Frauds, petitioners are in effect acknowledging the existence of a
contract between them and private respondent — only, the said
contract cannot be enforced by action for being non-compliant with
the legal requisite that it be reduced into writing. Suffice it to say
that while this assertion might be a viable defense against
respondent’s claim, it is principally a matter of evidence that may be
properly ventilated at the trial of the case on the merits.
Verily, no grave abuse of discretion has been committed by the trial
court in denying petitioners’ motion to dismiss this case. The Court
of Appeals is thus correct in affirming the same.
We now address the question of whether there is a valid reason to
deny petitioners’ motion to discharge the writ of preliminary
attachment.
Petitioners, advocating a negative stance on this issue, posit that as
a municipal corporation, the Municipality of Hagonoy is immune
from suit, and that its properties are by law exempt from execution
and garnishment. Hence, they submit that not only was there an
error committed by the trial court in denying their motion to
dissolve the writ of preliminary attachment; they also advance that it
should not have been issued in the first place. Nevertheless, they
believe that respondent has not been able to substantiate her
allegations of fraud necessary for the issuance of the writ.
Private respondent, for her part, counters that, contrary to
petitioners’ claim, she has amply discussed the basis for the issuance
of the writ of preliminary attachment in her affidavit; and that
petitioners’ claim of immunity from suit is negated by Section 22 of
the Local Government Code, which vests municipal corporations
with the power to sue and be sued. Further, she contends that the
arguments offered by petitioners against the writ of preliminary
attachment clearly touch on matters that when ruled upon in the
hearing for the motion to discharge, would amount to a trial of the
case on the merits.
The general rule spelled out in Section 3, Article XVI of the
Constitution is that the state and its political subdivisions may not be
sued without their consent. Otherwise put, they are open to suit but
only when they consent to it. Consent is implied when the
government enters into a business contract, as it then descends to
the level of the other contracting party; or it may be embodied in a
general or special law such as that found in Book I, Title I, Chapter 2,
Section 22 of the Local Government Code of 1991, which vests local
government units with certain corporate powers —one of them is
the power to sue and be sued.
Be that as it may, a difference lies between suability and liability. As
held in City of Caloocan v. Allarde, where the suability of the state is
conceded and by which liability is ascertained judicially, the state is
at liberty to determine for itself whether to satisfy the judgment or
not. Execution may not issue upon such judgment, because statutes
waiving non-suability do not authorize the seizure of property to
satisfy judgments recovered from the action. These statutes only
convey an implication that the legislature will recognize such
judgment as final and make provisions for its full satisfaction. Thus,
where consent to be sued is given by general or special law, the
implication thereof is limited only to the resultant verdict on the
action before execution of the judgment.
Traders Royal Bank v. Intermediate Appellate Court, citing
Commissioner of Public Highways v. San Diego, is instructive on this
Page 40 of 41
point. In that case which involved a suit on a contract entered into
by an entity supervised by the Office of the President, the Court held
that while the said entity opened itself to suit by entering into the
subject contract with a private entity; still, the trial court was in
error in ordering the garnishment of its funds, which were public in
nature and, hence, beyond the reach of garnishment and
attachment proceedings. Accordingly, the Court ordered that the
writ of preliminary attachment issued in that case be lifted, and that
the parties be allowed to prove their respective claims at the trial on
the merits. There, the Court highlighted the reason for the rule, to
wit:
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
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 of execution or
garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must
be covered by the corresponding appropriations as required by law.
The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects. x x x
With this in mind, the Court holds that the writ of preliminary
attachment must be dissolved and, indeed, it must not have been
issued in the very first place. While there is merit in private
respondent’s position that she, by affidavit, was able to substantiate
the allegation of fraud in the same way that the fraud attributable to
petitioners was sufficiently alleged in the complaint and, hence, the
issuance of the writ would have been justified. Still, the writ of
attachment in this case would only prove to be useless and
unnecessary under the premises, since the property of the
municipality may not, in the event that respondent’s claim is
validated, be subjected to writs of execution and garnishment —
unless, of course, there has been a corresponding appropriation
provided by law.
Anent the other issues raised by petitioners relative to the denial of
their motion to dissolve the writ of attachment, i.e., unenforceability
of the contract and the veracity of private respondent’s allegation of
fraud, suffice it to say that these pertain to the merits of the main
action. Hence, these issues are not to be taken up in resolving the
motion to discharge, lest we run the risk of deciding or prejudging
the main case and force a trial on the merits at this stage of the
proceedings.
There is one final concern raised by petitioners relative to the denial
of their motion for reconsideration. They complain that it was an
error for the Court of Appeals to have denied the motion on the
ground that the same was filed by an unauthorized counsel and,
hence, must be treated as a mere scrap of paper.
It can be derived from the records that petitioner Ople, in his
personal capacity, filed his Rule 65 petition with the Court of Appeals
through the representation of the law firm Chan Robles &
Associates. Later on, municipal legal officer Joselito Reyes, counsel
for petitioner Ople, in his official capacity and for petitioner
municipality, filed with the Court of Appeals a Manifestation with
Entry of Appearance to the effect that he, as counsel, was "adopting
all the pleadings filed for and in behalf of [Ople’s personal
representation] relative to this case."
It appears, however, that after the issuance of the Court of Appeals’
decision, only Ople’s personal representation signed the motion for
reconsideration. There is no showing that the municipal legal officer
made the same manifestation, as he previously did upon the filing of
the petition. From this, the Court of Appeals concluded that it was as
if petitioner municipality and petitioner Ople, in his official capacity,
had never moved for reconsideration of the assailed decision, and
adverts to the ruling in Ramos v. Court of Appeals and Municipality
of Pililla, Rizal v. Court of Appeals that only under well-defined
exceptions may a private counsel be engaged in lawsuits involving a
municipality, none of which exceptions obtains in this case.
The Court of Appeals is mistaken. As can be seen from the manner in
which the Manifestation with Entry of Appearance is worded, it is
clear that petitioner municipality’s legal officer was intent on
adopting, for both the municipality and Mayor Ople, not only
the certiorari petition filed with the Court of Appeals, but also all
other pleadings that may be filed thereafter by Ople’s personal
representation, including the motion for reconsideration subject of
this case. In any event, however, the said motion for reconsideration
would warrant a denial, because there seems to be no matter raised
therein that has not yet been previously addressed in the assailed
decision of the Court of Appeals as well as in the proceedings below,
and that would have otherwise warranted a different treatment of
the issues involved.
WHEREFORE, the Petition is GRANTED IN PART. The January 31,
2005 Decision of the Court of Appeals in CA-G.R. SP No. 81888
is AFFIRMED insofar as it affirmed the October 20, 2003 Decision of
the Regional Trial Court of Cebu City, Branch 7 denying petitioners’
motion to dismiss in Civil Case No. CEB-28587. The assailed decision
is REVERSED insofar as it affirmed the said trial court’s denial of
petitioners’ motion to discharge the writ of preliminary attachment
issued in that case. Accordingly, the August 4, 2003 Writ of
Preliminary Attachment issued in Civil Case No. CEB-28587 is
ordered lifted. SO ORDERED.
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