STATE IMMUNITY CASES

1. UNITED STATES OF AMERICA and MAXINE BRADFORD vs. HON. LUIS R. REYES
G.R. No. 79253 March 1, 1993

The doctrine of state immunity is at the core of this controversy.

FACTS: Petitioner Maxine Bradford, hereinafter referred to as Bradford, is likewise an American citizen who was the activity
exchange manager at the said JUSMAG Headquarters. Private respondent, hereinafter referred to as Montoya, is an American citizen
who was employed as an identification (I.D.) checker at the U.S. Navy Exchange (NEX) at the Joint United States Military Assistance
Group (JUSMAG) headquarters in Quezon City. Respondents’s body and belongings were searched at the parking area after had
bought some items from the retail store of the NEX JUSMAG. Thus, the filing of a complaint against Bradford for damages due to the
oppressive and discriminatory acts committed by the latter in excess of her authority as store manager of the NEX JUSMAG.

ISSUE: WON Bradford is immune from suit for acts done by her in the performance of her official functions (as manager of the U.S.
Navy Exchange of JUSMAG pursuant to the Philippines-United States Military Assistance Agreement of 1947 and the Military Bases
Agreement of 1947, as amended).

RULING: NO. It is beyond doubt that Montoya's cause of action is premised on the theory that the acts complained of were
committed by Bradford not only outside the scope of her authority — or more specifically, in her private capacity — but also outside
the territory where she exercises such authority, that is, outside the NEX-JUSMAG — particularly, at the parking area which has not
been shown to form part of the facility of which she was the manager.

The doctrine of state immunity and the exceptions thereto are summarized in Shauf vs. Court of Appeals, thus:

I. The rule that a state may not be sued without its consent, now expressed in Article XVI Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law of our land
under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and
also intended to manifest our resolve to abide by the rules of the international community.

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 formally impleaded. It must be noted, however, that the rule is not so all-encompassing as to be applicable under all
circumstances.

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, et al.
vs. Aligaen, etc., et al.   "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 or 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."  The rationale for this ruling is that the doctrinaire of
state immunity cannot be used as an instrument for perpetrating an injustice. 

In the case of Baer, etc. vs. Tizon, etc., et al., it was ruled that:

There should be no misinterpretation of the scope of the decision reached by this Court. Petitioner, as the Commander of
the United States Naval Base in Olongapo, does not possess diplomatic immunity. He may therefore be proceeded against
in his personal capacity, or when the action taken by him cannot be imputed to the government which he represents.

Also, in Animos, et al. vs. Philippine Veterans Affairs Office, et al., we held that:

. . . it is equally well-settled that where a litigation may have adverse consequences on the public treasury , whether in the
disbursements of funds or loss of property, the public official proceeded against not being liable in his personal capacity, then the
doctrine of non-suability may appropriately be invoked. It has no application, however, where the suit against such a functionary had
to be instituted because of his failure to comply with the duty imposed by statute appropriating public funds for the benefit of
plaintiff or petitioner. . . . .

The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit will not apply and may not be
invoked where the public official is being sued in his private and personal capacity as an ordinary citizen. The cloak of protection
afforded the officers and agents of the government is removed the moment they are sued in their individual capacity. This situation
usually arises where the public official acts without authority or in excess of the powers vested in him. It is a well-settled principle of

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law that a public official may be liable in his personal private capacity for whatever damage he may have caused by his act done
with malice and in bad faith, or beyond the scope of his authority or jurisdiction.

The agents and officials of the United States armed forces stationed in Clark Air Base are no exception to this rule. In the case of
United States of America, et al. vs. Guinto, etc., et al., ante, we declared:

It bears stressing at this point that the above observations do not confer on the United States of America Blanket immunity
for all acts done by it or its agents in the Philippines. Neither may the other petitioners claim that they are also insulated
from suit in this country merely because they have acted as agents of the United States in the discharge of their official
functions.

Since it is apparent from the complaint that Bradford was sued in her private or personal capacity for acts allegedly done beyond the
scope and even beyond her place of official functions, said complaint is not then vulnerable to a motion to dismiss. Thus, the case
falls within the exception to the doctrine of state immunity.

In Williams vs. Rarang  and Minucher vs. Court of Appeals, this Court reiterated this exception.

There is no question, therefore, that the two (2) petitioners actively participated in screening the features and articles in the
POD as part of their official functions. Under the rule that U.S. officials in the performance of their official functions are immune
from suit, then it should follow that petitioners may not be held liable for the questioned publication.

It is to be noted, however, that the petitioners were sued in their personal capacities for their alleged tortious acts in publishing
a libelous article.

The question, therefore, arises — are American naval officers who commit a crime or tortious act while discharging official functions
still covered by the principle of state immunity from suit? Pursuing the question further, does the grant of rights, power, and
authority to the United States under the RP-US Bases Treaty cover immunity of its officers from crimes and torts? Our answer is No.

2. THE HOLY SEE vs. THE HON. ERIBERTO U. ROSARIO, JR

G.R. No. 101949 December 1, 1994

QUIASON, J.:
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is represented in the Philippines by the
Papal Nuncio. Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-A, Transfer Certificate of Title
No. 390440) located in the Municipality of Parañaque, Metro Manila and registered in the name of petitioner. The three lots were
sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his rights to the sale to
private respondent.

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

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

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

RULING: Yes. The Department of Foreign Affairs has formally intervened in this case and officially certified that the Embassy of the
Holy See is a duly accredited diplomatic mission to the Republic of the Philippines exempt from local jurisdiction and entitled to all
the rights, privileges and immunities of a diplomatic mission or embassy in this country.

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

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

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

This Court has considered the following transactions by a foreign state with private parties as acts  jure imperii:

(1) the lease by a foreign government of apartment buildings for use of its military officers (Syquia v. Lopez, 84 Phil. 312
[1949];
(2) the conduct of public bidding for the repair of a wharf at a United States Naval Station (United States of America v.
Ruiz, supra.); and
(3) the change of employment status of base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private parties as acts  jure gestionis:

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

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

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

ULTIMATE TEST

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

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

3. SEAFDEC (SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER) vs. NLRC (National Labor Relations Commission)
G.R. Nos. 97468-70 September 2, 1993

VITUG, J.:

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The private respondents, as well as respondent labor arbiter, allege that the petitioner is not immune from suit and assuming that if,
indeed, it is an international organization, it has, however, impliedly, if not expressly, waived its immunity by belatedly raising the
issue of jurisdiction.

FACTS: Two labor cases, docketed as RAB Case No. VI- 0156-86 and RAB case No. VI - 0214-86, were filed by the herein private
respondents against the petitioner, Southeast Asian Fisheries Development Center (SEAFDEC), before the National Labor Relations
Commission (NLRC), Regional Arbitration Branch, Iloilo City. In these cases, the private respondents claim having been wrongfully
terminated from their employment by the petitioner.

On 22 August 1990, the petitioner, contending to be an international inter-government organization, composed of various Southeast
Asian countries, filed a Motion to Dismiss, challenging the jurisdiction of the public respondent in taking cognizance of the above
cases.

ISSUE:

1. WON the petitioner is immune from suit.

2. WON the petitioner waived its immunity by belatedly raising the issue of jurisdiction.

RULING: Yes. Petitioner SEAFDEC is an international agency enjoying diplomatic immunity.

As held in Southeast Asian Fisheries Development Center-Aquaculture Department vs. National Labor Relations Commission, G.R. No.
86773; 206 SCRA 283/1992; see also Lacanilao v. de Leon, G.R. No. 76532, 147 SCRA, 286/1987/, where we said —

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an

international agency beyond the jurisdiction of public respondent NLRC. The Republic of the Philippines became a
signatory to the Agreement establishing SEAFDEC on January 16, 1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the fisheries development in Southeast Asia by
mutual co-operation among the member governments of the Center, hereinafter called the 'Members', and
through collaboration with international organizations and governments external to the Center.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional independence and freedom
from control of the state in whose territory its office is located.

Anent the issue of waiver of immunity, suffice it to say at the moment that the petitioner has timely raised the issue of jurisdiction.
While the petitioner did not question the public respondent's lack of jurisdiction at the early stages of the proceedings, it,
nevertheless, did so before it rested its case and certainly well before the proceedings thereat had terminated. The invocation by
private respondents of the doctrine of estoppel is unavailing, because estoppel does not confer jurisdiction on a tribunal that has
none over a cause of action.

4. Ernesto COLLADO vs. IRRI (INTERNATIONAL RICE RESEARCH INSTITUTE)

G.R. No. 106483 May 22, 1995

ROMERO, J.:

Did the International Rice Research Institute (IRRI) waive its immunity from suit in this dispute which arose from an employer-
employee relationship?

FACTS: Ernesto Callado, petitioner, was employed as a driver at the IRRI. 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 HRD Manager. After 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 before the Labor Arbiter for illegal dismissal.

Thereafter, 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. 

ISSUE: WON Petitioner, as an international organization, waived its immunity (by virtue of its Memorandum on "Guidelines on the
handling of dismissed employees in relation to P.D. 1620.")

RULING: No. IRRI's immunity from suit is undisputed.

Presidential Decree No. 1620, Article 3 provides:

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 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 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 G.R No. 85750, the Court stated that “the letter of the Acting Secretary of Foreign
Affairs to the Secretary of Labor 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.”

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 clearly necessitated by their international character and
respective purposes. The objective is to avoid the danger of partiality and interference by the host country in their internal
workings. The exercise of jurisdiction by the Department of Labor in these instances would defeat the very purpose of
immunity, which is to shield the affairs of international organizations, in accordance with international practice, from
political pressure or control by the host country to the prejudice of member States of the organization, and to ensure the
unhampered the performance of their functions. 16

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.”

Therefore, The IRRI 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 representative.

5. DFA vs. NLRC

(G.R. No. 113191 September 18, 1996)

FACTS: On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-0690-93 for his alleged illegal dismissal by ADB
and the latter's violation of the "labor-only" contracting law. Two summonses were served, one sent directly to the ADB and the
other through the Department of Foreign Affairs ("DFA").
Forthwith, the ADB and the DFA notified respondent Labor Arbiter that the ADB, as well as its President and Office, were covered by
an immunity from legal processes except for borrowing, guaranties or the sale of securities pursuant to the Agreement Establishing
the Asian Development Bank (the "Charter") and the Agreement Between the Bank and the Government of the Philippines regarding
the Banker's Headquarters (the "Headquarters Agreement). The Labor Arbiter took cognizance of the complaint on the impression
that the ADB had waived its diplomatic immunity from suit. The ADB did not appeal the decision. Instead, the DFA referred the
matter to the NLRC; in its referral, the DFA sought a "formal vacation of the void jugdgment".
ISSUE: Whether the ADB is correct in invoking its immunity from suit.
Whether the ADB has descended to the level of an ordinary party to a commercial transaction giving rise to a waiver of its
immunity from suit
RULING: YES. The stipulations of both the Charter and the Headquarter's Agreement establish that, except in the specified cases of
borrowing and guarantee operations, as well as the purchase, sale and underwriting of securities, the ADB enjoys immunity from
legal process of every form.

The Bank's officers, on their part, enjoy immunity in respect of all acts performed by them in their official capacity. The granting of
these immunities and privileges are treaty covenants ans commitments voluntarily assumed by the Philippine Government. Being
an international organization that has been extended diplomatic status, the ADB is independent of the municipal law.

Being an international organization that has been extended diplomatic status, the ADB is independent of the municipal law. 
In the case of Holy See vs. Hon. Rosario, Jr., 16 the Court has held:

There are two conflicting concept of sovereign immunity, each widely held and firmly established. According to the classical or
absolute theory, a sovereign cannot, without its consent, be made a respondent in the Courts of another sovereign. According to the

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newer or restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or acts   jure imperii of a state,
but not with regard to private act or acts  jure gestionis.

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

The service contracts referred to by private respondent have not been intended by the ADB for profit or gain but are official acts
over which a waiver of immunity would not attack.

6. MUNICIPALITY OF SAN FERNANDO, LA UNION vs. HON. JUDGE ROMEO N. FIRME

G.R. No. L-52179             April 8, 1991

FACTS: A collision occurred involving a passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras,
a gravel and sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the Municipality of San
Fernando, La Union and driven by Alfredo Bislig. Several passengers of the jeepney including Laureano Baniña Sr. died and others
suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages against the Estate of Macario Nieveras
and Bernardo Balagot, owner and driver, respectively, of the passenger jeepney. However, the aforesaid defendants filed a Third
Party Complaint against the petitioner and the driver of a dump truck of petitioner (Municipality of San Fernando).

Petitioner filed its answer and raised affirmative defenses such as lack of cause of action, non-suability of the State, prescription of
cause of action and the negligence of the owner and driver of the passenger jeepney as the proximate cause of the collision.

ISSUE:
1. Can the Municipality of San Fernando, La Union be sued?
2. Is the Municipality of San Fernando, La Union liable for the torts committed by its employee?

RULING:
1. NO. The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment it arbitrarily failed to
resolve the vital issue of non-suability of the State in the guise of the municipality. However, said judge acted in excess of his
jurisdiction when in his decision dated October 10, 1979 he held the municipality liable for the quasi delict committed by its regular
employee.

Stated in simple parlance, the general rule is that the State may not be sued except when it gives consent to be sued. Consent
takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the State to be sued in case of money
claims involving liability arising from contracts is found in Act No. 3083. A special law may be passed to enable a person to sue the
government for an alleged quasi-delict.

Consent is implied when the government enters into business contracts, thereby descending to the level of the other contracting
party, and also when the State files a complaint, thus opening itself to a counterclaim.

Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental
functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to suit even in the
performance of such functions because their charter provided that they can sue and be sued.

It has already been remarked that municipal corporations are suable because their charters grant them the competence to sue and
be sued. Nevertheless, they are generally not liable for torts committed by them in the discharge of governmental functions and can
be held answerable only if it can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued, the
State merely gives the claimant the right to show that the defendant was not acting in its governmental capacity when the injury
was committed or that the case comes under the exceptions recognized by law. Failing this, the claimant cannot recover.

There is a distinction 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."

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2. NO. The municipality cannot be held liable for the torts committed by its regular employee, who was then engaged in the
discharge of governmental functions. The test of liability of the municipality depends on whether or not the driver, acting in behalf
of the municipality, is performing governmental or proprietary functions.
In City of Kokomo vs. Loy, “Municipal corporations exist in a dual capacity, and their functions are twofold. In one they exercise the
right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political and
governmental. Their officers and agents in such capacity, though elected or appointed by them, are nevertheless public functionaries
performing a public service, and as such they are officers, agents, and servants of the state. In the other capacity the municipalities
exercise a private, proprietary or corporate right, arising from their existence as legal persons and not as public agencies. Their
officers and agents in the performance of such functions act in behalf of the municipalities in their corporate or individual capacity,
and not for the state or sovereign power." Municipal corporations are generally not liable for torts committed by them in the
discharge of governmental functions and can be held answerable only if it can be shown that they were acting in a proprietary
capacity.

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to the Naguilian River to get a load
of sand and gravel for the repair of San Fernando's municipal streets. In the absence of any evidence to the contrary, the regularity
of the performance of official duty is presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, the driver
of the dump truck was performing duties or tasks pertaining to his office

Therefore, the municipality cannot be held liable for the torts committed by its regular employee, who was then engaged
in the discharge of governmental functions. Hence, the municipality has no duty to pay monetary compensation. Hence, the death
of the passenger –– tragic and deplorable though it may be –– imposed on the municipality no duty to pay monetary compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to resolve the issue of non-suability
did not amount to grave abuse of discretion. But said judge exceeded his jurisdiction when it ruled on the issue of liability.

7. HON. RAMON J. FAROLAN vs. COURT OF TAX APPEALS

G.R. No. 42204, January 21, 1993

FACTS: On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 arrived at the Port of Manila carrying, among
others, 80 bales of screen net consigned to Bagong Buhay Trading (Bagong Buhay). Since the customs examiner found the subject
shipment reflective of the declaration, Bagong Buhay paid the duties and taxes due in the amount of P11,350.00 which was paid
through the Bank of Asia under Official Receipt No. 042787 dated February 1, 1972. Thereafter, the customs appraiser made a return
of duty.

Re-appraised, Bagong Buhay Trading was assessed P272,600.00 as duties and taxes due on the shipment in question. Since the
shipment was also misdeclared as to quantity and value, the Collector of Customs forfeited the subject shipment in favor of the
government.

Private respondent alleges that of the 143,454 yards (64 bales) released to Bagong Buhay, only 116,950 yards were in good condition
and the 26,504 yards were in bad condition. Consequently, private respondent demands that the Bureau of Customs be ordered to
pay for damages for the 43,050 yards it actually lost.

ISSUE: Whether or not the Collector of Customs may be held liable for the 43,050 yards actually lost by private respondent.

RULING: NO. The Bureau of Customs cannot be held liable for actual damages that the private respondent sustained with regard to
its goods. Otherwise, to permit private respondent's claim to prosper would violate the doctrine of sovereign immunity. Since it
demands that the Commissioner of Customs be ordered to pay for actual damages it sustained, for which ultimately liability will fall
on the government, it is obvious that this case has been converted technically into a suit against the state.

As an unincorporated government agency without any separate juridical personality of its own, the Bureau of Customs enjoys
immunity from suit. Along with the Bureau of Internal Revenue, it is invested with an inherent power of sovereignty, namely,
taxation. As an agency, the Bureau of Customs performs the governmental function of collecting revenues which is definitely not a
proprietary function. Thus, private respondent's claim for damages against the Commissioner of Customs must fail.

8. THE CITY OF ANGELES, Hon. ANTONIO ABAD SANTOS vs. COURT OF APPEALS
G.R. No. 97882 August 28, 1996

FACTS: In a Deed of Donation dated March 9, 1984, subsequently superseded by a Deed of Donation dated September 27, 1984,
which in turn was superseded by an Amended Deed of Donation dated November 26, 1984, private respondent donated to the City
of Angeles. The amended deed provided, among others, that:
. . . 8) Any substantial breach of the foregoing provisos shall entitle the DONOR to revoke or rescind this Deed of Donation, and in
such eventuality, the DONEE agrees to vacate and return the premises, together with all improvements, to the DONOR peacefully
without necessity of judicial action.

Page 7 of 16
In the amended Deed of Donation, Timog Silangan Development Corporation donated 50,676 square meters of land to the City Of
Angeles for the construction of the Angeles City Sports Center. However, petitioners started the construction of a drug rehabilitation
center on the portion of the donated land.

The conditions in the amended deed of donation was made in pursuant of Sec. 31 of P.D. 957, as amended by P.D. No. 1216,
requiring subdivision owners to provide roads, alleys, sidewalks and reserve open space for parks or recreational use. (Thus, a
conditional donation.)
On July 19, 1988, petitioners started the construction of a drug rehabilitation center on a portion of the donated land. Upon
learning thereof, private respondent protested such action for being violative of the terms and conditions of the amended deed and
prejudicial to its interest and to those of its clients and residents. Private respondent also offered another site for the rehabilitation
center. However, petitioners ignored the protest, maintaining that the construction was not violative of the terms of the donation.
The alternative site was rejected because, according to petitioners, the site was too isolated and had no electric and water facilities.

ISSUE: Are public officials immune from damages in their personal capacities arising from acts done in bad faith?

RULING In theory, the cost of such demolition, and the reimbursement of the public funds expended in the construction thereof,
should be borne by the officials of the City of Angeles who ordered and directed such construction. This Court has time and again
ruled that public officials are not immune from damages in their personal capacities arising from acts done in bad faith . Otherwise
stated, a public official may be liable in his personal capacity for whatever damage he may have caused by his act done with malice
and in bad faith or beyond the scope of his authority or jurisdiction.
In the instant case, the public officials concerned deliberately violated the law and persisted in their violations , going so far
as attempting to deceive the courts by their pretended change of purpose and usage for the center, and making a mockery of the
judicial system. Indisputably, said public officials acted beyond the scope of their authority and jurisdiction and with evident bad
faith. However, as noted by the trial court, the petitioners mayor and members of the Sangguniang Panlungsod of Angeles City were
sued only in their official capacities, hence, they could not be held personally liable without first giving them their day in court. 
This Court has time and again ruled that public officials are not immune from damages in their personal capacities arising from
acts done in bad faith. Otherwise stated, a public official may be liable in his personal capacity for whatever damage he may have
caused by his act done with malice and in bad faith or beyond the scope of his authority or jurisdiction. Moreover, public officials
are personally liable for damages arising from illegal acts done in bad faith are premised on said officials having been sued both in
their official and personal capacities.

In here, said public officials acted beyond the scope of their authority and jurisdiction and with evident bad faith. After
due consideration, the Court believes that the fairest and most equitable solution is to have the City of Angeles undertake the
demolition and removal of said center, and if feasible, recover the cost thereof from the city officials.

The general law on donations does not prohibit the imposition of conditions on a donation so long as the conditions are not illegal
or impossible.  We hold that any condition may be imposed in the donation, so long as the same is not contrary to law, morals, good
customs, public order or public policy.

The Amended Deed of Donation dated November 26, 1984 is hereby declared valid and subsisting, except that the stipulations or
conditions therein concerning the construction of the Sports Center or Complex are hereby declared void and as if not imposed, and
therefore of no force and effect.

WHEREFORE, the assailed Decision of the Court of appeals hereby MODIFIED as follows:
(1) Petitioners are hereby ENJOINED perpetually from operating the drug rehabilitation center or any other such facility on
the donated open space.
(2) Petitioner City of Angeles is ORDERED to undertake and removal of said drug rehabilitation center within a period of
three (3) months from finality of this Decision, and thereafter, to devote public use as a park, playground or other recreational use.
(3) The Amended Deed of Donation dated November 26, 1984 is hereby declared valid and subsisting, except that the
stipulations or conditions therein concerning the construction of the Sports Center or Complex are hereby declared void and as if not
imposed, and therefore of no force and effect.

9. VETERANS MANPOWER AND PROTECTIVE SERVICES, INC., v. THE COURT OF APPEALS

G.R. No. 91359. September 25, 1992

FACTS: 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

Page 8 of 16
VMPSI from PADPAO and the cancellation of its license to operate a security agency. The PC-SUSIA made similar findings and
likewise recommended the cancellation of VMPSI’s license.

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.

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.

Veterans filed a complaint before the RTC questioning the constitutionality of R.A. 5487 as it violates the Constitution against
monopolies, unfair competition and combinations in restraint of trade, enjoining PC-SUSIA from committing acts that would result in
the cancellation or non-renewal of the license of Veterans to operate as a security agency, and collecting a total amount of 2.2
million of damages and atty’s. fees.

ISSUE: Whether or not VMPSI’s complaint against the PC Chief and PC-SUSIA is a suit against the State without its consent.

RULING: 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.

In in Shauf v. 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 formally impleaded."

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 v. 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.

Waiver of the State’s immunity from suit, being a derogation of sovereignty, will not be lightly inferred, but must be construed
strictissimi juris (Republic v. 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 v. U.S. Wall, 152, 19 L. ed. 129, as cited in 78 SCRA 477).

"Nonetheless, a continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that
may be cause [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.

10. M.H. WYLIE and CAPT. JAMES WILLIAMS vs. AURORA I. RARANG
G.R. No. 74135 May 28, 1992

FACTS: In February, 1978, petitioner M. H. Wylie was the assistant administrative officer while petitioner Capt. James Williams was
the commanding officer of the U. S. Naval Base in Subic Bay, Olongapo City. Private respondent Aurora I. Rarang was an employee in
the office of the Provost Marshal assigned as merchandise control guard.
M. H. Wylie, in his capacity as assistant administrative officer of the U.S. Naval Station supervised the publication of the
"Plan of the Day" (POD) which was published daily by the US Naval Base station. The POD featured important announcements,
necessary precautions, and general matters of interest to military personnel. One of the regular features of the POD was the "action
line inquiry." On February 3, 1978, the POD published, under the "NAVSTA ACTION LINE INQUIRY" that “Auring” consumes for her
own benefit things she has confiscated from Base Personnel and is described as a disgrace to her division and to the Office of the
Provost Marshal.
The private respondent was the only one who was named "Auring" in the Office of the Provost Marshal and was subsequently
proven that it was her being referred to when petitioner M. H. Wylie wrote her a letter of apology for the "inadvertent" publication.

Page 9 of 16
The private respondent the filed an action for damages alleging that the article constituted false, injurious, and malicious defamation
and libel tending to impeach her honesty, virtue and reputation exposing her to public hatred, contempt and ridicule.

The defendants however contended by filing a motion to dismiss based on the grounds that the defendants M. H. Wylie and Capt.
James Williams acted in the performance of their official functions as officers of the United States Navy and are, therefore, immune
from suit; and the United States Naval Base is an instrumentality of the US government which cannot be sued without its consent.

ISSUE: Whether or not American naval officer who commit a crime or tortious act while discharging official functions still covered by
the principle of state immunity from suit.

RULING: No.

The general rule is that public officials can be held personally accountable for acts claimed to have been performed in connection
with official duties where they have acted ultra vires or where there is showing of bad faith.

A mere invocation of the immunity clause does not ipso facto result in the charges being automatically dropped. Immunity from suit
cannot institutionalize irresponsibility and non-accountability nor grant a privileged status not claimed by any other official of the
Republic.

Where a public officer has committed an ultra vires act, or where there is a showing of bad faith, malice or gross negligence, the
officer can be held personally accountable, even if such act are claimed to have been performed in connection with official duties.

The acts of defendants M. H. Wylie and Cpt. James Williams were not official acts of the government of the United States of
America in the operation and control of the Base but personal and tortious acts which are exceptions to the general rule that a
sovereign country cannot be sued in the court of another country without its consent. In short, the acts and omissions of the two US
officials were not imputable against the US government but were done in the individual and personal capacities of the said officials.

Such act or omission is ultra vires and cannot be part of official duty. It was a tortious act which ridiculed the private respondent. As
a result of the petitioners' act, the private respondent, according to the record, suffered besmirched reputation, serious anxiety,
wounded feelings and social humiliation, specially so, since the article was baseless and false. Thus, the petitioners, alone, in their
personal capacities are liable for the damages they caused the private respondent.

11. REPUBLIC OF THE PHILIPPINES, vs. PABLO FELICIANO

G.R. No. 70853 March 12, 1987

FACTS: Feliciano claims ownership of a parcel of land, consisting of 4 lots situated in Camarines Sur evidenced by a Deed of Absolute
Sale of the property traced from a possessory information. However, the property was subjected for resettlement purposes under
Proclamation no. 90 by President Ramon Magsaysay. It was sub-divided and distributed to the settlers. Feliciano asserts that the
property must be excluded from the coverage of the resettlement project as the said Proclamation established the reservation
“subject to private rights, if any there be.”

He then filed a complaint against the Republic of the Philippines, represented by the Land Authority, for the recovery of ownership
and possession of the said land.

On August 31, 1970, intervenors filed a motion to dismiss, principally on the ground that the Republic of the Philippines cannot be
sued without its consent and hence the action cannot prosper. The motion was opposed by the plaintiff.

ISSUE: Is the reservation made in Proclamation no. 90 considered as waiver of State Immunity?

RULING: NO. No such consent can be drawn from the language of the Proclamation. The exclusion of existing private rights from the
reservation established by Proclamation No. 90 cannot be construed as a waiver of the immunity of the State from suit. Waiver of
immunity, being a derogation of sovereignty, will not be inferred lightly, but must be construed in strictissimi juris. Moreover, the
Proclamation is not a legislative act. The consent of the State to be sued must emanate from statutory authority. Waiver of State
immunity can only be made by an act of the legislative body.

The doctrine of non-suability of the State has proper application in this case. The plaintiff has impleaded the Republic of the
Philippines as defendant in an action for recovery of ownership and possession of a parcel of land, bringing the State to court just
like any private person who is claimed to be usurping a piece of property. A suit for the recovery of property is not an action in rem,
but an action in personam. 

It is an action directed against a specific party or parties, and any judgment therein binds only such party or parties. The complaint
filed by plaintiff, the private respondent herein, is directed against the Republic of the Philippines, represented by the Land
Authority, a governmental agency created by Republic Act No. 3844.

Page 10 of 16
The complaint is clearly a suit against the State, which under settled jurisprudence is not permitted, except upon a showing that the
State has consented to be sued, either expressly or by implication through the use of statutory language too plain to be
misinterpreted. There is no such showing in the instant case. Worse, the complaint itself fails to allege the existence of such consent.

In order that suit may lie against the State, there must be consent, either express or implied. Where no consent is shown, state
immunity from suit may be invoked as a defense by the courts sua sponte at any stage of the proceedings, because waiver of
immunity, being in derogation of sovereignty, will not be inferred lightly and must be construed in strictissimi juris. Accordingly, the
complaint (or counterclaim) against the State must alleged the existence of such consent (and where the same is found), otherwise,
the complaint may be dismissed.

12. E. MERRITT, vs. GOVERNMENT OF THE PHILIPPINE ISLANDS

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

FACTS: Merrit was riding a motorcycle along Padre Faura Street when he was bumped by the ambulance of the General Hospital.
Merrit sustained severe injuries rendering him unable to return to work. The legislature later enacted Act 2457 authorizing Merritt
to file a suit 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 he is entitled.

After trial, the lower court held that the collision was due to the negligence of the driver of the ambulance.

ISSUE:

1. Whether the Government, in enacting the Act 2457, waived its immunity from suit or did it also concede its liability to the
plaintiff.
2. Is the Government legally liable for damages resulting from a tort committed by its agents or employees?

RULING: “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.”

The Government cannot be sued by an individual without its consent.

In this case, the government has consented to be sued by way of legislative enactment. By consenting to be sued, the State simply
waives its immunity from suit. It does not thereby concede its liability to the plaintiff or create any cause of action in his favor. It
merely gives a remedy to enforce a preexisting liability and submits itself to the jurisdiction of the court.

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:

. . . 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.

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.

While consent to be sued was granted through special law, the government was held not liable for damages, because under the
attendant circumstances the government was not acting through a special agent.

13. FERNANDO A. FROILAN, vs. PAN ORIENTAL SHIPPING CO.

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

FACTS: Petitioner Froilan purchased a vessel from Shipping Commission for 200k paying 50k as down payment and agreeing to pay
the balance in installments. To secure the payment of the balance, he executed a chattel mortgage of said vessel in favor of Shipping

Page 11 of 16
Commission. Due to the non-payment of the installments, Shipping Commission took possession of the vessel. The Shipping
Commission then chartered and delivered it to Pan Oriental Shipping Co. subject to the approval of the President of the Philippines.

Plaintiff appealed the action of the Shipping Commission to the President of the Philippines and, in its meeting the Cabinet restored
him to all his rights under his original contract with the Shipping Commission. Plaintiff had repeatedly demanded from the Pan
Oriental Shipping Co. the possession of the vessel in question, but the latter refused to do so.

Plaintiff, prayed that a writ of replevin be issued for the seizure of  said vessel with all its equipment and appurtenances. Thereafter,
the lower court issued the writ of replevin prayed for by Froilan and by virtue thereof the Pan Oriental Shipping Co. was divested of
its possession of said vessel.

Pan Oriental protested to this restoration of Plaintiff‘s rights under the contract of sale. Plaintiff paid the required cash of P10,000.00
and as Pan Oriental refused to surrender possession of the vessel, he filed an action to recover possession thereof and have him
declared the rightful owner of said property.

The Republic of the Philippines was allowed to intervene in said civil case praying for the possession of the in order that the chattel
mortgage constituted thereon may be foreclosed.

ISSUE: Whether or not the Court has jurisdiction over the intervenor with regard to the counterclaim.

RULING: When the government enters into a contract, for the State is then deem to have divested itself of the mantle of sovereign
immunity and descended to the level of the ordinary individual. Having done so, it becomes subject to judicial action and processes.

Yes. The Supreme Court held that the government impliedly allowed itself to be sued when it filed a complaint in intervention for
the purpose of asserting claim for affirmative relief against the plaintiff to the recovery of the vessel. The immunity of the state from
suits does not deprive it of the right to sue private parties in its own courts. The state as plaintiff may avail itself of the different
forms of actions open to private litigants. In short, by taking the initiative in an action against a private party, the state surrenders its
privileged position and comes down to the level of the defendant. The latter automatically acquires, within certain limits, the right to
set up whatever claims and other defenses he might have against the state.

14. USA V. RUIZ

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

FACTS: The United States of America had a naval base in Subic, Zambales. The base was one of those provided in the Military Bases
Agreement between the Philippines and the United States. Sometime in May, 1972, the United States invited the submission of bids
for a couple of repair projects.

Eligio de Guzman land Co., Inc. responded to the invitation and submitted bids. The United States requested the company
to confirm its price and to submit the name of its bonding company. The company complied, as it thought that the United States had
already accepted its bids for the projects. The company received a letter informing them that the company did not qualify to receive
an award for the projects because of its previous unsatisfactory performance rating in repairs, and that the projects were awarded
to third parties. For this reason, a suit for specific performance was filed by him against the US.

ISSUE: Whether or not the US naval base, in bidding for said contracts exercise governmental functions, is immune from suit.

RULING: Yes.

The traditional role of the state immunity exempts a state from being sued in the courts of another state without its consent or
waiver. This rule is necessary consequence of the principle of independence and equality of states. However, the rules of
international law are not petrified; they are continually and evolving and because the activities of states have multiplied. It has been
necessary to distinguish them between sovereign and governmental acts (jure imperii) and private, commercial and proprietary
acts (juregestionis).

The result is that State immunity now extends only to acts jure imperil. The restrictive application of State immunity is now the rule
in the United States, the United Kingdom and other states in western Europe.

The Supreme Court held that the contract relates to the exercise of its sovereign functions. In this case the projects are an integral
part of the naval base which is devoted to the defense of both the United States and the Philippines, indisputably a function of the
government of the highest order, they are not utilized for nor dedicated to commercial or business purposes.

The restrictive application of state immunity is proper only when the proceedings arise out of commercial transactions of the
foreign sovereign. Its commercial activities of economic affairs. A state may be descended to the level of an individual and can thus
be deemed to have tacitly given its consent to be sued. Only when it enters into business contracts.

15. MERRITT, vs. GOVERNMENT OF THE PHILIPPINE ISLANDS

Page 12 of 16
 16. FONTANILLA V. MALIAMAN
G.R. No. L-55963 December 1, 1989

The National Irrigation Administration is an agency of the government exercising proprietary functions.

FACTS: A pick up owned by the National Irrigation Administration and driven officially by its regular driver, Hugo Garcia, bumped a
bicycle ridden by Francisco Fontanilla, which resulted in the latter's death. The parents of Francisco filed a suit for damages against
Garcia and the NIA, as Garcia's employer. After trial, the court awarded actual, moral and exemplary damages to Spouses Fontanilla.
The Solicitor General contends that the NIA does not perform solely and primarily proprietary functions but is an agency of the
government tasked with governmental functions, and is therefore not liable for the tortious act of its driver Hugo Garcia, who was
not its special agent.

ISSUE: May NIA, a government agency, be held liable for the damages caused by the negligent act of its driver who was not its
special agent?

RULING: Yes.

NIA is a government agency with a juridical personality separate and distinct from the government. It is not a mere agency
of the government but a corporate body performing proprietary functions. Therefore, it may be held liable for the damages caused
by the negligent act of its driver who was not its special agent.

The liability of the State has two aspects. namely:

1. Its public or governmental aspects where it is liable for the tortious acts of special agents only.
2. Its private or business aspects (as when it engages in private enterprises) where it becomes liable as an ordinary
employer. (p. 961, Civil Code of the Philippines; Annotated, Paras; 1986 Ed.  ).

Indubitably, the NIA is a government corporation with juridical personality and not a mere agency of the governmen t. Since it is a
corporate body performing non-governmental functions, it now becomes liable for the damage caused by the accident resulting
from the tortious act of its driver-employee. In this particular case, the NIA assumes the responsibility of an ordinary employer and
as such, it becomes answerable for damages.

This assumption of liability, however, is predicated upon the existence of negligence on the part of respondent NIA. The negligence
referred to here is the negligence of supervision.

Evidently, there was negligence in the supervision of the driver for the reason that they were travelling at a high speed within the
city limits and yet the supervisor of the group, Ely Salonga, failed to caution and make the driver observe the proper and allowed
speed limit within the city. Under the situation, such negligence is further aggravated by their desire to reach their destination
without even checking whether or not the vehicle suffered damage from the object it bumped, thus showing imprudence and
recklessness on the part of both the driver and the supervisor in the group.

Significantly, this Court has ruled that even if the employer can prove the diligence in the selection and supervision (the latter aspect
has not been established herein) of the employee, still if he ratifies the wrongful acts, or take no step to avert further damage, the
employer would still be liable.

Certain functions and activities, which can be performed only by the government, are more or less generally agreed to be
"governmental" in character, and thus, the State is immune from tort liability.

On the other hand, a service which might as well be provided by a private corporation, and particularly when it collects
revenues from it, the function is considered a "proprietary" one, as to which there may be liability for the torts of agents within the
scope of their employment.

17. REPUBLIC vs. VILLASOR

G.R. No. L-30671 November 28, 1973

The case was filed by the Republic of the Philippines requesting to nullify the ruling of the CFI in Cebu in garnishing the public funds
allocated for the Armed Froces of the Philippines.

FACTS: A decision was rendered in Special Proceedings in favor of respondents P. J. Kiener Co., Ltd., Gavino Unchuan, and
International Construction Corporation, and against the petitioner herein, confirming the arbitration award in the amount of
P1,712,396.40, subject of Special Proceedings.

Page 13 of 16
 The respondent Honorable Guillermo P. Villasor, issued an Order declaring the said decision final and executory, directing
the Sheriffs of Rizal Province, Quezon City and Manila to execute the said decision. The corresponding Alia Writ of Execution was
issued.

On the strength of the aforementioned Alias Writ of Execution, the Provincial Sheriff of Rizal served Notices of Garnishment
with several Banks. The funds of the Armed Forces of the Philippines on deposit with Philippine Veterans Bank and PNB are public
funds duly appropriated and allocated for the payment of pensions of retirees, pay and allowances of military and civilian personnel
and for maintenance and operations of the AFP.

ISSUE:

1. Whether or not the state can be sued without its consent.

2. Whether or not the notice of garnishment issued by Judge Villasor is valid.

RULING:

As a general rule, whether the money is deposited by way of general or special deposit, they remain government funds and are not
subject to garnishment. An exception of the rule is a law or ordinance that has been enacted appropriating a specific amount to pay
a valid government obligation.

It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as well as its
government is immune from suit unless it gives its consent. A corollary is that public funds cannot be the object of a garnishment
proceeding even if the consent to be sued had been previously granted and the state liability adjudged. Such a principle applies
even to an attempted garnishment of a salary that had accrued in favor of an employee.

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. A continued adherence to
the doctrine of non-suability is not to be deplored for as against the inconvenience that may cause private parties, the loss of
government efficiency and the obstacle to the performance of its multifarious functions are far greater is such a fundamental
principle were abandoned and the availability of judicial remedy were not thus restricted.

What was done by respondent Judge is not in conformity with the dictates of the Constitution. From a logical and sound
sense from the basic concept of the non-suability of the State, public funds cannot be the object of a garnishment proceeding even
if the consent to be sued had been previously granted and the state liability adjudged . 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 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.

18. MUNICIPALITY OF SAN MIGUEL, BULACAN vs. Hon. OSCAR FERNANDEZ

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

FACTS: The Court of First Instance of Bulacan rendered a judgment holding the petitioner liable to private respondents and ordering
the municipality, among others, to pay private respondents the loss of income from rentals on subject lots and attorney’s fees.

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

ISSUE: Whether or not the funds of the Municipality of San Miguel, Bulacan are public funds which are exempt from execution.

RULING: Yes. It is a Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained
in the case of Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended and used for the
accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and public funds
to execution would materially impede, even defeat and in some instances destroy said purpose."

And, in Tantoco vs. Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not only the
public property but also the taxes and public revenues of such corporations Cannot be seized under execution against them, either

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in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of
the law, are not subject to execution unless so declared by statute."

Thus, it is clear that all the funds of petitioner municipality in the possession of the Municipal Treasurer of San Miguel, as well as
those in the possession of the Provincial Treasurer of Bulacan, are also public funds and as such they are exempt from execution.

The funds of a municipality (although it is an incorporated agency whose character provides that it can sue and be sued) are public in
character and may not be garnished unless there is a corresponding appropriation or ordinance duly passed by the Sangguniang
Bayan.

19. MUNICIPALITY OF MAKATI vs. CA

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

FACTS: Petitioner Municipality of Makati expropriated a portion of land owned by private respondents, Admiral Finance Creditors
Consortium, Inc. After proceedings, the RTC of Makati determined the cost of the said land which the petitioner must pay to the
private respondents amounting to P5,291,666.00 minus the advanced payment of P338,160.00. It issued the corresponding writ of
execution accompanied with a writ of garnishment of funds of the petitioner which was deposited in PNB. However, such order was
opposed by petitioner through a motion for reconsideration, contending that its funds at the PNB could neither be garnished nor
levied upon execution, for to do so would result in the disbursement of public funds without the proper appropriation required
under the law, citing the case of Republic of the Philippines v. Palacio.The RTC dismissed such motion, which was appealed to the
Court of Appeals; the latter affirmed said dismissal and petitioner now filed this petition for review.

ISSUE: Whether or not funds of the Municipality of Makati are exempt from garnishment and levy upon execution.
Whether Municipality of Makati can refuse to pay its obligation.

RULING: 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.

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.

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].

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. Makati 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. The State's power of
eminent domain should be exercised within the bounds of fair play and justice.

In the case at bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in
full possession and utilizing the property for public purpose, for three (3) years, the Court finds that the municipality has had more
than reasonable time to pay full compensation.

WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay Philippine Savings Bank, Inc. and
private respondent the amount of P4,953,506.45.

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 20. MINISTERIO V. CFI OF CEBU
G.R. No. L-31635 August 31, 1971

Petitioners sought the payment of just compensation for a registered lot.

FACTS: Petitioners alleged that in 1927 the National Government through its authorized representatives took physical and material
possession of it and used it for the widening of a national road, 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.

ISSUE: Whether or not the defendants, Public Highway Commissioner and the Auditor General (in their capacity as public officials ),
are immune from suit.

RULING: NO.

In Syquia v. Almeda Lopez: “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 court except with the consent of
said Government.”

In Director of the Bureau of Telecommunications v. Aligean: “in as much 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.

The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. . It is just
as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained.
It is not too much to say that when the government takes any property for public use, which is conditioned upon the payment of just
compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then
that the doctrine of immunity from suit could still be appropriately invoked.

The Supreme Court said that the suit may lie because the Doctrine of State Immunity cannot be used to perpetrate an injustice.

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."
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 the above Alfonso case: "As to the value of the
property, although the plaintiff claims the present market value thereof, the rule is that 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.”

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