PVT vs.

CIR The principal issue that calls for resolution in this appeal by certiorari from an order of respondent Court of Industrial Relations is one of constitutional significance. It is concerned with the expanded role of government necessitated by the increased responsibility to provide for the general welfare. More specifically, it deals with the question of whether petitioner, the Philippine Virginia Tobacco Administration, discharges governmental and not proprietary functions. The landmark opinion of the then Justice, row Chief Justice, Makalintal in Agricultural Credit and Cooperative Financing Administration v. Confederation of Unions in Government Corporations and offices, points the way to the right answer. 1It interpreted the then fundamental law as hostile to the view of a limited or negative state. It is antithetical to the laissez faire concept. For as noted in an earlier decision, the welfare state concept "is not alien to the philosophy of [the 1935] Constitution." 2 It is much more so under the present Charter, which is impressed with an even more explicit recognition of social and economic rights. 3 There is manifest, to recall Laski, "a definite increase in the profundity of the social conscience," resulting in "a state which seeks to realize more fully the common good of its members." 4It does not necessarily follow, however, just because petitioner is engaged in governmental rather than proprietary functions, that the labor controversy was beyond the jurisdiction of the now defunct respondent Court. Nor is the objection raised that petitioner does not come within the coverage of the Eight-Hour Labor Law persuasive. 5We cannot then grant the reversal sought. We affirm.chanroblesvirtualawlibrarychanrobles virtual law library The facts are undisputed. On December 20, 1966, claimants, now private respondents, filed with respondent Court a petition wherein they alleged their employment relationship, the overtime services in excess of the regular eight hours a day rendered by them, and the failure to pay them overtime compensation in accordance with Commonwealth Act No. 444. Their prayer was for the differential between the amount actually paid to them and the amount allegedly due them. 6There was an answer filed by petitioner Philippine

Virginia Tobacco Administration denying the allegations and raising the special defenses of lack of a cause of action and lack of jurisdiction. 7The issues were thereafter joined, and the case set for trial, with both parties presenting their evidence. 8After the parties submitted the case for decision, the then Presiding Judge Arsenio T. Martinez of respondent Court issued an order sustaining the claims of private respondents for overtime services from December 23, 1963 up to the date the decision was rendered on March 21, 1970, and directing petitioner to pay the same, minus what it had already paid. 9 There was a motion for reconsideration, but respondent Court en banc denied the same. 10Hence this petition for certiorari.chanroblesvirtualawlibrarychanrobles virtual law library Petitioner Philippine Virginia Tobacco Administration, as had been noted, would predicate its plea for the reversal of the order complained of on the basic proposition that it is beyond the jurisdiction of respondent Court as it is exercising governmental functions and that it is exempt from the operation of Commonwealth Act No. 444. 11While, to repeat, its submission as to the governmental character of its operation is to be given credence, it is not a necessary consequence that respondent Court is devoid of jurisdiction. Nor could the challenged order be set aside on the additional argument that the Eight-Hour Labor Law is not applicable to it. So it was, at the outset, made clear.chanroblesvirtualawlibrarychanrobles virtual law library 1. A reference to the enactments creating petitioner corporation suffices to demonstrate the merit of petitioner's plea that it performs governmental and not proprietary functions. As originally established by Republic Act No. 2265, 12its purposes and objectives were set forth thus: "(a) To promote the effective merchandising of Virginia tobacco in the domestic and foreign markets so that those engaged in the industry will be placed on a basis of economic security; (b) To establish and maintain balanced production and consumption of Virginia tobacco and its manufactured products, and such marketing conditions as will insure and stabilize the price of a level sufficient to cover the cost of production plus reasonable profit both in the local as well as in the foreign market; (c) To create, establish, maintain,

and operate processing, warehousing and marketing facilities in suitable centers and supervise the selling and buying of Virginia tobacco so that the farmers will enjoy reasonable prices that secure a fair return of their investments; (d) To prescribe rules and regulations governing the grading, classifying, and inspecting of Virginia tobacco; and (e) To improve the living and economic conditions of the people engaged in the tobacco industry." 13The amendatory statute, Republic Act No. 4155, 14renders even more evident its nature as a governmental agency. Its first section on the declaration of policy reads: "It is declared to be the national policy, with respect to the local Virginia tobacco industry, to encourage the production of local Virginia tobacco of the qualities needed and in quantities marketable in both domestic and foreign markets, to establish this industry on an efficient and economic basis, and, to create a climate conducive to local cigarette manufacture of the qualities desired by the consuming public, blending imported and native Virginia leaf tobacco to improve the quality of locally manufactured cigarettes." 15The objectives are set forth thus: "To attain this national policy the following objectives are hereby adopted: 1. Financing; 2. Marketing; 3. The disposal of stocks of the Agricultural Credit Administration (ACA) and the Philippine Virginia Tobacco Administration (PVTA) at the best obtainable prices and conditions in order that a reinvigorated Virginia tobacco industry may be established on a sound basis; and 4. Improving the quality of locally manufactured cigarettes through blending of imported and native Virginia leaf tobacco; such importation with corresponding exportation at a ratio of one kilo of imported to four kilos of exported Virginia tobacco, purchased by the importer-exporter from the Philippine Virginia Tobacco Administration." 16chanrobles virtual law library It is thus readily apparent from a cursory perusal of such statutory provisions why petitioner can rightfully invoke the doctrine announced in the leading Agricultural Credit and Cooperative Financing Administration decision 17and why the objection of private respondents with its overtones of the distinction between constituent and ministrant functions of governments as set forth in Bacani v. National Coconut Corporation 18if futile. The irrelevance of such a

distinction considering the needs of the times was clearly pointed out by the present Chief Justice, who took note, speaking of the reconstituted Agricultural Credit Administration, that functions of that sort "may not be strictly what President Wilson described as "constituent" (as distinguished from "ministrant"),such as those relating to the maintenance of peace and the prevention of crime, those regulating property and property rights, those relating to the administration of justice and the determination of political duties of citizens, and those relating to national defense and foreign relations. Under this traditional classification, such constituent functions are exercised by the State as attributes of sovereignty, and not merely to promote the welfare, progress and prosperity of the people these latter functions being ministrant, the exercise of which is optional on the part of the government." 19Nonetheless, as he explained so persuasively: "The growing complexities of modern society, however, have rendered this traditional classification of the functions of government quite unrealistic, not to say obsolete. The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally, and only "because it was better equipped to administer for the public welfare than is any private individual or group of individuals", continue to lose their well-defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself in its declaration of principle concerning the promotion of social justice." 20Thus was laid to rest the doctrine in Bacani v. National Coconut Corporation, 21based on the Wilsonian classification of the tasks incumbent on government into constituent and ministrant in accordance with the laissez faire principle. That concept, then dominant in economics, was carried into the governmental sphere, as noted in a textbook on political science, 22the first edition of which was published in 1898, its author being the then Professor, later American President, Woodrow Wilson. He took pains to emphasize that what was categorized by him as constituent functions had its basis in a recognition of what was

demanded by the "strictest [concept of] laissez faire, [as they] are indeed the very bonds of society." 23The other functions he would minimize as ministrant or optional.chanroblesvirtualawlibrarychanrobles virtual law library It is a matter of law that in the Philippines, the laissez faire principle hardly commanded the authoritative position which at one time it held in the United States. As early as 1919, Justice Malcolm in Rubi v. Provincial Board 24could affirm: "The doctrines of laissez faire and of unrestricted freedom of the individual, as axioms of economic and political theory, are of the past. The modern period has shown a widespread belief in the amplest possible demonstration of government activity." 25The 1935 Constitution, as was indicated earlier, continued that approach. As noted in Edu v. Ericta: 26"What is more, to erase any doubts, the Constitutional Convention saw to it that the concept of laissez-faire was rejected. It entrusted to our government the responsibility of coping with social and economic problems with the commensurate power of control over economic affairs. Thereby it could live up to its commitment to promote the general welfare through state action." 27Nor did the opinion in Edu stop there: "To repeat, our Constitution which took effect in 1935 erased whatever doubts there might be on that score. Its philosophy is a repudiation of laissez-faire. One of the leading members of the Constitutional Convention, Manuel A. Roxas, later the first President of the Republic, made it clear when he disposed of the objection of Delegate Jose Reyes of Sorsogon, who noted the "vast extensions in the sphere of governmental functions" and the "almost unlimited power to interfere in the affairs of industry and agriculture as well as to compete with existing business" as "reflections of the fascination exerted by [the then] current tendencies' in other jurisdictions. He spoke thus: "My answer is that this constitution has a definite and well defined philosophy, not only political but social and economic.... If in this Constitution the gentlemen will find declarations of economic policy they are there because they are necessary to safeguard the interest and welfare of the Filipino people because we believe that the days have come when in self-defense, a nation may provide in its constitution those safeguards, the patrimony, the freedom to grow, the freedom to develop national aspirations and

national interests, not to be hampered by the artificial boundaries which a constitutional provision automatically imposes." 28 chanrobles virtual law library It would be then to reject what was so emphatically stressed in the Agricultural Credit Administration decision about which the observation was earlier made that it reflected the philosophy of the 1935 Constitution and is even more in consonance with the expanded role of government accorded recognition in the present Charter if the plea of petitioner that it discharges governmental function were not heeded. That path this Court is not prepared to take. That would be to go backward, to retreat rather than to advance. Nothing can thus be clearer than that there is no constitutional obstacle to a government pursuing lines of endeavor, formerly reserved for private enterprise. This is one way, in the language of Laski, by which through such activities, "the harsh contract which [does] obtain between the levels of the rich and the poor" may be minimized. 29It is a response to a trend noted by Justice Laurel in Calalang v. Williams 30for the humanization of laws and the promotion of the interest of all component elements of society so that man's innate aspirations, in what was so felicitously termed by the First Lady as "a compassionate society" be attained. 31 chanrobles virtual law library 2. The success that attended the efforts of petitioner to be adjudged as performing governmental rather than proprietary functions cannot militate against respondent Court assuming jurisdiction over this labor dispute. So it was mentioned earlier. As far back as Tabora v. Montelibano, 32this Court, speaking through Justice Padilla, declared: The NARIC was established by the Government to protect the people against excessive or unreasonable rise in the price of cereals by unscrupulous dealers. With that main objective there is no reason why its function should not be deemed governmental. The Government owes its very existence to that aim and purpose - to protect the people." 33In a subsequent case, Naric Worker's Union v. Hon. Alvendia, 34decided four years later, this Court, relying on Philippine Association of Free Labor Unions v. Tan , 35 which specified the cases within the exclusive jurisdiction of the

Court of Industrial Relations, included among which is one that involves hours of employment under the Eight-Hour Labor Law, ruled that it is precisely respondent Court and not ordinary courts that should pass upon that particular labor controversy. For Justice J. B. L. Reyes, the ponente, the fact that there were judicial as well as administrative and executive pronouncements to the effect that the Naric was performing governmental functions did not suffice to confer competence on the then respondent Judge to issue a preliminary injunction and to entertain a complaint for damages, which as pointed out by the labor union, was connected with an unfair labor practice. This is emphasized by the dispositive portion of the decision: "Wherefore, the restraining orders complained of, dated May 19, 1958 and May 27, 1958, are set aside, and the complaint is ordered dismissed, without prejudice to the National Rice and Corn Corporation's seeking whatever remedy it is entitled to in the Court of Industrial Relations." 36Then, too, in a case involving petitioner itself, Philippine Virginia Tobacco Administration, 37 where the point in dispute was whether it was respondent Court or a court of first instance that is possessed of competence in a declaratory relief petition for the interpretation of a collective bargaining agreement, one that could readily be thought of as pertaining to the judiciary, the answer was that "unless the law speaks clearly and unequivocally, the choice should fall on the Court of Industrial Relations." 38Reference to a number of decisions which recognized in the then respondent Court the jurisdiction to determine labor controversies by government-owned or controlled corporations lends to support to such an approach. 39Nor could it be explained only on the assumption that proprietary rather than governmental functions did call for such a conclusion. It is to be admitted that such a view was not previously bereft of plausibility. With the aforecited Agricultural Credit and Cooperative Financing Administration decision rendering obsolete the Bacani doctrine, it has, to use a Wilsonian phrase, now lapsed into "innocuous desuetude." 40Respondent Court clearly was vested with jurisdiction.chanroblesvirtualawlibrarychanrobles virtual law library 3. The contention of petitioner that the Eight-Hour Labor Law 41does not apply to it hardly deserves any extended consideration. There is

an air of casualness in the way such an argument was advanced in its petition for review as well as in its brief. In both pleadings, it devoted less than a full page to its discussion. There is much to be said for brevity, but not in this case. Such a terse and summary treatment appears to be a reflection more of the inherent weakness of the plea rather than the possession of an advocate's enviable talent for concision. It did cite Section 2 of the Act, but its very language leaves no doubt that "it shall apply to all persons employed in any industry or occupation, whether public or private ... ." 42Nor are private respondents included among the employees who are thereby barred from enjoying the statutory benefits. It cited Marcelo v. Philippine National Red Cross 43and Boy Scouts of the Philippines v. Araos. 44Certainly, the activities to which the two above public corporations devote themselves can easily be distinguished from that engaged in by petitioner. A reference to the pertinent sections of both Republic Acts 2265 and 2155 on which it relies to obtain a ruling as to its governmental character should render clear the differentiation that exists. If as a result of the appealed order, financial burden would have to be borne by petitioner, it has only itself to blame. It need not have required private respondents to render overtime service. It can hardly be surmised that one of its chief problems is paucity of personnel. That would indeed be a cause for astonishment. It would appear, therefore, that such an objection based on this ground certainly cannot suffice for a reversal. To repeat, respondent Court must be sustained.chanroblesvirtualawlibrarychanrobles virtual law library WHEREFORE, the appealed Order of March 21, 1970 and the Resolution of respondent Court en banc of May 8, 1970 denying a motion for reconsideration are hereby affirmed. The last sentence of the Order of March 21, 1970 reads as follows: "To find how much each of them [private respondents] is entitled under this judgment, the Chief of the Examining Division, or any of his authorized representative, is hereby directed to make a reexamination of records, papers and documents in the possession of respondent PVTA pertinent and proper under the premises and to submit his report of his findings to the Court for further disposition thereof." Accordingly, as provided by the New Labor Code, this case is

referred to the National Labor Relations Commission for further proceedings conformably to law. No costs. -ROMUALDEZ-YAP V. CIVIL SERVICE COMMISSION PADILLA, J.: This is a special civil action for certiorari under Rule 65 of the Rules of Court, assailing Resolution No. 92-201 of the respondent Civil Service Commission, which upheld the petitioner's separation from the Philippine National Bank(PNB) as a result of the abolition of the Fund Transfer Department pursuant to a reorganization under Executive Order No. 80, dated 3 December 1986. Petitioner Conchita Romualdez-Yap started working with the Philippine National Bank on 20 September 1972 as special assistant with the rank of Second Assistant Manager assigned to the office of the PNB President. After several promotions, she was appointed in 1983 Senior Vice President assigned to the Fund Transfer Department. Starting 1 April 1986 up to 20 February 1987, petitioner filed several applications for leave of absence (due to medical reasons) which were duly approved. While she was on leave, Executive Order No. 80 (Revised Charter of the PNB) was approved on 3 December 1986. Said executive order authorized the restructure/reorganization and rehabilitation of PNB. Pursuant to the reorganization plan, the Fund Transfer Department was abolished and its functions transferred to the International Department. Consequently, petitioner was notified of her separation from the service in a letter dated 30 January 1987, thus: Pursuant to the Transitory Provision of the 1986 Revised Charter of the Bank, please be

informed that Management has approved your separation from the service effective February 16, 1986. You shall be entitled to the regular benefits allowed under existing law. (emphasis supplied) Please be informed further of the Bank's 1986 Revised or employee who feels matter treated above may the Civil Commission. 1 that under Sec. 37 Charter, any officer aggrieved by any submit his case to Service

This letter was received by petitioner's secretary at the PNB head office on 16 February 1987. Petitioner's first recorded appeal to the Civil Service Commission questioning her separation is a letter dated 4 August 1989. Then CSC Chairman Samilo N. Barlongay upheld the validity of her separation from the service in a letter/opinion dated 30 August 1989 (this was allegedly received by petitioner only on 26 February 1990) stating thus: xxx xxx xxx It may be mentioned in this connection, that inasmuch as you did not avail of the ERIP/Supplementary Retirement Plans adopted by the PNB in 1986, you have therefore lost your right thereto. Moreover, since you lack the required number of years of service to entitle you to retirement benefits under existing laws, you may be entitled to the return of your GSIS personal contributions. Considering further that you have exhausted all your accumulated leave credits as you went on leave of absence for the period from April 1,

1986 to February 20, 1987, there is no legal or valid basis to entitle you to payment of terminal leave. Finally, pursuant to Section 16, Article XVIII of the Transitory Provisions of the 1987 Philippine Constitution, you may be entitled to payment of separation subject to auditing rules and regulations. 2 In her motion for reconsideration with the Civil Service Commission, dated 5 March 1990, questioning Chairman Barlongay's ruling, petitioner claimed: 1. The opinion/ruling was not fully supported by the evidence on record; 2. Errors of law prejudicial to the interest of the movant have been committed. She argued: . . . that her separation from the service was illegal and was done in bad faith considering that her termination on February 16, 1986 was made effective prior to the effectivity of Executive Order No. 80 on December 3, 1986, which law authorized the reorganization of the PNB, and even before February 25, 1986, when President Corazon C. Aquino came into power. She further claims that although the notice of termination was dated January 30, 1987 it was only served upon her on February 16, 1987 when the new Constitution which guarantees security of tenure to public employees was already in effect. 3 xxx xxx xxx

. . . the bad faith in her separation from the service in 1987 was evident from the recent restoration of the Fund Transfer Department as a separate and distinct unit from the International Department . . . 4 Denying the motion for reconsideration, the Civil Service Commission in its aforecited Resolution No. 92-201, dated 30 January, 1992, ruled: Sec. 33 of EO 80 (1986 Revised Charter of the PNB) provides: Sec. 33. Authority to Reorganize. In view of reduced operations contemplated under this charter in pursuance of the national policy expressed in the "Whereas" clause hereof, a reorganization of the Bank and a reduction in force are hereby authorized to achieve greater efficiency and economy in operations, including the adoption of a new staffing pattern to suit the reduced operations envisioned. The program of reorganization shall begin immediately after the approval of this Order, and shall be completed within six (6) months and shall be fully implemented within eighteen (18) months thereafter." Clearly; as aforequoted, PNB was authorized to undergo reorganization and to effect a reduction in force to "achieve greater efficiency and economy in operations". It cannot, be disputed that reduction in force necessitates, among others, the abolition of positions/offices. The records show that prior to its reorganization, PNB originally had 7,537 positions which were reduced to 5,405 after the reorganization. Indeed, 2,132 positions were abolished, that is, the original positions in PNB were reduced by

28%. This reduction in force likewise included the senior officer positions, in PNB, which were reduced, thus: Positions Incumbents Proposed Position President 1 Sr. Exec. VP Exec. VP 3 Senior VP 12 Vice Pres. 33 27 15 1 1 2 11 1 1 0 2 7

security of tenure would not be a Chinese Wall. . . . . . . . Good faith, as a component of a reorganization under a constitutional regime is judged from the facts of each case. In the instant case, therefore, this Commission is inclined to believe that the reorganization of PNB was done in good faith. For indeed, the reorganization was pursued to achieve economy. It undertook reduction in force as a means to streamline the numbers of the workforce. It was incidental that movant Yap's position was one among those abolished. Movant Yap failed to substantiate her claim by clear and convincing evidence that the abolition of her position was a result of her close identification with the previous regime, being a sister of former First Lady Imelda Romualdez Marcos. This being so, and pursuant to the presumption of regularity in the performance of official functions, the abolition of movant Yap's position should be upheld. PNB, in the instant case, has clearly proved by substantial evidence that its act in terminating the services of some of its employees was done in good faith. 5 Overruling her imputation of bad faith, i.e. her separation was illegal because it took effect on 16 February 1986 or even before the promulgation of EO No. 80 on 3 December 1986, the CSC noted that the year "1986" stated in the notice of her separation from the service was a typographical error. PNB submitted documents (p. 6 of Resolution No. 92-201) supporting its stand that the separation actually took effect on 16 February 1987.

The position of movant Yap (SVP) was one among the original twelve (12) SVP positions. It was one among the five (5) SVP positions which were abolished. In fact, the FTD of which she was then the incumbent SVP, was merged with the International Department to which its functions were closedly related. It should be noted that as ruled by the Supreme Court in Dario vs. Mison (G.R. NO. 81954): Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal or separation actually occurs because the position itself ceases to exist. And in that case,

On the issue of bad faith as related to the later restoration of the Fund Transfer Department, the subject CSC resolution adds: xxx xxx xxx It may be mentioned that the recent restoration of the Fund Transfer Department, actually was a merger of the Fund Transfer Group, the Foreign Remittance Development and Coordinating Unit based on board Resolution No. 60 of March 12, 1991, or after the lapse of over four (4) years from the date it was abolished in 1987. Moreover, the restoration of the Fund Transfer Department and other offices in the PNB was primarily caused by the improved financial capability and present needs of the Bank. This improved financial condition of the PNB is evident from the 1990 Annual Report it submitted. It may be further stated that the re-established FTD is headed by a Vice President, a position much lower in rank than the former department headed by a Senior Vice President. Furthermore, it should be noted that granting arguendo that movant Yap's termination from the service was tainted with bad faith, she however, is now barred from assailing the same as she did not seasonably assert her right thereto. Records show that she was separated from PNB on February 16, 1987 and it was only in 1989 or about 2 years thereafter when she brought this matter to this Commission. By her inaction in questioning her termination within a period of one year, she is considered to have acquiesced to her separation from the service and abandoned her right to the position. 6

In the present petition before the Court, the following issues are raised: 1. Existence of bad faith in the reorganization of the Philippine National Bank resulting in the separation from the service of petitioner. 2. Erroneous application of the Dario v. Mison doctrine vis-a-vis PNB's reorganization. 3. Erroneous application of the one (1) year prescriptive period for quo warranto proceedings in petitioner's case. Dario v. Mison 7 laid down the requirement of good faith in the reorganization of a government bureau wherein offices are abolished. It says: . . . Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition," which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid "abolition" takes place and whatever "abolition" is done, is void ab initio. There is an invalid "abolition" as where there is merely a change of nomenclature of positions, or where claims of economy are belied by the existence of ample funds. It is to be stressed that by

predisposing a reorganization to the yardstick of good faith, we are not, as a consequence, imposing a "cause" for restructuring. Retrenchment in the course of a reorganization in good faith is still removal "not for cause" if by "cause" we refer to "grounds" or conditions that call for disciplinary action. Good faith, as a component of a reorganization under a constitutional regime, is judged from the facts of each case. In Petitioner's case, the following instances are cited by her as indicia of bad faith: 1. The abolished department was later restored and the number of senior vice presidents was increased. 2. PNB did not follow the prescribed sequence of separation of employees from the service contained in Rep. Act No. 6656 which is: Sec. 3. In the separation of personnel pursuant to reorganization, the following order of removal shall be followed: (a) Casual employees with less than five (5) years of government service; (b) Casual employees with

five (5) years or more of government service; (c) Employees holding temporary appointments; and (d) Employees holding permanent appointments: Provided, That those in the same category as enumerated above, who are least qualified in terms of performance and merit shall be laid off first, length of service notwithstanding. 3. Petitioner was not extended preference in appointment to the positions in the new staffing pattern as mandated by Sec. 4 of Rep. Act 6656, her qualification and fitness for new positions were never evaluated or considered in violation of Sec. 27 of P.D. 807 which was incorporated as Sec. 29 Ch. 5 Subtitle A, Book V of the Administrative Code of 1987. 4. Lack of notice and bearing before separation from the service.

5. Petitioner was forced to take a leave of absence and prevented from reporting for work. 6. There is a discrepancy in the date of her separation from the service and the effectivity thereof. 7. PNB employees in the Fund Transfer Department identified with her were reassigned or frozen. 8. She is listed as having resigned instead of being separated or dismissed which was what actually happened. 9. The dismissal was politically motivated, she being a sister of Mrs. Imelda Romualdez Marcos, wife of deposed President Ferdinand Marcos. Executive Order No. 80 conferred upon the PNB the authority to reorganize. The order was issued by then Pres. Corazon Aquino on 3 December 1986 while she was exercising the powers vested in the President of the Philippines by the Freedom Constitution. After 3 December 1986, what remained to be done was the implementation of the reorganization. There is no doubt as to the legal basis for PNB's reorganization. The real question is: was it done in good faith, tested by the Dario v. Mison doctrine? To start with it is almost absurd for petitioner to insist that her termination from the service was antedated to 16 February 1986. At that time, the reorganization of PNB had not even been conceived. In most of PNB's pleadings, it has documented and supported its stand that the year of petitioner's separation is 1987 not 1986. The antedating of the termination date, aside from being clearly a typographical error, is a periphernal issue. The real issue is

existence of bad faith consisting of tangible bureaucratic/management pressures exerted to ease her out of office. Bad faith has been defined as a state of mind affirmatively operating with furtive design or with some motive of self interest or ill will or for an ulterior purpose. 8 It is the performance of an act with the knowledge that the actor is violating the fundamental law or right, even without willful intent to injure or purposive malice to perpetrate a damnifying harm. 9 PNB's reorganization, to repeat, was by virtue of a valid law. At the time of reorganization, due to the critical financial situation of the bank, departments, positions and functions were abolished or merged. The abolition of the Fund Transfer Department (FTD) was deemed necessary. This, to the Court's mind, was a management prerogative exercised pursuant to a business judgment. At this point, a distinction can be made in ruling on the validity of a reorganization between a government bureau or office performing constituent functions (like the Customs) and a government-owned or controlled corporation performing ministrant functions (like the PNB). Constituent function are those which constitute the very bonds of society and are compulsory in nature; ministrant functions are those undertaken by way of advancing the general interests of society, and are merely optional. Commercial or universal banking is, ideally, not a governmental but a private sector, endeavor. It is an optional function of government. . . . The principles determining whether or not a government shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do those things which by its very, nature it is better equipped to administer for the public welfare than is any private individual or group

of individuals (Malcolm, The Government of the Philippine Islands, pp. 19-20) From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporation under the Corporation Law. (Bacani vs. Nacoco, No, L-9657, November 29, 1956, 100 Phil. 468) But a reorganization whether in a government bureau performing constituent functions or in a government-owned or controlled corporation performing ministrant functions must meet a common test, the test of good faith. In this connection, the philosophy behind PNB's reorganization is spelled out in the whereas clauses of Executive Order No. 80: WHEREAS, within the context of the general policy there nevertheless exists a clear role for direct government-participation in the banking system, particularly in servicing the requirements of agriculture, small and medium scale industry, export development, and the government sector.

WHEREAS, in pursuit of this national policy there is need to restructure the government financial institutions, particularly the Philippine National Bank, to achieve a more efficient and effective use of available scarce resources, to improve its viability, and to avoid unfair competition with the private sector, and WHEREAS, the reorganization and rehabilitation of the Philippine National Bank into a similar but stronger and more operationally viable bank is an important component of the nationalization programs for both the financial system and the government corporation sector; . . . . Whether there was a hidden political agenda to persecute petitioner due to her consanguinial relation to Mrs. Imelda Romualdez Marcos, the widow of former President Marcos, is not clearly shown. On the other hand, it is entirely possible that, precisely because of such consanguinial relation, petitioner may have been the object of deferential, if not special treatment under the Marcos regime. It is part of the Filipino culture to extend such deferential, if not special treatment to close relatives of persons in power. Many times this is carried to unwholesome extremes. But a discontinuance of such deferential or special treatment in the wake of a change in government or administration is not bad faith per se. It may be merely putting things in their proper places. Due to the restructuring and this is empirically verifiable PNB became once more a viable banking institution. The restoration of the FTD four years after it was abolished and its functions transferred to the International Department, can be attributed to the bank's growth after reorganizations, thereby negating malice or bad faith in that reorganization. The essence of good faith lies in an honest belief in the validity of one's right. 10 It consists of an honest intention to abstain from taking an unconscionable and unscrupulous

advantage of another, its absence should be established by convincing evidence. 11 The records also clearly indicate that starting April 1986 to February 1987, petitioner went on leave of absence for medical reasons. While she was not reporting to the office, the bank's reorganization got underway. She continued, however, receiving her salaries, allowances, emoluments, honoraria and fees up to March 1987. Employees who were affected by the reorganization had the option to avail of the bank's Separation Benefits Plan/Early Retirement Plan (SBP/ERIP). Petitioner opted not to avail of such plan and instead submitted to the result of the bank's ongoing reorganization and management's discretion. If petitioner had the desire for continued employment with the bank, she could have asserted it for management's consideration. There is no proof on record that she affirmatively expressed willingness to be employed. Since she cannot rebut the CSC finding that her earliest appeal was made on 4 August 1989, there is no reason for this Court to hold that she did not sleep on her rights. On the contrary, her present argument that bad faith existed at the time of the abolition of the FTD because it was restored four years later is a little too late. Who could have predicted in 1986 or 1987 that PNB would be able to rise from its financial crisis and become a viable commercial bank again? The decision to abolish the FTD at the time it was abolished, to repeat, was a business judgment made in good faith. PNB for its part submits that its reorganization was effected in good faith because a) There was not only a perceptible but substantial restructuring of the PNB hierarchy showing reduction of personnel, consolidation of offices and abolition of positions. b) Two thousand one hundred thirty two (2,132) positions were abolished during the

period from February 16, 1986 to January 14, 1987 leaving a lean workforce of five thousand four hundred five (5,405) as of latter date per B.R. No. 34 hereto attached as Annex "R". c) The number of senior officers, including Senior Vice Presidents, was accordingly reduced. Another issue raised by petitioner is PNB's alleged non-compliance with the mandate of Sections 2 and 4 of Rep. Act No. 6656. These Sections provide: Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving to a claim for reinstatement or reappointment by an aggrieved party. (a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; (b) Where an office is abolished and another performing substantially the same functions is created;

(c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit; (d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices; (e) Where the removal violates the order of separation provided in Section 3 hereof. xxx xxx xxx Sec. 4. Officers and employees holding permanent, appointments shall be given preference for appointment to the new position in the approved staffing pattern comparable to their former positions or in case there are not enough comparable positions, to positions next lower in rank. No new employees shall be taken in until all permanent officers and employees have been appointed, including temporary and casual employees who possess the necessary qualification requirements, among which is the appropriate civil service eligibility, for permanent appointment to positions in the approved staffing pattern, in case there are still positions to be filled, unless such positions are policy-determining, primarily confidential or highly technical in nature. In the first place, Rep. Act No. 6656 cannot be invoked by petitioner because it took effect on 15 June 1987, or after PNB's reorganization had already been implemented. But assuming, ex gratia argumenti,

that it is applicable here and petitioner must be accorded preferential right to appointment in the bank, PNB in its rejoinder impressively asserts: Needless to say, there were various committees that were created in the implementation of the organizational restructuring of the Bank based on the foregoing policy guidelines. Each personnel to be retained was evaluated in terms of relative fitness and merit along with the other personnel of the Bank. Thus, when then SVP Federico Pascual was chosen to head the International Department from among other officers of the Bank, including Ms. Yap, his qualifications far exceeded those of the other candidates for the position. We attach hereto as Annexes "G-1" and "G-2" the service records of Mr. Federico Pascual and Petitioner Ms. Yap, respectively, which clearly show that the qualifications of Mr. Pascual far exceed those of Petitioner Yap. Aside from being a lawyer having been a law graduate from the University of the Philippines, he is also a Bachelor of Arts degree holder from Ateneo de Manila and a Master of Laws graduate o Columbia Law School. He had studied Masteral Arts in Public Administration at the London School of Economics and had undergone extensive seminars since 1974 at the International Department and had been assigned in several foreign branches of the Bank. Before he resigned from the Bank, he held the second highest position of Executive Vice President and served as Acting President of the Bank before the incumbent president,

President position.

Gabriel

Singson

assumed

his

On the other hand, the service record of Petitioner Yap will show that she only holds a Bachelor of Science in Commerce Degree from Assumption Convent and has undergone only one seminar on Management and Leadersbip Training Program. She entered the Bank service in 1972. (Rollo at pp. 312 to 313) xxx xxx xxx The prayer in the petition at bar seeks petitioner's immediate reinstatement to her former position as senior vice president and head of the Fund Transfer Department, or reappointment to a position of comparable or equivalent rank without loss of seniority rights and pay, etc., under the bank's new staffing pattern. A person claiming to be entitled to a public office or position usurped or unlawfully held or exercised by another may bring an action for quo warranto (Rule 66, Sec. 6, Rules of Court). The petitioner therein must show a clear legal right to the office allegedly held unlawfully by another. 12 An action for quo warranto should be brought within one (1) year after ouster from office; 13 the failure to institute the same within the reglementary period constitutes more than a sufficient basis for its dismissal 14 since it is not proper that the title to a public office be subjected to continued uncertainty . . . 15 An exception to this prescriptive period lies only if the failure to file the action can be attributed to the acts of a responsible government officer and not of the dismissed employee.
16

former position which at present is occupied by another. She cannot invoke De Tavera v. Phil. Tuberculosis Society, Inc., et. al. 17 and contend that there is no claim of usurpation of office, and that quo warranto may be availed of to assert one's right to an office in the situation obtaining in the case at bar. Santos v. CA, et. al. 18 and Magno v. PNNC Corp. 19 are invoked by petitioner to illustrate that this action is one for separation without just cause, hence, the prescriptive period is allegedly four (4) years in accordance with Article 1146 of the Civil Code. 20 We do not agree. Petitioner's separation from the service was due to the abolition of her office in implementation of a valid reorganization. This is not the unjustifiable cause which results in injury to the rights of a person contemplated by Article 1146. The abolition of the office was not a whimsical, thoughtless move. It was a thoroughly evaluated action for streamlining functions based on a rehabilitation plan. 21 At the time of the abolition of the Fund Transfer Department in 1986, foreign exchange losses of the bank amounted to P81.1 Million. 22 The head of office was a Senior Vice President. At the time of restoration of the department in 1991, it was headed by a vice president (lower in rank) and showed earnings of P2,620.0 Million. 23 Other departments abolished in 1986 were also subsequently restored. Restoring petitioner to her previous position with backwages would be unjust enrichment to her, considering that she had abandoned or showed lack of interest in reclaiming the same position when the bank was not yet fully rehabilitated and she only insisted on reinstatement in August 1989 or two (2) years after her alleged unjustified separation. To those who feel that their unjustified separation from the service is for a cause beyond their control, the aforecited Magno case teaches: . . . while We fully recognize the special protection which the Constitution, labor laws,

Measured by the above jurisprudence, petitioner's action may be said to be one for quo warranto, seeking reinstatement to her

and social legislation accord the workingman, We cannot, however, alter or amend the law on prescription to relieve him of the consequences of his inaction. Vigilantibus, non dormientibus, jura subveniunt (Laws come to the assistance of the vigilant, not of the sleeping). His explanation that he could not have filed the complaint earlier because "he was prevented to do so beyond his control for the simple reason that private respondent have (sic) tried to circumvent the law by merely floating" him is very flimsy and does not even evoke sympathetic consideration, if at all it is proper and necessary. We note that petitioner herein is not an unlettered man; he seems to be educated and assertive of his rights and appears to be familiar with judicial procedures. He filed a motion for extension of time to file the petition and the petition itself without the assistance of counsel. We cannot believe that if indeed he had a valid grievance against PNCC he would not have taken immediate positive steps for its redress. WHEREFORE, premises considered, the assailed CSC resolution is AFFIRMED. The petition is DISMISSED for failure to show grave abuse of discretion on the part of said CSC in rendering the questioned resolution. No pronouncement as to costs. -SHIPSIDE INCORPORATED vs. THE HON. COURT OF APPEALS MELO, J.: Before the Court is a petition for certiorari filed by Shipside Incorporated under Rule 65 of the 1997 Rules on Civil Procedure against the resolutions of the Court of Appeals promulgated on

November 4, 1999 and May 23, 2000, which respectively, dismissed a petition for certiorari and prohibition and thereafter denied a motion for reconsideration. The antecedent facts are undisputed: On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez, over four parcels of land Lot 1 with 6,571 square meters; Lot 2, with 16,777 square meters; Lot 3 with 1,583 square meters; and Lot 4, with 508 square meters. On April 11, 1960, Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril, Cleopatra Llana, Regina Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry No. 9115 OCT No. 0-381 on August 10, 1960. Consequently, Transfer Certificate No. T-4304 was issued in favor of the buyers covering Lots No. 1 and 4. Lot No. 1 is described as: A parcel of land (Lot 1, Plan PSU-159621, L. R. Case No. N361; L. R. C. Record No. N-14012, situated in the Barrio of Poro, Municipality of San Fernando, Province of La Union, bounded on the NE, by the Foreshore; on the SE, by Public Land and property of the Benguet Consolidated Mining Company; on the SW, by properties of Rafael Galvez (US Military Reservation Camp Wallace) and Policarpio Munar; and on the NW, by an old Barrio Road. Beginning at a point marked 1 on plan, being S. 74 deg. 11W. , 2670. 36 from B. L. L. M. 1, San Fernando, thence S. 66 deg. 19E., 134.95 m. to point 2; S. 14 deg. 57W., 11.79 m. to point 3; S. 12 deg. 45W., 27.00 m. to point 4; S. 12 deg. 45W, 6.90 m. to point 5; N. 69 deg., 32W., 106.00 m. to point 6; N. 52 deg., 21W., 36. 85 m. to point 7; N. 21 deg. 31E., 42. 01 m. to the point of beginning; containing an area of SIX THOUSAND FIVE HUNDRED AND SEVENTY-ONE (6,571) SQUARE METERS, more or less. All points

referred to are indicated on the plan; and marked on the ground; bearings true, date of survey, February 421, 1957. Lot No. 4 has the following technical description: A parcel of land (Lot 4, Plan PSU-159621, L. R. Case No. N-361 L. R. C. Record No. N-14012), situated in the Barrio of Poro, Municipality of San Fernando, La Union. Bounded on the SE by the property of the Benguet Consolidated Mining Company; on the S. by property of Pelagia Carino; and on the NW by the property of Rafael Galvez (US Military Reservation, Camp Wallace). Beginning at a point marked 1 on plan, being S. deg. 24W. 2591. 69 m. from B. L. L. M. 1, San Fernando, thence S. 12 deg. 45W., 73. 03 m. to point 2; N. 79 deg. 59W., 13.92 m. to point 3; N. 23 deg. 26E. , 75.00 m. to the point of beginning; containing an area of FIVE HUNDED AND EIGHT (508) SQUARE METERS, more or less. All points referred to are indicated in the plan and marked on the ground; bearings true, date of survey, February 4-21, 1957. On August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to Lepanto Consolidated Mining Company. The deed of sale covering the aforesaid property was inscribed as Entry No. 9173 on TCT No. T-4304. Subsequently, Transfer Certificate No. T-4314 was issued in the name of Lepanto Consolidated Mining Company as owner of Lots No. 1 and 4. On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First Instance of La Union, Second Judicial District, issued an Order in Land Registration Case No. N-361 (LRC Record No. N-14012) entitled Rafael Galvez, Applicant, Eliza Bustos, et al., Parties-In-Interest; Republic of the Philippines, Movant declaring OCT No. 0-381 of the Registry of Deeds for the Province of La Union issued in the name of Rafael Galvez, null and void, and ordered the cancellation thereof. The Order pertinently provided: Accordingly, with the foregoing, and without prejudice on the rights of incidental parties concerned herein to institute their respective appropriate actions compatible with whatever cause they

may have, it is hereby declared and this court so holds that both proceedings in Land Registration Case No. N-361 and Original Certificate No. 0-381 of the Registry of Deeds for the province of La Union issued in virtue thereof and registered in the name of Rafael Galvez, are null and void; the Register of Deeds for the Province of La Union is hereby ordered to cancel the said original certificate and / or such other certificates of title issued subsequent thereto having reference to the same parcels of land; without pronouncement as to costs. On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No. 1 and 4, with the deed being entered in TCT NO. 4314 as entry No. 12381. Transfer Certificate of Title No. T-5710 was thus issued in favor of the petitioner which starting since then exercised proprietary rights over Lots No. 1 and 4. In the meantime, Rafael Galvez filed his motion for reconsideration against the order issued by the trial court declaring OCT No. 0-381 null and void. The motion was denied on January 25, 1965. On appeal, the Court of Appeals ruled in favor of the Republic of the Philippines in a Resolution promulgated on August 14, 1973 in CA-G. R. No. 36061-R. Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated August 14, 1973 became final and executory on October 23, 1973. On April 22, 1974, the trial court in L. R. C. Case No. N-361 issued a writ of execution of the judgment which was served on the Register of Deeds, San Fernando, La Union on April 29, 1974. Twenty four long years thereafter, on January 14, 1999, the Office of the Solicitor General received a letter dated January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point Development Corporation, stating that the aforementioned orders and decision of the trial court in L. R. C. No. N-361 have not been executed by the Register of Deeds, San Fernando, La Union despite receipt of the writ of execution.

On April 21, 1999, the Office of the Solicitor General filed a complaint for revival of judgment and cancellation of titles before the Regional Trial Court of the First Judicial Region (Branch 26, San Fernando, La Union) docketed therein as Civil Case No. 6346 entitled, Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, represented by Teresita Tan, Reynaldo Mamaril, Elisa Bustos, Erlinda Balatbat, Regina Bustos, Shipside Incorporated and the Register of Deeds of La Union, Defendants. The evidence shows that the impleaded defendants (except the Register of Deeds of the province of La Union) are the successors-ininterest of Rafael Galvez (not Reynaldo Galvez as alleged by the Solicitor General) over the property covered by OCT No. 0-381, namely: (a) Shipside Inc. which is presently the registered owner in fee simple of Lots No. 1 and 4 covered by TCT No. T-5710, with a total area of 7,079 square meters; (b) Elisa Bustos, Jesusito Galvez, and Teresita Tan who are the registered owners of Lot No. 2 of OCT No. 0-381;and (c) Elisa Bustos, Filipina Mamaril, Regina Bustos and Erlinda Balatbat who are the registered owners of Lot No. 3 of OCT No. 0-381, now covered by TCT No. T-4916, with an area of 1,583 square meters. In its complaint in Civil Case No. 6346, the Solicitor General argued that since the trial court in LRC Case No. 361 had ruled and declared OCT No. 0-381 to be null and void, which ruling was subsequently affirmed by the Court of Appeals, the defendantssuccessors-in-interest of Rafael Galvez have no valid title over the property covered by OCT No. 0-381, and the subsequent Torrens titles issued in their names should be consequently cancelled. On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following grounds: (1) the complaint stated no cause of action because only final and executory judgments may be subject of an action for revival of judgment; (2) the plaintiff is not the real party-in-interest because the real property covered by the Torrens titles sought to be cancelled, allegedly part of Camp Wallace (Wallace Air Station), were under the ownership and administration of the Bases Conversion Development Authority (BCDA) under Republic Act No. 7227; (3) plaintiffs cause of action is

barred by prescription; (4) twenty-five years having lapsed since the issuance of the writ of execution, no action for revival of judgment may be instituted because under Paragraph 3 of Article 1144 of the Civil Code, such action may be brought only within ten (10) years from the time the judgment had been rendered. An opposition to the motion to dismiss was filed by the Solicitor General on August 23, 1999, alleging among others, that: (1) the real party-in-interest is the Republic of the Philippines;and (2) prescription does not run against the State. On August 31, 1999, the trial court denied petitioners motion to dismiss and on October 14, 1999, its motion for reconsideration was likewise turned down. On October 21, 1999, petitioner instituted a petition for certiorari and prohibition with the Court of Appeals, docketed therein as CA-G.R. SP No. 55535, on the ground that the orders of the trial court denying its motion to dismiss and its subsequent motion for reconsideration were issued in excess of jurisdiction. On November 4, 1999, the Court of Appeals dismissed the petition in CA-G.R. SP No. 55535 on the ground that the verification and certification in the petition, under the signature of Lorenzo Balbin, Jr., was made without authority, there being no proof therein that Balbin was authorized to institute the petition for and in behalf and of petitioner. On May 23, 2000, the Court of Appeals denied petitioners motion for reconsideration on the grounds that: (1) a complaint filed on behalf of a corporation can be made only if authorized by its Board of Directors, and in the absence thereof, the petition cannot prosper and be granted due course;and (2) petitioner was unable to show that it had substantially complied with the rule requiring proof of authority to institute an action or proceeding. Hence, the instant petition. In support of its petition, Shipside, Inc. asseverates that: 1. The Honorable Court of Appeals gravely abused its

discretion in dismissing the petition when it made a conclusive legal presumption that Mr. Balbin had no authority to sign the petition despite the clarity of laws, jurisprudence and Secretarys certificate to the contrary; 2. The Honorable Court of Appeals abused its discretion when it dismissed the petition, in effect affirming the grave abuse of discretion committed by the lower court when it refused to dismiss the 1999 Complaint for Revival of a 1973 judgment, in violation of clear laws and jurisprudence.

The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the resident manager for petitioner, who was the signatory in the verification and certification on nonforum shopping, failed to show proof that he was authorized by petitioners board of directors to file such a petition. A corporation, such as petitioner, has no power except those expressly conferred on it by the Corporation Code and those that are implied or incidental to its existence. In turn, a corporation exercises said powers through its board of directors and / or its duly authorized officers and agents. Thus, it has been observed that the power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers (Premium Marble Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn, physical acts of the corporation, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors. It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the petition, there was no proof attached thereto that Balbin was authorized to sign the verification and non-forum shopping certification therein, as a consequence of which the petition was dismissed by the Court of Appeals. However, subsequent to such dismissal, petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by its board secretary stating that on October 11, 1999, or ten days prior to the filing of the petition, Balbin had been authorized by petitioners board of directors to file said petition. The Court has consistently held that the requirement regarding verification of a pleading is formal, not jurisdictional ( Uy v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is simply a condition affecting the form of the pleading, noncompliance with which does not necessarily render the pleading fatally defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith. The court may order the

Petitioner likewise adopted the arguments it raised in the petition and comment/reply it filed with the Court of Appeals, attached to its petition as Exhibit L and N, respectively. In his Comment, the Solicitor General moved for the dismissal of the instant petition based on the following considerations: (1) Lorenzo Balbin, who signed for and in behalf of petitioner in the verification and certification of non-forum shopping portion of the petition, failed to show proof of his authorization to institute the petition for certiorari and prohibition with the Court of Appeals, thus the latter court acted correctly in dismissing the same; (2) the real party-in-interest in the case at bar being the Republic of the Philippines, its claims are imprescriptible. In order to preserve the rights of herein parties, the Court issued a temporary restraining order on June 26, 2000 enjoining the trial court from conducting further proceedings in Civil Case No. 6346. The issues posited in this case are: (1) whether or not an authorization from petitioners Board of Directors is still required in order for its resident manager to institute or commence a legal action for and in behalf of the corporation; and (2) whether or not the Republic of the Philippines can maintain the action for revival of judgment herein. We find for petitioner. Anent the first issue:

correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order that the ends of justice may thereby be served. On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the petitioner to submit the required documents that should accompany the petition, including the certification against forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized to file a petition on behalf of the corporation. In certain exceptional circumstances, however, the Court has allowed the belated filing of the certification. In Loyola v. Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered the filing of the certification one day after the filing of an election protest as substantial compliance with the requirement. In Roadway Express, Inc. v. Court of Appeals, et. al. (264 SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before the dismissal of the petition. In Uy v. LandBank, supra, the Court had dismissed Uys petition for lack of verification and certification against non-forum shopping. However, it subsequently reinstated the petition after Uy submitted a motion to admit certification and non-forum shopping certification. In all these cases, there were special circumstances or compelling reasons that justified the relaxation of the rule requiring verification and certification on nonforum shopping. In the instant case, the merits of petitioners case should be considered special circumstances or compelling reasons that justify tempering the requirement in regard to the certificate of non-forum shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the requirement as to the certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner herein did submit a certification on non-

forum shopping, failing only to show proof that the signatory was authorized to do so. That petitioner subsequently submitted a secretarys certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise mitigates this oversight. It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the objective of preventing the undesirable practice of forumshopping (Bernardo v. NLRC, 255 SCRA 108 [1996]). Lastly, technical rules of procedure should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an even more urgent ideal. Now to the second issue: The action instituted by the Solicitor General in the trial court is one for revival of judgment which is governed by Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil Procedure. Article 1144(3) provides that an action upon a judgment must be brought within 10 years from the time the right of action accrues." On the other hand, Section 6, Rule 39 provides that a final and executory judgment or order may be executed on motion within five (5) years from the date of its entry, but that after the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. Taking these two provisions into consideration, it is plain that an action for revival of judgment must be brought within ten years from the time said judgment becomes final. From the records of this case, it is clear that the judgment sought to be revived became final on October 23, 1973. On the other hand, the action for revival of judgment was instituted only in 1999, or more than twenty-five (25) years after the judgment had become final. Hence, the action is barred by extinctive prescription considering that such an action can be instituted only within ten (10) years from the time the cause of action accrues. The Solicitor General, nonetheless, argues that the States

cause of action in the cancellation of the land title issued to petitioners predecessor-in-interest is imprescriptible because it is included in Camp Wallace, which belongs to the government. The argument is misleading. While it is true that prescription does not run against the State, the same may not be invoked by the government in this case since it is no longer interested in the subject matter. While Camp Wallace may have belonged to the government at the time Rafael Galvezs title was ordered cancelled in Land Registration Case No. N-361, the same no longer holds true today. Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, created the Bases Conversion and Development Authority. Section 4 pertinently provides: Section 4. Purposes of the Conversion Authority. The Conversion Authority shall have the following purposes: (a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air Station, ODonnell Transmitter Station, San Miguel Naval Communications Station, Mt. Sta. Rita Station (Hermosa, Bataan) and those portions of Metro Manila military camps which may be transferred to it by the President; Section 2 of Proclamation No. also provides: 216, issued on July 27, 1993,

no longer has a right or interest to protect. Consequently, the Republic is not a real party in interest and it may not institute the instant action. Nor may it raise the defense of imprescriptibility, the same being applicable only in cases where the government is a party in interest. Under Section 2 of Rule 3 of the 1997 Rules of Civil Procedure, every action must be prosecuted or defe nded in the name of the real party in interest. To qualify a person to be a real party in interest in whose name an action must be prosecuted, he must appear to be the present real owner of the right sought to enforced (Pioneer Insurance v. CA, 175 SCRA 668 [1989]). A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. And by real interest is meant a present substantial interest, as distinguished from a mere expectancy, or a future, contingent, subordinate or consequential interest (Ibonilla v. Province of Cebu, 210 SCRA 526 [1992]). Being the owner of the areas covered by Camp Wallace, it is the Bases Conversion and Development Authority, not the Government, which stands to be benefited if the land covered by TCT No. T-5710 issued in the name of petitioner is cancelled. Nonetheless, it has been posited that the transfer of military reservations and their extensions to the BCDA is basically for the purpose of accelerating the sound and balanced conversion of these military reservations into alternative productive uses and to enhance the benefits to be derived from such property as a measure of promoting the economic and social development, particularly of Central Luzon and, in general, the countrys goal for enhancement (Section 2, Republic Act No. 7227). It is contended that the transfer of these military reservations to the Conversion Authority does not amount to an abdication on the part of the Republic of its interests, but simply a recognition of the need to create a body corporate which will act as its agent for the realization of its program. It is consequently asserted that the Republic remains to be the real party in interest and the Conversion Authority merely its agent. We, however, must not lose sight of the fact that the BCDA is an entity invested with a personality separate and distinct from the

Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development Authority. All areas covered by the Wallace Air Station as embraced and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, excluding those covered by Presidential Proclamations and some 25-hectare area for the radar and communication station of the Philippine Air Force, are hereby transferred to the Bases Conversion Development Authority With the transfer of Camp Wallace to the BCDA, the government

government. Section 3 of Republic Act No. 7227 reads: Section 3. Creation of the Bases Conversion and Development Authority. There is hereby created a body corporate to be known as the Conversion Authority which shall have the attribute of perpetual succession and shall be vested with the powers of a corporation. It may not be amiss to state at this point that the functions of government have been classified into governmental or constituent and proprietary or ministrant. While public benefit and public welfare, particularly, the promotion of the economic and social development of Central Luzon, may be attributable to the operation of the BCDA, yet it is certain that the functions performed by the BCDA are basically proprietary in nature. The promotion of economic and social development of Central Luzon, in particular, and the countrys goal for enhancement, in general, do not make the BCDA equivalent to the Government. Other corporations have been created by government to act as its agents for the realization of its programs, the SSS, GSIS, NAWASA and the NIA, to count a few, and yet, the Court has ruled that these entities, although performing functions aimed at promoting public interest and public welfare, are not government-function corporations invested with governmental attributes. It may thus be said that the BCDA is not a mere agency of the Government but a corporate body performing proprietary functions. Moreover, Section 5 of Republic Act No. 7227 provides: Section 5. Powers of the Conversion Authority. To carry out its objectives under this Act, the Conversion Authority is hereby vested with the following powers: (a) To succeed in its corporate name, to sue and be sued in such corporate name and to adopt, alter and use a corporate seal which shall be judicially noticed; Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to cancel petitioners title, not the Republic, the former being the real party in interest. One having no

right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action (Ralla v. Ralla, 199 SCRA 495 [1991]). A suit may be dismissed if the plaintiff or the defendant is not a real party in interest. If the suit is not brought in the name of the real party in interest, a motion to dismiss may be filed, as was done by petitioner in this case, on the ground that the complaint states no cause of action (Tanpingco v. IAC, 207 SCRA 652 [1992]). However, E. B. Marcha Transport Co. , Inc. v. IAC (147 SCRA 276 [1987]) is cited as authority that the Republic is the proper party to sue for the recovery of possession of property which at the time of the institution of the suit was no longer held by the national government but by the Philippine Ports Authority. In E. B. Marcha, the Court ruled: It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. We may presume that, by doing so, the Republic of the Philippines did not intend to retain the said rentals for its own use, considering that by its voluntary act it had transferred the land in question to the Philippine Ports Authority effective July 11, 1974. The Republic of the Philippines had simply sought to assist, not supplant, the Philippine Ports Authority, whose title to the disputed property it continues to recognize. We may expect then that the said rentals, once collected by the Republic of the Philippines, shall be turned over by it to the Philippine Ports Authority conformably to the purposes of P. D. No. 857. E. B. Marcha is, however, not on all fours with the case at bar. In the former, the Court considered the Republic a proper party to sue since the claims of the Republic and the Philippine Ports Authority against the petitioner therein were the same. To dismiss the complaint in E. B. Marcha would have brought needless delay in the settlement of the matter since the PPA would have to refile the case on the same claim already litigated upon. Such is not the case here since to allow the government to sue herein enables it to raise the issue of imprescriptibility, a claim which is not available to the

BCDA. The rule that prescription does not run against the State does not apply to corporations or artificial bodies created by the State for special purposes, it being said that when the title of the Republic has been divested, its grantees, although artificial bodies of its own creation, are in the same category as ordinary persons (Kingston v. LeHigh Valley Coal Co., 241 Pa 469). By raising the claim of imprescriptibility, a claim which cannot be raised by the BCDA, the Government not only assists the BCDA, as it did in E. B. Marcha, it even supplants the latter, a course of action proscribed by said case. Moreover, to recognize the Government as a proper party to sue in this case would set a bad precedent as it would allow the Republic to prosecute, on behalf of government-owned or controlled corporations, causes of action which have already prescribed, on the pretext that the Government is the real party in interest against whom prescription does not run, said corporations having been created merely as agents for the realization of government programs. Parenthetically, petitioner was not a party to the original suit for cancellation of title commenced by the Republic twenty-seven years for which it is now being made to answer, nay, being made to suffer financial losses. It should also be noted that petitioner is unquestionably a buyer in good faith and for value, having acquired the property in 1963, or 5 years after the issuance of the original certificate of title, as a third transferee. If only not to do violence and to give some measure of respect to the Torrens System, petitioner must be afforded some measure of protection. One more point. Since the portion in dispute now forms part of the property owned and administered by the Bases Conversion and Development Authority, it is alienable and registerable real property. We find it unnecessary to rule on the other matters raised by the herein parties.

WHEREFORE, the petition is hereby granted and the orders dated August 31, 1999 and October 4, 1999 of the Regional Trial Court of the First National Judicial Region (Branch 26, San Fernando, La Union) in Civil Case No. 6346 entitled Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et. al., Defendants as well as the resolutions promulgated on November 4, 1999 and May 23, 2000 by the Court of Appeals (Twelfth Division) in CA-G. R. SP No. 55535 entitled Shipside, Inc., Petitioner versus Hon. Alfredo Cajigal, as Judge, RTC, San Fernando, La Union, Branch 26, and the Republic of the Philippines, Respondents are hereby reversed and set aside. The complaint in Civil Case No. 6346, Regional Trial Court, Branch 26, San Fernando City, La Union entitled Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et al." is ordered dismissed, without prejudice to the filing of an appropriate action by the Bases Development and Conversion Authority. -GOVERNMENT OF THE PHILIPPINES V. MONTE DE PIEDAD About $400,000, were subscribed and paid into the treasury of the Philippine Islands by the inhabitants of the Spanish Dominions of the relief of those damaged by the earthquake which took place in the Philippine Islands on June 3, 1863. Subsequent thereto and on October 6 of that year, a central relief board was appointed, by authority of the King of Spain, to distribute the moneys thus voluntarily contributed. After a thorough investigation and consideration, the relief board allotted $365,703.50 to the various sufferers named in its resolution, dated September 22, 1866, and, by order of the Governor-General of the Philippine Islands, a list of these allotments, together with the names of those entitled thereto, was published in the Official Gazette of Manila dated April 7, 1870. There was later distributed, inaccordance with the above-mentioned allotments, the sum of $30,299.65, leaving a balance of S365,403.85 for distribution. Upon the petition of the governing body of the Monte de Piedad, dated February 1, 1833, the Philippine Government, by order dated the 1st of that month, directed its

treasurer to turn over to the Monte de Piedad the sum of $80,000 of the relief fund in installments of $20,000 each. These amounts were received on the following dates: February 15, March 12, April 14, and June 2, 1883, and are still in the possession of the Monte de Piedad. On account of various petitions of the persons, and heirs of others to whom the above-mentioned allotments were made by the central relief board for the payment of those amounts, the Philippine Islands to bring suit against the Monte de Piedad a recover, "through the Attorney-General and in representation of the Government of the Philippine Islands," the $80.000, together with interest, for the benefit of those persons or their heirs appearing in the list of names published in the Official Gazette instituted on May 3, 1912, by the Government of the Philippine Islands, represented by the Insular Treasurer, and after due trial, judgment was entered in favor of the plaintiff for the sum of $80,000 gold or its equivalent in Philippine currency, together with legal interest from February 28, 1912, and the costs of the cause. The defendant appealed and makes the following assignment of errors: 1. The court erred in not finding that the eighty thousand dollars ($80,000), give to the Monte de Piedad y Caja de Ahorros, were so given as a donation subject to one condition, to wit: the return of such sum of money to the Spanish Government of these Islands, within eight days following the day when claimed, in case the Supreme Government of Spain should not approve the action taken by the former government. 2. The court erred in not having decreed that this donation had been cleared; said eighty thousand dollars ($80,000) being at present the exclusive property of the appellant the Monte de Piedad y Caja de Ahorros. 3. That the court erred in stating that the Government of the Philippine Islands has subrogated the Spanish Government in its rights, as regards an important sum

of money resulting from a national subscription opened by reason of the earthquake of June 3, 1863, in these Island. 4. That the court erred in not declaring that Act Numbered 2109, passed by the Philippine Legislature on January 30, 1912, is unconstitutional. 5. That the court erred in holding in its decision that there is no title for the prescription of this suit brought by the Insular Government against the Monte de Piedad y Caja de Ahorros for the reimbursement of the eighty thousand dollars ($80,000) given to it by the late Spanish Government of these Islands. 6. That the court erred in sentencing the Monte de Piedad y Caja de Ahorros to reimburse the Philippine Government in the sum of eighty thousand dollars ($80,000) gold coin, or the equivalent thereof in the present legal tender currency in circulation, with legal interest thereon from February 28th, 1912, and the costs of this suit. In the royal order of June 29, 1879, the Governor-General of the Philippine Islands was directed to inform the home Government in what manner the indemnity might be paid to which, by virtue of the resolutions of the relief board, the persons who suffered damage by the earthquake might be entitled, in order to perform the sacred obligation which the Government of Spain had assumed toward the donors. The next pertinent document in order is the defendant's petition, dated February 1, 1883, addressed to the Governor-General of the Philippine Islands, which reads: Board of Directors of the Monte de Piedad of Manila Presidencia.

Excellency: The Board of Directors of the Monte de Piedad y Caja de Ahorros of Manila informs your Excellency, First: That the funds which it has up to the present been able to dispose of have been exhausted in loans on jewelry, and there only remains the sum of one thousand and odd pesos, which will be expended between to-day and day after tomorrow. Second: That, to maintain the credit of the establishment, which would be greatly injured were its operations suspended, it is necessary to procure money. Third: That your Excellency has proposed to His Majesty's Government to apply to the funds of the Monte de Piedad a part of the funds held in the treasury derived form the national subscription for the relief of the distress caused by the earthquake of 1863. Fourth: That in the public treasury there is held at the disposal of the central earthquake relief board over $1090,000 which was deposited in the said treasury by order of your general Government, it having been transferred thereto from the Spanish-Filipino Bank where it had been held. fifth: That in the straightened circumstances of the moment, your Excellency can, to avert impending disaster to the Monte de Piedad, order that, out of that sum of one hundred thousand pesos held in the Treasury at the disposal of the central relief board, there be transferred to the Monte de Piedad the sum of $80,000, there to be held under the same conditions as at present in the Treasury, to wit, at the disposal of the Relief Board. Sixth: That should this transfer not be approved for any reason, either because of the failure of His Majesty's Government to approve the proposal made by your Excellency relative to the application to the needs of the Monte de Piedad of a pat of the subscription intended to believe the distress caused by the earthquake of 1863, or for any other reason, the board of directors of the Monte de Piedad obligates itself to return any sums which it may have received

on account of the eighty thousand pesos, or the whole thereof, should it have received the same, by securing a loan from whichever bank or banks may lend it the money at the cheapest rate upon the security of pawned jewelry. This is an urgent measure to save the Monte de Piedad in the present crisis and the board of directors trusts to secure your Excellency's entire cooperation and that of the other officials who have take part in the transaction. The Governor-General's resolution on the foregoing petition is as follows: GENERAL GOVERNMENT OF MANILA, February 1, 1883. THE PHILIPPINES.

In view of the foregoing petition addressed to me by the board of directors of the Monte de Piedad of this city, in which it is stated that the funds which the said institution counted upon are nearly all invested in loans on jewelry and that the small account remaining will scarcely suffice to cover the transactions of the next two days, for which reason it entreats the general Government that, in pursuance of its telegraphic advice to H. M. Government, the latter direct that there be turned over to said Monte de Piedad $80,000 out of the funds in the public treasury obtained from the national subscription for the relief of the distress caused by the earthquake of 1863, said board obligating itself to return this sum should H. M. Government, for any reason, not approve the said proposal, and for this purpose it will procure funds by means of loans raised on pawned jewelry; it stated further that if the aid so solicited is not furnished, it will be compelled to suspend operations, which would seriously injure the credit of so beneficient an institution; and in view of the report upon the matter made by the Intendencia General de Hacienda; and

considering the fact that the public treasury has on hand a much greater sum from the source mentioned than that solicited; and considering that this general Government has submitted for the determination of H. M. Government that the balance which, after strictly applying the proceeds obtained from the subscription referred to, may remain as a surplus should be delivered to the Monte de Piedad, either as a donation, or as a loan upon the security of the credit of the institution, believing that in so doing the wishes of the donors would be faithfully interpreted inasmuch as those wishes were no other than to relieve distress, an act of charity which is exercised in the highest degree by the Monte de Piedad, for it liberates needy person from the pernicious effects of usury; and Considering that the lofty purposes that brought about the creation of the pious institution referred to would be frustrated, and that the great and laudable work of its establishment, and that the great and laudable and valuable if the aid it urgently seeks is not granted, since the suspension of its operations would seriously and regrettably damage the ever-growing credit of the Monte de Piedad; and Considering that if such a thing would at any time cause deep distress in the public mind, it might be said that at the present juncture it would assume the nature of a disturbance of public order because of the extreme poverty of the poorer classes resulting from the late calamities, and because it is the only institution which can mitigate the effects of such poverty; and Considering that no reasonable objection can be made to granting the request herein contained, for the funds in question are sufficiently secured in the unlikely event that H> M. Government does not approve the

recommendation mentioned, this general Government, in the exercise of the extraordinary powers conferred upon it and in conformity with the report of the Intendencia de Hacienda, resolves as follows: First. Authority is hereby given to deliver to the Monte de Piedad, out of the sum held in the public treasury of these Islands obtained from the national subscription opened by reason of the earthquakes of 1863, amounts up to the sum $80,000, as its needs may require, in installments of $20,000. Second. The board of directors of the Monte de Piedad is solemnly bound to return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this resolution. Third. The Intendencia General de Hacienda shall forthwith, and in preference to all other work, proceed to prepare the necessary papers so that with the least possible delay the payment referred to may be made and the danger that menaces the Monte de Piedad of having to suspend its operations may be averted. H. M. Government shall be advised hereof.lawphi1.net (Signed) P. DE RIVERA. By the royal order of December 3, 1892, the Governor-General of the Philippine Islands was ordered to "inform this ministerio what is the total sum available at the present time, taking into consideration the sums delivered to the Monte de Piedad pursuant to the decree issued by your general Government on February 1, 1883," and after the rights of the claimants, whose names were published in the Official Gazette of Manila on April 7, 1870, and their heirs had been established, as therein provided, as such persons "have an unquestionable right to be paid the donations assigned to them

therein, your general Government shall convoke them all within a reasonable period and shall pay their shares to such as shall identify themselves, without regard to their financial status," and finally "that when all the proceedings and operations herein mentioned have been concluded and the Government can consider itself free from all kinds of claims on the part of those interested in the distribution of the funds deposited in the vaults of the Treasury, such action may be taken as the circumstances shall require, after first consulting the relief board and your general Government and taking account of what sums have been delivered to the Monte de Piedad and those that were expended in 1888 to relieve public calamities," and "in order that all the points in connection with the proceedings had as a result of the earthquake be clearly understood, it is indispensable that the offices hereinbefore mentioned comply with the provisions contained in paragraphs 2 and 3 of the royal order of June 25, 1879." On receipt of this Finance order by the Governor-General, the Department of Finance was called upon for a report in reference to the $80,000 turned over to the defendant, and that Department's report to the Governor-General dated June 28, 1893, reads: Intendencia General de Hacienda de Filipinas (General Treasury of the Philippines) Excellency. By Royal Order No. 1044 of December 3, last, it is provided that the persons who sustained losses by the earthquakes that occurred in your capital in the year 1863 shall be paid the amounts allotted to them out of the sums sent from Spain for this purpose, with observance of the rules specified in the said royal order, one of them being that before making the payment to the interested parties the assets shall be reduced to money. These assets, during the long period of time that has elapsed since they were turned over to the Treasury of the Philippine Islands, were used to cover the general needs of the appropriation, a part besides being invested in the relief of charitable institutions and another part to meet pressing needs occasioned by public calamities. On January 30, last,

your Excellency was please to order the fulfillment of that sovereign mandate and referred the same to this Intendencia for its information and the purposes desired (that is, for compliance with its directions and, as aforesaid, one of these being the liquidation, recovery, and deposit with the Treasury of the sums paid out of that fund and which were expended in a different way from that intended by the donors) and this Intendencia believed the moment had arrived to claim from the board of directors of the Monte de Piedad y Caja de Ahorros the sum of 80,000 pesos which, by decree of your general Government of the date of February 1, 1883, was loaned to it out of the said funds, the (Monte de Piedad) obligating itself to return the same within the period of eight days if H. M. Government did not approve the delivery. On this Intendencia's demanding from the Monte de Piedad the eighty thousand pesos, thus complying with the provisions of the Royal Order, it was to be supposed that no objection to its return would be made by the Monte de Piedad for, when it received the loan, it formally engaged itself to return it; and, besides, it was indisputable that the moment to do so had arrived, inasmuch as H. M. Government, in ordering that the assets of the earthquake relief fund should he collected, makes express mention of the 80,000 pesos loaned to the Monte de Piedad, without doubt considering as sufficient the period of ten years during which it has been using this large sum which lawfully belongs to their persons. This Intendencia also supposed that the Monte de Piedad no longer needed the amount of that loan, inasmuch as, far from investing it in beneficient transactions, it had turned the whole amount into the voluntary deposit funds bearing 5 per cent interests, the result of this operation being that the debtor loaned to the creditor on interest what the former had gratuitously received. But the Monte de Piedad, instead of fulfilling the

promise it made on receiving the sum, after repeated demands refused to return the money on the ground that only your Excellency, and not the Intendencia (Treasury), is entitled to order the reimbursement, taking no account of the fact that this Intendencia was acting in the discharge of a sovereign command, the fulfillment of which your Excellency was pleased to order; and on the further ground that the sum of 80,000 pesos which it received from the fund intended for the earthquake victims was not received as a loan, but as a donation, this in the opinion of this Intendencia, erroneously interpreting both the last royal order which directed the apportionment of the amount of the subscription raised in the year 1863 and the superior decree which granted the loan, inasmuch as in this letter no donation is made to the Monte de Piedad of the 80,000 pesos, but simply a loan; besides, no donation whatever could be made of funds derived from a private subscription raised for a specific purpose, which funds are already distributed and the names of the beneficiaries have been published in the Gaceta, there being lacking only the mere material act of the delivery, which has been unduly delayed. In view of the unexpected reply made by the Monte de Piedad, and believing it useless to insist further in the matter of the claim for the aforementioned loan, or to argue in support thereof, this Intendencia believes the intervention of your Excellency necessary in this matter, if the royal Order No. 1044 of December 3, last, is to be complied with, and for this purpose I beg your Excellency kindly to order the Monte de Piedad to reimburse within the period of eight days the 80,000 which it owes, and that you give this Intendencia power to carry out the provisions of the said royal order. I must call to the attention of your Excellency that the said pious establishment, during the last few days and after demand was made upon it, has endorsed to the

Spanish-Filipino Bank nearly the whole of the sum which it had on deposit in the general deposit funds. The record in the case under consideration fails to disclose any further definite action taken by either the Philippine Government or the Spanish Government in regard to the $80,000 turned over to the Monte de Piedad. In the defendant's general ledger the following entries appear: "Public Treasury: February 15, 1883, $20,000; March 12, 1883, $20,000; April 14, 1883, $20,000; June 2, 1883, $20,000, total $80,000." The book entry for this total is as follows: "To the public Treasury derived from the subscription for the earthquake of 1863, $80,000 received from general Treasury as a returnable loan, and without interest." The account was carried in this manner until January 1, 1899, when it was closed by transferring the amount to an account called "Sagrada Mitra," which latter account was a loan of $15,000 made to the defendant by the Archbishop of Manila, without interest, thereby placing the "Sagrada Mitra" account at $95,000 instead of $15,000. The above-mentioned journal entry for January 1, 1899, reads: "Sagrada Mitra and subscription, balance of these two account which on this date are united in accordance with an order of the Exmo. Sr. Presidente of the Council transmitted verbally to the Presidente Gerente of these institutions, $95,000." On March 16, 1902, the Philippine government called upon the defendant for information concerning the status of the $80,000 and received the following reply: MANILA, March 31, 1902. To the Attorney-General of the Department of Justice of the Philippine Islands. SIR: In reply to your courteous letter of the 16th inst., in which you request information from this office as to when and for what purpose the Spanish Government

delivered to the Monte de Piedad eighty thousand pesos obtained from the subscription opened in connection with the earthquake of 1863, as well as any other information that might be useful for the report which your office is called upon to furnish, I must state to your department that the books kept in these Pious Institutions, and which have been consulted for the purpose, show that on the 15th of February, 1883, they received as a reimbursable loan and without interest, twenty thousand pesos, which they deposited with their own funds. On the same account and on each of the dates of March 12, April 14 and June 2 of the said year, 1883, they also received and turned into their funds a like sum of twenty thousand pesos, making a total of eighty thousand pesos. (Signed) Emilio Moreta. I hereby certify that the foregoing is a literal copy of that found in the letter book No. 2 of those Pious Institutions. Manila, (Sgd.) Secretary November EMILIO 19, 1913 LAZCANOTEGUI,

(Sgd.) O. Managing Director.

K.

EMILIO

MORETA,

The foregoing documentary evidence shows the nature of the transactions which took place between the Government of Spain and the Philippine Government on the one side and the Monte de Piedad on the other, concerning the $80,000. The Monte de Piedad, after setting forth in its petition to the Governor-General its financial condition and its absolute necessity for more working capital, asked that out of the sum of $100,000 held in the Treasury of the Philippine Islands, at the disposal of the central relief board, there be transferred to it the sum of $80,000 to be held under the same

conditions, to wit, "at the disposal of the relief board." The Monte de Piedad agreed that if the transfer of these funds should not be approved by the Government of Spain, the same would be returned forthwith. It did not ask that the $80,000 be given to it as a donation. The Governor-General, after reciting the substance of the petition, stated that "this general Government has submitted for the determination of H. M. Government that the balance which, after strictly applying the proceeds obtained from the subscription referred to, may remain as a surplus, should be delivered to the Monte de Piedad, either as a donation, or as a loan upon the security of the credit of the institution," and "considering that no reasonable objection can be made to granting the request herein contained," directed the transfer of the $80,000 to be made with the understanding that "the Board of Directors of the Monte de Piedad is solemnly bound to return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this resolution." It will be noted that the first and only time the word "donation" was used in connection with the $80,000 appears in this resolution of the Governor-General. It may be inferred from the royal orders that the Madrid Government did tacitly approve of the transfer of the $80,000 to the Monte de Piedad as a loan without interest, but that Government certainly did not approve such transfer as a donation for the reason that the Governor-General was directed by the royal order of December 3, 1892, to inform the Madrid Government of the total available sum of the earthquake fund, "taking into consideration the sums delivered to the Monte de Piedad pursuant to the decree issued by your general Government on February 1, 1883." This language, nothing else appearing, might admit of the interpretation that the Madrid Government did not intend that the Governor-General of the Philippine Islands should include the $80,000 in the total available sum, but when considered in connection with the report of the Department of Finance there can be no doubt that it was so intended. That report refers expressly to the royal order of December 3d, and sets forth in detail the action taken in order to secure the return of the $80,000. The Department of Finance, acting under the orders of the Governor-General, understood that the $80,000 was transferred to the Monte de Piedad well knew that it received this sum as a loan interest." The amount

was thus carried in its books until January, 1899, when it was transferred to the account of the "Sagrada Mitra" and was thereafter known as the "Sagrada Mitra and subscription account." Furthermore, the Monte de Piedad recognized and considered as late as March 31, 1902, that it received the $80,000 "as a returnable loan, and without interest." Therefore, there cannot be the slightest doubt the fact that the Monte de Piedad received the $80,000 as a mere loan or deposit and not as a donation. Consequently, the first alleged error is entirely without foundation. Counsel for the defendant, in support of their third assignment of error, say in their principal brief that: The Spanish nation was professedly Roman Catholic and its King enjoyed the distinction of being deputy ex officio of the Holy See and Apostolic Vicar-General of the Indies, and as such it was his duty to protect all pious works and charitable institutions in his kingdoms, especially those of the Indies; among the latter was the Monte de Piedad of the Philippines, of which said King and his deputy the Governor-General of the Philippines, as royal vice-patron, were, in a special and peculiar manner, the protectors; the latter, as a result of the cession of the Philippine Islands, Implicitly renounced this high office and tacitly returned it to the Holy See, now represented by the Archbishop of Manila; the national subscription in question was a kind of foundation or pious work, for a charitable purpose in these Islands; and the entire subscription not being needed for its original purpose, the royal vice-patron, with the consent of the King, gave the surplus thereof to an analogous purpose; the fulfillment of all these things involved, in the majority, if not in all cases, faithful compliance with the duty imposed upon him by the Holy See, when it conferred upon him the royal patronage of the Indies, a thing that touched him very closely in his conscience and religion; the cessionary Government though Christian,

was not Roman Catholic and prided itself on its policy of non-interference in religious matters, and inveterately maintained a complete separation between the ecclesiastical and civil powers. In view of these circumstances it must be quite clear that, even without the express provisions of the Treaty of Paris, which apparently expressly exclude such an idea, it did not befit the honor of either of the contracting parties to subrogate to the American Government in lieu of the Spanish Government anything respecting the disposition of the funds delivered by the latter to the Monte de Piedad. The same reasons that induced the Spanish Government to take over such things would result in great inconvenience to the American Government in attempting to do so. The question was such a delicate one, for the reason that it affected the conscience, deeply religious, of the King of Spain, that it cannot be believed that it was ever his intention to confide the exercise thereof to a Government like the American. (U. S. vs. Arredondo, 6 Pet. [U. S.], 711.) It is thus seen that the American Government did not subrogate the Spanish Government or rather, the King of Spain, in this regard; and as the condition annexed to the donation was lawful and possible of fulfillment at the time the contract was made, but became impossible of fulfillment by the cession made by the Spanish Government in these Islands, compliance therewith is excused and the contract has been cleared thereof. The contention of counsel, as thus stated, in untenable for two reason, (1) because such contention is based upon the erroneous theory that the sum in question was a donation to the Monte de Piedad and not a loan, and (2) because the charity founded by the donations for the earthquake sufferers is not and never was

intended to be an ecclesiastical pious work. The first proposition has already been decided adversely to the defendant's contention. As to the second, the record shows clearly that the fund was given by the donors for a specific and definite purpose the relief of the earthquake sufferers and for no other purpose. The money was turned over to the Spanish Government to be devoted to that purpose. The Spanish Government remitted the money to the Philippine Government to be distributed among the suffers. All officials, including the King of Spain and the Governor-General of the Philippine Islands, who took part in the disposal of the fund, acted in their purely civil, official capacity, and the fact that they might have belonged to a certain church had nothing to do with their acts in this matter. The church, as such, had nothing to do with the fund in any way whatever until the $80,000 reached the coffers of the Monte de Piedad (an institution under the control of the church) as a loan or deposit. If the charity in question had been founded as an ecclesiastical pious work, the King of Spain and the GovernorGeneral, in their capacities as vicar-general of the Indies and as royal vice-patron, respectively, would have disposed of the fund as such and not in their civil capacities, and such functions could not have been transferred to the present Philippine Government, because the right to so act would have arisen out of the special agreement between the Government of Spain and the Holy See, based on the union of the church and state which was completely separated with the change of sovereignty. And in their supplemental brief counsel say: By the conceded facts the money in question is part of a charitable subscription. The donors were persons in Spain, the trustee was the Spanish Government, the donees, the cestuis que trustent, were certain persons in the Philippine Islands. The whole matter is one of trusteeship. This is undisputed and indisputable. It follows that the Spanish Government at no time was the owner of the fund. Not being the owner of the fund it could not transfer the ownership. Whether or not it could transfer its trusteeship it certainly never

has expressly done so and the general terms of property transfer in the Treaty of Paris are wholly insufficient for such a purpose even could Spain have transferred its trusteeship without the consent of the donors and even could the United States, as a Government, have accepted such a trust under any power granted to it by the thirteen original States in the Constitution, which is more than doubtful. It follows further that this Government is not a proper party to the action. The only persons who could claim to be damaged by this payment to the Monte, if it was unlawful, are the donors or the cestuis que trustent, and this Government is neither. If "the whole matter is one of trusteeship," and it being true that the Spanish Government could not, as counsel say, transfer the ownership of the fund to the Monte de Piedad, the question arises, who may sue to recover this loan? It needs no argument to show that the Spanish or Philippine Government, as trustee, could maintain an action for this purpose had there been no change of sovereignty and if the right of action has not prescribed. But those governments were something more than mere common law trustees of the fund. In order to determine their exact status with reference to this fund, it is necessary to examine the law in force at the time there transactions took place, which are the law of June 20, 1894, the royal decree of April 27. 1875, and the instructions promulgated on the latter date. These legal provisions were applicable to the Philippine Islands (Benedicto vs. De la Rama, 3 Phil. Rep., 34) The funds collected as a result of the national subscription opened in Spain by royal order of the Spanish Government and which were remitted to the Philippine Government to be distributed among the earthquake sufferers by the Central Relief Board constituted, under article 1 of the law of June 20, 1894, and article 2 of the instructions of April 27, 1875, a special charity of a temporary nature as distinguished from a permanent public charitable institution. As the Spanish Government initiated the creation of the fund and as the donors turned their contributions over to that Government, it

became the duty of the latter, under article 7 of the instructions, to exercise supervision and control over the moneys thus collected to the end that the will of the donors should be carried out. The relief board had no power whatever to dispose of the funds confided to its charge for other purposes than to distribute them among the sufferers, because paragraph 3 of article 11 of the instructions conferred the power upon the secretary of the interior of Spain, and no other, to dispose of the surplus funds, should there be any, by assigning them to some other charitable purpose or institution. The secretary could not dispose of any of the funds in this manner so long as they were necessary for the specific purpose for which they were contributed. The secretary had the power, under the law above mentioned to appoint and totally or partially change the personnel of the relief board and to authorize the board to defend the rights of the charity in the courts. The authority of the board consisted only in carrying out the will of the donors as directed by the Government whose duty it was to watch over the acts of the board and to see that the funds were applied to the purposes for which they were contributed .The secretary of the interior, as the representative of His Majesty's Government, exercised these powers and duties through the Governor-General of the Philippine Islands. The Governments of Spain and of the Philippine Islands in complying with their duties conferred upon them by law, acted in their governmental capacities in attempting to carry out the intention of the contributors. It will this be seen that those governments were something more, as we have said, than mere trustees of the fund. It is further contended that the obligation on the part of the Monte de Piedad to return the $80,000 to the Government, even considering it a loan, was wiped out on the change of sovereignty, or inn other words, the present Philippine Government cannot maintain this action for that reason. This contention, if true, "must result from settled principles of rigid law," as it cannot rest upon any title to the fund in the Monte de Piedad acquired prior to such change. While the obligation to return the $80,000 to the Spanish Government was still pending, war between the United States and Spain ensued. Under the Treaty of Paris of December 10, 1898, the Archipelago, known as the Philippine Islands, was ceded to the

United States, the latter agreeing to pay Spain the sum of $20,000,000. Under the first paragraph of the eighth article, Spain relinquished to the United States "all buildings, wharves, barracks, forts, structures, public highways, and other immovable property which, in conformity with law, belonged to the public domain, and as such belonged to the crown of Spain." As the $80,000 were not included therein, it is said that the right to recover this amount did not, therefore, pass to the present sovereign. This, in our opinion, does not follow as a necessary consequence, as the right to recover does not rest upon the proposition that the $80,000 must be "other immovable property" mentioned in article 8 of the treaty, but upon contractual obligations incurred before the Philippine Islands were ceded to the United States. We will not inquire what effect his cession had upon the law of June 20, 1849, the royal decree of April 27, 1875, and the instructions promulgated on the latter date. In Vilas vs. Manila (220 U. S., 345), the court said: That there is a total abrogation of the former political relations of the inhabitants of the ceded region is obvious. That all laws theretofore in force which are in conflict with the political character, constitution, or institutions of the substituted sovereign, lose their force, is also plain. (Alvarez y Sanchez vs. United States, 216 U. S., 167.) But it is equally settled in the same public law that the great body of municipal law which regulates private and domestic rights continues in force until abrogated or changed by the new ruler. If the above-mentioned legal provisions are in conflict with the political character, constitution or institutions of the new sovereign, they became inoperative or lost their force upon the cession of the Philippine Islands to the United States, but if they are among "that great body of municipal law which regulates private and domestic rights," they continued in force and are still in force unless they have been repealed by the present Government. That they fall within the latter class is clear from their very nature and character. They are laws which are not political in any sense of the word. They conferred upon the Spanish Government the right and duty to

supervise, regulate, and to some extent control charities and charitable institutions. The present sovereign, in exempting "provident institutions, savings banks, etc.," all of which are in the nature of charitable institutions, from taxation, placed such institutions, in so far as the investment in securities are concerned, under the general supervision of the Insular Treasurer (paragraph 4 of section 111 of Act No. 1189; see also Act No. 701). Furthermore, upon the cession of the Philippine Islands the prerogatives of he crown of Spain devolved upon he United States. In Magill vs. Brown (16 Fed. Cas., 408), quoted with approval in Mormon Charch vs. United States (136 U. S.,1, 57), the court said: The Revolution devolved on the State all the transcendent power of Parliament, and the prerogative of the crown, and gave their Acts the same force and effect. In Fontain vs. Ravenel (17 Hw., 369, 384), Mr. Justice McLean, delivering the opinion of the court in a charity case, said: When this country achieved its independence, the prerogatives of the crown devolved upon the people of the States. And this power still remains with them except so fact as they have delegated a portion of it to the Federal Government. The sovereign will is made known to us by legislative enactment. The State as a sovereign, is the parens patriae. Chancelor Kent says: In this country, the legislature or government of the State, as parens patriae, has the right to enforce all charities of public nature, by virtue of its general superintending authority over the public interests, where no other person is entrusted with it. (4 Kent Com., 508, note.)

The Supreme Court of the United States in Mormon Church vs. United States, supra, after approving also the last quotations, said: This prerogative of parens patriae is inherent in the supreme power of every State, whether that power is lodged in a royal person or in the legislature, and has no affinity to those arbitrary powers which are sometimes exerted by irresponsible monarchs to the great detriment of the people and the destruction of their liberties. On the contrary, it is a most beneficient functions, and often necessary to be exercised in the interest of humanity, and for the prevention of injury to those who cannot protect themselves. The court in the same case, after quoting from Sohier vs. Mass. General Hospital (3 Cush., 483, 497), wherein the latter court held that it is deemed indispensible that there should be a power in the legislature to authorize the same of the estates of in facts, idiots, insane persons, and persons not known, or not in being, who cannot act for themselves, said: These remarks in reference to in facts, insane persons and person not known, or not in being, apply to the beneficiaries of charities, who are often in capable of vindicating their rights, and justly look for protection to the sovereign authority, acting as parens patriae. They show that this beneficient functions has not ceased t exist under the change of government from a monarchy to a republic; but that it now resides in the legislative department, ready to be called into exercise whenever required for the purposes of justice and right, and is a clearly capable of being exercised in cases of charities as in any other cases whatever. In People vs. Cogswell (113 Cal. 129, 130), it was urged that the plaintiff was not the real party in interest; that the Attorney-General had no power to institute the action; and that there must be an

allegation and proof of a distinct right of the people as a whole, as distinguished from the rights of individuals, before an action could be brought by the Attorney-General in the name of the people. The court, in overruling these contentions, held that it was not only the right but the duty of the Attorney-General to prosecute the action, which related to charities, and approved the following quotation from Attorney-General vs. Compton (1 Younge & C. C., 417): Where property affected by a trust for public purposes is in the hands of those who hold it devoted to that trust, it is the privilege of the public that the crown should be entitled to intervene by its officers for the purpose of asserting, on behalf on the public generally, the public interest and the public right, which, probably, no individual could be found effectually to assert, even if the interest were such as to allow it. (2 Knet's Commentaries, 10th ed., 359; Lewin on Trusts, sec. 732.) It is further urged, as above indicated, that "the only persons who could claim to be damaged by this payment to the Monte, if it was unlawful, are the donors or the cestuis que trustent, and this Government is neither. Consequently, the plaintiff is not the proper party to bring the action." The earthquake fund was the result or the accumulation of a great number of small contributions. The names of the contributors do not appear in the record. Their whereabouts are unknown. They parted with the title to their respective contributions. The beneficiaries, consisting of the original sufferers and their heirs, could have been ascertained. They are quite numerous also. And no doubt a large number of the original sufferers have died, leaving various heirs. It would be impracticable for them to institute an action or actions either individually or collectively to recover the $80,000. The only course that can be satisfactorily pursued is for the Government to again assume control of the fund and devote it to the object for which it was originally destined.

The impracticability of pursuing a different course, however, is not the true ground upon which the right of the Government to maintain the action rests. The true ground is that the money being given to a charity became, in a measure, public property, only applicable, it is true, to the specific purposes to which it was intended to be devoted, but within those limits consecrated to the public use, and became part of the public resources for promoting the happiness and welfare of the Philippine Government. (Mormon Church vs. U. S., supra.) To deny the Government's right to maintain this action would be contrary to sound public policy, as tending to discourage the prompt exercise of similar acts of humanity and Christian benevolence in like instances in the future. As to the question raised in the fourth assignment of error relating to the constitutionality of Act No. 2109, little need be said for the reason that we have just held that the present Philippine Government is the proper party to the action. The Act is only a manifestation on the part of the Philippine Government to exercise the power or right which it undoubtedly had. The Act is not, as contended by counsel, in conflict with the fifth section of the Act of Congress of July 1, 1902, because it does not take property without due process of law. In fact, the defendant is not the owner of the $80,000, but holds it as a loan subject to the disposal of the central relief board. Therefor, there can be nothing in the Act which transcends the power of the Philippine Legislature. In Vilas vs. Manila, supra, the plaintiff was a creditor of the city of Manila as it existed before the cession of the Philippine Islands to the United States by the Treaty of Paris of December 10, 1898. The action was brought upon the theory that the city, under its present charter from the Government of the Philippine Islands, was the same juristic person, and liable upon the obligations of the old city. This court held that the present municipality is a totally different corporate entity and in no way liable for the debts of the Spanish municipality. The Supreme Court of the United States, in reversing this judgment and in holding the city liable for the old debt, said:

The juristic identity of the corporation has been in no wise affected, and, in law, the present city is, in every legal sense, the successor of the old. As such it is entitled to the property and property rights of the predecessor corporation, and is, in law, subject to all of its liabilities. In support of the fifth assignment of error counsel for the defendant argue that as the Monte de Piedad declined to return the $80,000 when ordered to do so by the Department of Finance in June, 1893, the plaintiff's right of action had prescribed at the time this suit was instituted on May 3, 1912, citing and relying upon article 1961, 1964 and 1969 of the Civil Code. While on the other hand, the AttorneyGeneral contends that the right of action had not prescribed (a) because the defense of prescription cannot be set up against the Philippine Government, (b) because the right of action to recover a deposit or trust funds does not prescribe, and (c) even if the defense of prescription could be interposed against the Government and if the action had, in fact, prescribed, the same was revived by Act No. 2109. The material facts relating to this question are these: The Monte de Piedad received the $80,000 in 1883 "to be held under the same conditions as at present in the treasury, to wit, at the disposal of the relief board." In compliance with the provisions of the royal order of December 3, 1892, the Department of Finance called upon the Monte de Piedad in June, 1893, to return the $80,000. The Monte declined to comply with this order upon the ground that only the Governor-General of the Philippine Islands and not the Department of Finance had the right to order the reimbursement. The amount was carried on the books of the Monte as a returnable loan until January 1, 1899, when it was transferred to the account of the "Sagrada Mitra." On March 31, 1902, the Monte, through its legal representative, stated in writing that the amount in question was received as a reimbursable loan, without interest. Act No. 2109 became effective January 30, 1912, and the action was instituted on May 3rd of that year.

Counsel for the defendant treat the question of prescription as if the action was one between individuals or corporations wherein the plaintiff is seeking to recover an ordinary loan. Upon this theory June, 1893, cannot be taken as the date when the statute of limitations began to run, for the reason that the defendant acknowledged in writing on March 31, 1902, that the $80,000 were received as a loan, thereby in effect admitting that it still owed the amount. (Section 50, Code of Civil Procedure.) But if counsels' theory is the correct one the action may have prescribed on May 3, 1912, because more than ten full years had elapsed after March 31, 1902. (Sections 38 and 43, Code of Civil Procedure.) Is the Philippine Government bound by the statute of limitations? The Supreme Court of the United States in U. S. vs. Nashville, Chattanooga & St. Louis Railway Co. (118 U. S., 120, 125), said: It is settled beyond doubt or controversy upon the foundation of the great principle of public policy, applicable to all governments alike, which forbids that the public interests should be prejudiced by the negligence of the officers or agents to whose care they are confided that the United States, asserting rights vested in it as a sovereign government, is not bound by any statute of limitations, unless Congress has clearly manifested its intention that it should be so bound. (Lindsey vs. Miller, 6 Pet. 666; U. S. vs. Knight, 14 Pet., 301; Gibson vs. Chouteau, 13 Wall., 92; U. S. vs. Thompson, 98 U. S., 486; Fink vs. O'Neil, 106 U. S., 272, 281.) In Gibson vs. Choteau, supra, the court said: It is a matter of common knowledge that statutes of limitation do not run against the State. That no laches can be imputed to the King, and that no time can bar his rights, was the maxim of the common laws, and was founded on the principle of public policy, that as

he was occupied with the cares of government he ought not to suffer from the negligence of his officer and servants. The principle is applicable to all governments, which must necessarily act through numerous agents, and is essential to a preservation of the interests and property of the public. It is upon this principle that in this country the statutes of a State prescribing periods within which rights must be prosecuted are not held to embrace the State itself, unless it is expressly designated or the mischiefs to be remedied are of such a nature that it must necessarily be included. As legislation of a State can only apply to persons and thing over which the State has jurisdiction, the United States are also necessarily excluded from the operation of such statutes. In 25 Cyc., 1006, the rule, supported by numerous authorities, is stated as follows: In the absence of express statutory provision to the contrary, statute of limitations do not as a general rule run against the sovereign or government, whether state or federal. But the rule is otherwise where the mischiefs to be remedied are of such a nature that the state must necessarily be included, where the state goes into business in concert or in competition with her citizens, or where a party seeks to enforces his private rights by suit in the name of the state or government, so that the latter is only a nominal party. In the instant case the Philippine Government is not a mere nominal party because it, in bringing and prosecuting this action, is exercising its sovereign functions or powers and is seeking to carry out a trust developed upon it when the Philippine Islands were ceded to the United States. The United States having in 1852, purchased as trustee for the Chickasaw Indians under treaty with that tribe, certain bonds of the State of Tennessee, the right of action of the

Government on the coupons of such bonds could not be barred by the statute of limitations of Tennessee, either while it held them in trust for the Indians, or since it became the owner of such coupons. (U. S. vs. Nashville, etc., R. Co., supra.) So where lands are held in trust by the state and the beneficiaries have no right to sue, a statute does not run against the State's right of action for trespass on the trust lands. (Greene Tp. vs. Campbell, 16 Ohio St., 11; see also Atty.-Gen. vs. Midland R. Co., 3 Ont., 511 [following Reg. vs. Williams, 39 U. C. Q. B., 397].) These principles being based "upon the foundation of the great principle of public policy" are, in the very nature of things, applicable to the Philippine Government. Counsel in their argument in support of the sixth and last assignments of error do not question the amount of the judgment nor do they question the correctness of the judgment in so far as it allows interest, and directs its payment in gold coin or in the equivalent in Philippine currency. For the foregoing reasons the judgment appealed from is affirmed, with costs against the appellant. So ordered. -MELCHORA CABANAS vs. FRANCISCO PILAPIL FERNANDO, J.:p The disputants in this appeal from a question of law from a lower court decision are the mother and the uncle of a minor beneficiary of the proceeds of an insurance policy issued on the life of her deceased father. The dispute centers as to who of them should be entitled to act as trustee thereof. The lower court applying the appropriate Civil Code provisions decided in favor of the mother, the plaintiff in this case. Defendant uncle appealed. As noted, the lower court acted the way it did following the specific mandate of the law.

In addition, it must have taken into account the principle that in cases of this nature the welfare of the child is the paramount consideration. It is not an unreasonable assumption that between a mother and an uncle, the former is likely to lavish more care on and pay greater attention to her. This is all the more likely considering that the child is with the mother. There are no circumstances then that did militate against what conforms to the natural order of things, even if the language of the law were not as clear. It is not to be lost sight of either that the judiciary pursuant to its role as an agency of the State as parens patriae, with an even greater stress on family unity under the present Constitution, did weigh in the balance the opposing claims and did come to the conclusion that the welfare of the child called for the mother to be entrusted with such responsibility. We have to affirm. The appealed decision made clear: "There is no controversy as to the facts. " 1 The insured, Florentino Pilapil had a child, Millian Pilapil, with a married woman, the plaintiff, Melchora Cabanas. She was ten years old at the time the complaint was filed on October 10, 1964. The defendant, Francisco Pilapil, is the brother of the deceased. The deceased insured himself and instituted as beneficiary, his child, with his brother to act as trustee during her minority. Upon his death, the proceeds were paid to him. Hence this complaint by the mother, with whom the child is living, seeking the delivery of such sum. She filed the bond required by the Civil Code. Defendant would justify his claim to the retention of the amount in question by invoking the terms of the insurance policy. 2 After trial duly had, the lower court in a decision of May 10, 1965, rendered judgment ordering the defendant to deliver the proceeds of the policy in question to plaintiff. Its main reliance was on Articles 320 and 321 of the Civil Code. The former provides: "The father, or in his absence the mother, is the legal administrator of the property pertaining to the child under parental authority. If the property is worth more than two thousand pesos, the father or mother shall give a bond subject to the approval of the Court of First Instance." 3 The latter states: "The property which the unemancipated child has acquired or may acquire with his work or industry, or by any

lucrative title, belongs to the child in ownership, and in usufruct to the father or mother under whom he is under parental authority and whose company he lives; ... 4 Conformity to such explicit codal norm is apparent in this portion of the appealed decision: "The insurance proceeds belong to the beneficiary. The beneficiary is a minor under the custody and parental authority of the plaintiff, her mother. The said minor lives with plaintiff or lives in the company of the plaintiff. The said minor acquired this property by lucrative title. Said property, therefore, belongs to the minor child in ownership, and in usufruct to the plaintiff, her mother. Since under our law the usufructuary is entitled to possession, the plaintiff is entitled to possession of the insurance proceeds. The trust, insofar as it is in conflict with the above quoted provision of law, is pro tanto null and void. In order, however, to protect the rights of the minor, Millian Pilapil, the plaintiff should file an additional bond in the guardianship proceedings, Sp. Proc. No. 2418-R of this Court to raise her bond therein to the total amount of P5,000.00." 5 It is very clear, therefore, considering the above, that unless the applicability of the two cited Civil Code provisions can be disputed, the decision must stand. There is no ambiguity in the language employed. The words are rather clear. Their meaning is unequivocal. Time and time again, this Court has left no doubt that where codal or statutory norms are cast in categorical language, the task before it is not one of interpretation but of application. 6 So it must be in this case. So it was in the appealed decision. 1. It would take more than just two paragraphs as found in the brief for the defendant-appellant 7 to blunt the force of legal commands that speak so plainly and so unqualifiedly. Even if it were a question of policy, the conclusion will remain unaltered. What is paramount, as mentioned at the outset, is the welfare of the child. It is in consonance with such primordial end that Articles 320 and 321 have been worded. There is recognition in the law of the deep ties that bind parent and child. In the event that there is less than full measure of concern for the offspring, the protection is supplied by

the bond required. With the added circumstance that the child stays with the mother, not the uncle, without any evidence of lack of maternal care, the decision arrived at can stand the test of the strictest scrutiny. It is further fortified by the assumption, both logical and natural, that infidelity to the trust imposed by the deceased is much less in the case of a mother than in the case of an uncle. Manresa, commenting on Article 159 of the Civil Code of Spain, the source of Article 320 of the Civil Code, was of that view: Thus "El derecho y la obligacion de administrar el Patrimonio de los hijos es una consecuencia natural y lgica de la patria potestad y de la presuncin de que nadie cuidar de los bienes de acqullos con mas cario y solicitude que los padres. En nuestro Derecho antiguo puede decirse que se hallaba reconocida de una manera indirecta aquelia doctrina, y asi se desprende de la sentencia del Tribunal Supremeo de 30 de diciembre de 1864, que se refiere a la ley 24, tit. XIII de la Partida 5. De la propia suerte aceptan en general dicho principio los Codigos extranjeros, con las limitaciones y requisitos de que trataremos mis adelante." 8 2. The appealed decision is supported by another cogent consideration. It is buttressed by its adherence to the concept that the judiciary, as an agency of the State acting as parens patriae, is called upon whenever a pending suit of litigation affects one who is a minor to accord priority to his best interest. It may happen, as it did occur here, that family relations may press their respective claims. It would be more in consonance not only with the natural order of things but the tradition of the country for a parent to be preferred. it could have been different if the conflict were between father and mother. Such is not the case at all. It is a mother asserting priority. Certainly the judiciary as the instrumentality of the State in its role of parens patriae, cannot remain insensible to the validity of her plea. In a recent case, 9 there is this quotation from an opinion of the United States Supreme Court: "This prerogative of parens patriae is inherent in the supreme power of every State, whether that power is lodged in a royal person or in the legislature, and has no affinity to those arbitrary powers which are sometimes exerted by irresponsible monarchs to the great detriment of the people and the destruction of their liberties." What is more, there is this

constitutional provision vitalizing this concept. It reads: "The State shall strengthen the family as a basic social institution." 10 If, as the Constitution so wisely dictates, it is the family as a unit that has to be strengthened, it does not admit of doubt that even if a stronger case were presented for the uncle, still deference to a constitutional mandate would have led the lower court to decide as it did. WHEREFORE, the decision of May 10, 1965 is affirmed. Costs against defendant-appellant. -CO KIM CHAM (alias CO KIM CHAM) vs. EUSEBIO VALDEZ TAN KEH and ARSENIO P. DIZON, Judge of First Instance of Manila FERIA, J.: This petition for mandamus in which petitioner prays that the respondent judge of the lower court be ordered to continue the proceedings in civil case No. 3012 of said court, which were initiated under the regime of the so-called Republic of the Philippines established during the Japanese military occupation of these Islands. The respondent judge refused to take cognizance of and continue the proceedings in said case on the ground that the proclamation issued on October 23, 1944, by General Douglas MacArthur had the effect of invalidating and nullifying all judicial proceedings and judgements of the court of the Philippines under the Philippine Executive Commission and the Republic of the Philippines established during the Japanese military occupation, and that, furthermore, the lower courts have no jurisdiction to take cognizance of and continue judicial proceedings pending in the courts of the defunct Republic of the Philippines in the absence of an enabling law granting such authority. And the same respondent, in his answer and memorandum filed in this Court, contends that the

government established in the Philippines during the Japanese occupation were no de facto governments. On January 2, 1942, the Imperial Japanese Forces occupied the City of Manila, and on the next day their Commander in Chief proclaimed "the Military Administration under law over the districts occupied by the Army." In said proclamation, it was also provided that "so far as the Military Administration permits, all the laws now in force in the Commonwealth, as well as executive and judicial institutions, shall continue to be effective for the time being as in the past," and "all public officials shall remain in their present posts and carry on faithfully their duties as before." A civil government or central administration organization under the name of "Philippine Executive Commission was organized by Order No. 1 issued on January 23, 1942, by the Commander in Chief of the Japanese Forces in the Philippines, and Jorge B. Vargas, who was appointed Chairman thereof, was instructed to proceed to the immediate coordination of the existing central administrative organs and judicial courts, based upon what had existed therefore, with approval of the said Commander in Chief, who was to exercise jurisdiction over judicial courts. The Chairman of the Executive Commission, as head of the central administrative organization, issued Executive Orders Nos. 1 and 4, dated January 30 and February 5, 1942, respectively, in which the Supreme Court, Court of Appeals, Courts of First Instance, and the justices of the peace and municipal courts under the Commonwealth were continued with the same jurisdiction, in conformity with the instructions given to the said Chairman of the Executive Commission by the Commander in Chief of Japanese Forces in the Philippines in the latter's Order No. 3 of February 20, 1942, concerning basic principles to be observed by the Philippine Executive Commission in exercising legislative, executive and judicial powers. Section 1 of said Order provided that "activities of the administration organs and judicial courts in the Philippines shall be based upon the existing statutes, orders, ordinances and customs. . . ."

On October 14, 1943, the so-called Republic of the Philippines was inaugurated, but no substantial change was effected thereby in the organization and jurisdiction of the different courts that functioned during the Philippine Executive Commission, and in the laws they administered and enforced. On October 23, 1944, a few days after the historic landing in Leyte, General Douglas MacArthur issued a proclamation to the People of the Philippines which declared: 1. That the Government of the Commonwealth of the Philippines is, subject to the supreme authority of the Government of the United States, the sole and only government having legal and valid jurisdiction over the people in areas of the Philippines free of enemy occupation and control; 2. That the laws now existing on the statute books of the Commonwealth of the Philippines and the regulations promulgated pursuant thereto are in full force and effect and legally binding upon the people in areas of the Philippines free of enemy occupation and control; and 3. That all laws, regulations and processes of any other government in the Philippines than that of the said Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy occupation and control. On February 3, 1945, the City of Manila was partially liberated and on February 27, 1945, General MacArthur, on behalf of the Government of the United States, solemnly declared "the full powers and responsibilities under the Constitution restored to the Commonwealth whose seat is here established as provided by law."

In the light of these facts and events of contemporary history, the principal questions to be resolved in the present case may be reduced to the following:(1) Whether the judicial acts and proceedings of the court existing in the Philippines under the Philippine Executive Commission and the Republic of the Philippines were good and valid and remained so even after the liberation or reoccupation of the Philippines by the United States and Filipino forces; (2)Whether the proclamation issued on October 23, 1944, by General Douglas MacArthur, Commander in Chief of the United States Army, in which he declared "that all laws, regulations and processes of any of the government in the Philippines than that of the said Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy occupation and control," has invalidated all judgements and judicial acts and proceedings of the said courts; and (3) If the said judicial acts and proceedings have not been invalidated by said proclamation, whether the present courts of the Commonwealth, which were the same court existing prior to, and continued during, the Japanese military occupation of the Philippines, may continue those proceedings pending in said courts at the time the Philippines were reoccupied and liberated by the United States and Filipino forces, and the Commonwealth of the Philippines were reestablished in the Islands. We shall now proceed to consider the first question, that is, whether or not under the rules of international law the judicial acts and proceedings of the courts established in the Philippines under the Philippine Executive Commission and the Republic of the Philippines were good and valid and remained good and valid even after the liberation or reoccupation of the Philippines by the United States and Filipino forces. 1. It is a legal truism in political and international law that all acts and proceedings of the legislative, executive, and judicial departments of a de facto government are good and valid. The question to be determined is whether or not the governments established in these Islands under the names of the Philippine Executive Commission and Republic of the Philippines during the Japanese military occupation or regime were de facto governments.

If they were, the judicial acts and proceedings of those governments remain good and valid even after the liberation or reoccupation of the Philippines by the American and Filipino forces. There are several kinds of de facto governments. The first, or government de facto in a proper legal sense, is that government that gets possession and control of, or usurps, by force or by the voice of the majority, the rightful legal governments and maintains itself against the will of the latter, such as the government of England under the Commonwealth, first by Parliament and later by Cromwell as Protector. The second is that which is established and maintained by military forces who invade and occupy a territory of the enemy in the course of war, and which is denominated a government of paramount force, as the cases of Castine, in Maine, which was reduced to British possession in the war of 1812, and Tampico, Mexico, occupied during the war with Mexico, by the troops of the United States. And the third is that established as an independent government by the inhabitants of a country who rise in insurrection against the parent state of such as the government of the Southern Confederacy in revolt not concerned in the present case with the first kind, but only with the second and third kinds of de facto governments. Speaking of government "de facto" of the second kind, the Supreme Court of the United States, in the case of Thorington vs. Smith (8 Wall., 1), said: "But there is another description of government, called also by publicists a government de facto, but which might, perhaps, be more aptly denominated a government of paramount force. Its distinguishing characteristics are (1), that its existence is maintained by active military power with the territories, and against the rightful authority of an established and lawful government; and (2), that while it exists it necessarily be obeyed in civil matters by private citizens who, by acts of obedience rendered in submission to such force, do not become responsible, or wrongdoers, for those acts, though not warranted by the laws of the rightful government. Actual governments of this sort are established over districts differing greatly in extent and conditions. They are usually administered directly by military authority, but they may be

administered, also, civil authority, supported more or less directly by military force. . . . One example of this sort of government is found in the case of Castine, in Mine, reduced to British possession in the war of 1812 . . . U. S. vs. Rice (4 Wheaton, 253). A like example is found in the case of Tampico, occupied during the war with Mexico, by the troops of the United States . . . Fleming vs. Page (9 Howard, 614). These were cases of temporary possessions of territory by lawfull and regular governments at war with the country of which the territory so possessed was part." The powers and duties of de facto governments of this description are regulated in Section III of the Hague Conventions of 1907, which is a revision of the provisions of the Hague Conventions of 1899 on the same subject of said Section III provides "the authority of the legislative power having actually passed into the hands of the occupant, the latter shall take steps in his power to reestablish and insure, as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country." According to the precepts of the Hague Conventions, as the belligerent occupant has the right and is burdened with the duty to insure public order and safety during his military occupation, he possesses all the powers of a de facto government, and he can suspended the old laws and promulgate new ones and make such changes in the old as he may see fit, but he is enjoined to respect, unless absolutely prevented by the circumstances prevailing in the occupied territory, the municipal laws in force in the country, that is, those laws which enforce public order and regulate social and commercial life of the country. On the other hand, laws of a political nature or affecting political relations, such as, among others, the right of assembly, the right to bear arms, the freedom of the press, and the right to travel freely in the territory occupied, are considered as suspended or in abeyance during the military occupation. Although the local and civil administration of justice is suspended as a matter of course as soon as a country is militarily occupied, it is not usual for the invader to take the whole administration into his own hands. In practice, the local ordinary tribunals are authorized to continue administering justice; and

judges and other judicial officers are kept in their posts if they accept the authority of the belligerent occupant or are required to continue in their positions under the supervision of the military or civil authorities appointed, by the Commander in Chief of the occupant. These principles and practice have the sanction of all publicists who have considered the subject, and have been asserted by the Supreme Court and applied by the President of the United States. The doctrine upon this subject is thus summed up by Halleck, in his work on International Law (Vol. 2, p. 444): "The right of one belligerent to occupy and govern the territory of the enemy while in its military possession, is one of the incidents of war, and flows directly from the right to conquer. We, therefore, do not look to the Constitution or political institutions of the conqueror, for authority to establish a government for the territory of the enemy in his possession, during its military occupation, nor for the rules by which the powers of such government are regulated and limited. Such authority and such rules are derived directly from the laws war, as established by the usage of the of the world, and confirmed by the writings of publicists and decisions of courts in fine, from the law of nations. . . . The municipal laws of a conquered territory, or the laws which regulate private rights, continue in force during military occupation, excepts so far as they are suspended or changed by the acts of conqueror. . . . He, nevertheless, has all the powers of a de facto government, and can at his pleasure either change the existing laws or make new ones." And applying the principles for the exercise of military authority in an occupied territory, which were later embodied in the said Hague Conventions, President McKinley, in his executive order to the Secretary of War of May 19,1898, relating to the occupation of the Philippines by United States forces, said in part: "Though the powers of the military occupant are absolute and supreme, and immediately operate upon the political condition of the inhabitants, the municipal laws of the conquered territory, such as affect private rights of person and property and provide for the punishment of crime, are considered as continuing in force, so far as they are compatible with

the new order of things, until they are suspended or superseded by the occupying belligerent; and in practice they are not usually abrogated, but are allowed to remain in force and to be administered by the ordinary tribunals, substantially as they were before the occupation. This enlightened practice is, so far as possible, to be adhered to on the present occasion. The judges and the other officials connected with the administration of justice may, if they accept the authority of the United States, continue to administer the ordinary law of the land as between man and man under the supervision of the American Commander in Chief." (Richardson's Messages and Papers of President, X, p. 209.) As to "de facto" government of the third kind, the Supreme Court of the United States, in the same case of Thorington vs. Smith, supra, recognized the government set up by the Confederate States as a de facto government. In that case, it was held that "the central government established for the insurgent States differed from the temporary governments at Castine and Tampico in the circumstance that its authority did no originate in lawful acts of regular war; but it was not, on the account, less actual or less supreme. And we think that it must be classed among the governments of which these are examples. . . . In the case of William vs. Bruffy (96 U. S. 176, 192), the Supreme Court of the United States, discussing the validity of the acts of the Confederate States, said: "The same general form of government, the same general laws for the administration of justice and protection of private rights, which had existed in the States prior to the rebellion, remained during its continuance and afterwards. As far as the Acts of the States do not impair or tend to impair the supremacy of the national authority, or the just rights of citizens under the Constitution, they are, in general, to be treated as valid and binding. As we said in Horn vs. Lockhart (17 Wall., 570; 21 Law. ed., 657): "The existence of a state of insurrection and war did not loosen the bonds of society, or do away with civil government or the regular administration of the laws. Order was to be preserved, police regulations maintained, crime prosecuted, property protected, contracts enforced, marriages celebrated, estates settled, and the

transfer and descent of property regulated, precisely as in the time of peace. No one, that we are aware of, seriously questions the validity of judicial or legislative Acts in the insurrectionary States touching these and kindered subjects, where they were not hostile in their purpose or mode of enforcement to the authority of the National Government, and did not impair the rights of citizens under the Constitution'. The same doctrine has been asserted in numerous other cases." And the same court, in the case of Baldy vs. Hunter (171 U. S., 388, 400), held: "That what occured or was done in respect of such matters under the authority of the laws of these local de facto governments should not be disregarded or held to be invalid merely because those governments were organized in hostility to the Union established by the national Constitution; this, because the existence of war between the United States and the Confederate States did not relieve those who are within the insurrectionary lines from the necessity of civil obedience, nor destroy the bonds of society nor do away with civil government or the regular administration of the laws, and because transactions in the ordinary course of civil society as organized within the enemy's territory although they may have indirectly or remotely promoted the ends of the de facto or unlawful government organized to effect a dissolution of the Union, were without blame 'except when proved to have been entered into with actual intent to further invasion or insurrection:'" and "That judicial and legislative acts in the respective states composing the so-called Confederate States should be respected by the courts if they were not hostile in their purpose or mode of enforcement to the authority of the National Government, and did not impair the rights of citizens under the Constitution." In view of the foregoing, it is evident that the Philippine Executive Commission, which was organized by Order No. 1, issued on January 23, 1942, by the Commander of the Japanese forces, was a civil government established by the military forces of occupation and therefore a de facto government of the second kind. It was not different from the government established by the British in Castine, Maine, or by the United States in Tampico, Mexico. As Halleck says,

"The government established over an enemy's territory during the military occupation may exercise all the powers given by the laws of war to the conqueror over the conquered, and is subject to all restrictions which that code imposes. It is of little consequence whether such government be called a military or civil government. Its character is the same and the source of its authority the same. In either case it is a government imposed by the laws of war, and so far it concerns the inhabitants of such territory or the rest of the world, those laws alone determine the legality or illegality of its acts." (Vol. 2, p. 466.) The fact that the Philippine Executive Commission was a civil and not a military government and was run by Filipinos and not by Japanese nationals, is of no consequence. In 1806, when Napoleon occupied the greater part of Prussia, he retained the existing administration under the general direction of a french official (Langfrey History of Napoleon, 1, IV, 25); and, in the same way, the Duke of Willington, on invading France, authorized the local authorities to continue the exercise of their functions, apparently without appointing an English superior. (Wellington Despatches, XI, 307.). The Germans, on the other hand, when they invaded France in 1870, appointed their own officials, at least in Alsace and Lorraine, in every department of administration and of every rank. (Calvo, pars. 2186-93; Hall, International Law, 7th ed., p. 505, note 2.) The so-called Republic of the Philippines, apparently established and organized as a sovereign state independent from any other government by the Filipino people, was, in truth and reality, a government established by the belligerent occupant or the Japanese forces of occupation. It was of the same character as the Philippine Executive Commission, and the ultimate source of its authority was the same the Japanese military authority and government. As General MacArthur stated in his proclamation of October 23, 1944, a portion of which has been already quoted, "under enemy duress, a so-called government styled as the 'Republic of the Philippines' was established on October 14, 1943, based upon neither the free expression of the people's will nor the sanction of the Government of the United States." Japan had no legal power to grant independence to the Philippines or transfer the sovereignty of the United States to,

or recognize the latent sovereignty of, the Filipino people, before its military occupation and possession of the Islands had matured into an absolute and permanent dominion or sovereignty by a treaty of peace or other means recognized in the law of nations. For it is a well-established doctrine in International Law, recognized in Article 45 of the Hauge Conventions of 1907 (which prohibits compulsion of the population of the occupied territory to swear allegiance to the hostile power), the belligerent occupation, being essentially provisional, does not serve to transfer sovereignty over the territory controlled although the de jure government is during the period of occupancy deprived of the power to exercise its rights as such. (Thirty Hogshead of Sugar vs. Boyle, 9 Cranch, 191; United States vs. Rice, 4 Wheat., 246; Fleming vs. Page, 9 Howard, 603; Downes vs. Bidwell, 182 U. S., 345.) The formation of the Republic of the Philippines was a scheme contrived by Japan to delude the Filipino people into believing in the apparent magnanimity of the Japanese gesture of transferring or turning over the rights of government into the hands of Filipinos. It was established under the mistaken belief that by doing so, Japan would secure the cooperation or at least the neutrality of the Filipino people in her war against the United States and other allied nations. Indeed, even if the Republic of the Philippines had been established by the free will of the Filipino who, taking advantage of the withdrawal of the American forces from the Islands, and the occupation thereof by the Japanese forces of invasion, had organized an independent government under the name with the support and backing of Japan, such government would have been considered as one established by the Filipinos in insurrection or rebellion against the parent state or the Unite States. And as such, it would have been a de facto government similar to that organized by the confederate states during the war of secession and recognized as such by the by the Supreme Court of the United States in numerous cases, notably those of Thorington vs. Smith, Williams vs. Bruffy, and Badly vs. Hunter, above quoted; and similar to the short-lived government established by the Filipino insurgents in the Island of Cebu during the Spanish-American war, recognized as a de facto government by the Supreme Court of the United States in the

case of McCleod vs. United States (299 U. S., 416). According to the facts in the last-named case, the Spanish forces evacuated the Island of Cebu on December 25, 1898, having first appointed a provisional government, and shortly afterwards, the Filipinos, formerly in insurrection against Spain, took possession of the Islands and established a republic, governing the Islands until possession thereof was surrendered to the United States on February 22, 1898. And the said Supreme Court held in that case that "such government was of the class of de facto governments described in I Moore's International Law Digest, S 20, . . . 'called also by publicists a government de facto, but which might, perhaps, be more aptly denominated a government of paramount force . . '." That is to say, that the government of a country in possession of belligerent forces in insurrection or rebellion against the parent state, rests upon the same principles as that of a territory occupied by the hostile army of an enemy at regular war with the legitimate power. The governments by the Philippine Executive Commission and the Republic of the Philippines during the Japanese military occupation being de facto governments, it necessarily follows that the judicial acts and proceedings of the courts of justice of those governments, which are not of a political complexion, were good and valid, and, by virtue of the well-known principle of postliminy (postliminium) in international law, remained good and valid after the liberation or reoccupation of the Philippines by the American and Filipino forces under the leadership of General Douglas MacArthur. According to that well-known principle in international law, the fact that a territory which has been occupied by an enemy comes again into the power of its legitimate government of sovereignty, "does not, except in a very few cases, wipe out the effects of acts done by an invader, which for one reason or another it is within his competence to do. Thus judicial acts done under his control, when they are not of a political complexion, administrative acts so done, to the extent that they take effect during the continuance of his control, and the various acts done during the same time by private persons under the sanction of municipal law, remain good. Were it otherwise, the whole social life of a community would be paralyzed by an invasion;

and as between the state and the individuals the evil would be scarcely less, it would be hard for example that payment of taxes made under duress should be ignored, and it would be contrary to the general interest that the sentences passed upon criminals should be annulled by the disappearance of the intrusive government ." (Hall, International Law, 7th ed., p. 518.) And when the occupation and the abandonment have been each an incident of the same war as in the present case, postliminy applies, even though the occupant has acted as conqueror and for the time substituted his own sovereignty as the Japanese intended to do apparently in granting independence to the Philippines and establishing the so-called Republic of the Philippines. (Taylor, International Law, p. 615.) That not only judicial but also legislative acts of de facto governments, which are not of a political complexion, are and remain valid after reoccupation of a territory occupied by a belligerent occupant, is confirmed by the Proclamation issued by General Douglas MacArthur on October 23, 1944, which declares null and void all laws, regulations and processes of the governments established in the Philippines during the Japanese occupation, for it would not have been necessary for said proclamation to abrogate them if they were invalid ab initio. 2. The second question hinges upon the interpretation of the phrase "processes of any other government" as used in the above-quoted proclamation of General Douglas MacArthur of October 23, 1944 that is, whether it was the intention of the Commander in Chief of the American Forces to annul and void thereby all judgments and judicial proceedings of the courts established in the Philippines during the Japanese military occupation. The phrase "processes of any other government" is broad and may refer not only to the judicial processes, but also to administrative or legislative, as well as constitutional, processes of the Republic of the Philippines or other governmental agencies established in the Islands during the Japanese occupation. Taking into consideration the fact that, as above indicated, according to the well-known principles of international law all judgements and judicial

proceedings, which are not of a political complexion, of the de facto governments during the Japanese military occupation were good and valid before and remained so after the occupied territory had come again into the power of the titular sovereign, it should be presumed that it was not, and could not have been, the intention of General Douglas MacArthur, in using the phrase "processes of any other government" in said proclamation, to refer to judicial processes, in violation of said principles of international law. The only reasonable construction of the said phrase is that it refers to governmental processes other than judicial processes of court proceedings, for according to a well-known rule of statutory construction, set forth in 25 R. C. L., p. 1028, "a statute ought never to be construed to violate the law of nations if any other possible construction remains." It is true that the commanding general of a belligerent army of occupation, as an agent of his government, may not unlawfully suspend existing laws and promulgate new ones in the occupied territory, if and when the exigencies of the military occupation demand such action. But even assuming that, under the law of nations, the legislative power of a commander in chief of military forces who liberates or reoccupies his own territory which has been occupied by an enemy, during the military and before the restoration of the civil regime, is as broad as that of the commander in chief of the military forces of invasion and occupation (although the exigencies of military reoccupation are evidently less than those of occupation), it is to be presumed that General Douglas MacArthur, who was acting as an agent or a representative of the Government and the President of the United States, constitutional commander in chief of the United States Army, did not intend to act against the principles of the law of nations asserted by the Supreme Court of the United States from the early period of its existence, applied by the Presidents of the United States, and later embodied in the Hague Conventions of 1907, as above indicated. It is not to be presumed that General Douglas MacArthur, who enjoined in the same proclamation of October 23, 1944, "upon the loyal citizens of the Philippines full respect and obedience to the Constitution of the Commonwealth of the Philippines," should not only reverse the

international policy and practice of his own government, but also disregard in the same breath the provisions of section 3, Article II, of our Constitution, which provides that "The Philippines renounces war as an instrument of national policy, and adopts the generally accepted principles of international law as part of the law of the Nation." Moreover, from a contrary construction great inconvenience and public hardship would result, and great public interests would be endangered and sacrificed, for disputes or suits already adjudged would have to be again settled accrued or vested rights nullified, sentences passed on criminals set aside, and criminals might easily become immune for evidence against them may have already disappeared or be no longer available, especially now that almost all court records in the Philippines have been destroyed by fire as a consequence of the war. And it is another well-established rule of statutory construction that where great inconvenience will result from a particular construction, or great public interests would be endangered or sacrificed, or great mischief done, such construction is to be avoided, or the court ought to presume that such construction was not intended by the makers of the law, unless required by clear and unequivocal words. (25 R. C. L., pp. 1025, 1027.) The mere conception or thought of possibility that the titular sovereign or his representatives who reoccupies a territory occupied by an enemy, may set aside or annul all the judicial acts or proceedings of the tribunals which the belligerent occupant had the right and duty to establish in order to insure public order and safety during military occupation, would be sufficient to paralyze the social life of the country or occupied territory, for it would have to be expected that litigants would not willingly submit their litigation to courts whose judgements or decisions may afterwards be annulled, and criminals would not be deterred from committing crimes or offenses in the expectancy that they may escaped the penalty if judgments rendered against them may be afterwards set aside.

That the proclamation has not invalidated all the judgements and proceedings of the courts of justice during the Japanese regime, is impliedly confirmed by Executive Order No. 37, which has the force of law, issued by the President of the Philippines on March 10, 1945, by virtue of the emergency legislative power vested in him by the Constitution and the laws of the Commonwealth of the Philippines. Said Executive order abolished the Court of Appeals, and provided "that all case which have heretofore been duly appealed to the Court of Appeals shall be transmitted to the Supreme Court final decision." This provision impliedly recognizes that the judgments and proceedings of the courts during the Japanese military occupation have not been invalidated by the proclamation of General MacArthur of October 23, because the said Order does not say or refer to cases which have been duly appealed to said court prior to the Japanese occupation, but to cases which had therefore, that is, up to March 10, 1945, been duly appealed to the Court of Appeals; and it is to be presumed that almost all, if not all, appealed cases pending in the Court of Appeals prior to the Japanese military occupation of Manila on January 2, 1942, had been disposed of by the latter before the restoration of the Commonwealth Government in 1945; while almost all, if not all, appealed cases pending on March 10, 1945, in the Court of Appeals were from judgments rendered by the Court of First Instance during the Japanese regime. The respondent judge quotes a portion of Wheaton's International Law which say: "Moreover when it is said that an occupier's acts are valid and under international law should not be abrogated by the subsequent conqueror, it must be remembered that no crucial instances exist to show that if his acts should be reversed, any international wrong would be committed. What does happen is that most matters are allowed to stand by the restored government, but the matter can hardly be put further than this." (Wheaton, International Law, War, 7th English edition of 1944, p. 245.) And from this quotion the respondent judge "draws the conclusion that whether the acts of the occupant should be considered valid or not, is a question that is up to the restored government to decide; that there is no rule of international law that denies to the restored government to decide; that there is no rule of international law that

denies to the restored government the right of exercise its discretion on the matter, imposing upon it in its stead the obligation of recognizing and enforcing the acts of the overthrown government." There is doubt that the subsequent conqueror has the right to abrogate most of the acts of the occupier, such as the laws, regulations and processes other than judicial of the government established by the belligerent occupant. But in view of the fact that the proclamation uses the words "processes of any other government" and not "judicial processes" prisely, it is not necessary to determine whether or not General Douglas MacArthur had power to annul and set aside all judgments and proceedings of the courts during the Japanese occupation. The question to be determined is whether or not it was his intention, as representative of the President of the United States, to avoid or nullify them. If the proclamation had, expressly or by necessary implication, declared null and void the judicial processes of any other government, it would be necessary for this court to decide in the present case whether or not General Douglas MacArthur had authority to declare them null and void. But the proclamation did not so provide, undoubtedly because the author thereof was fully aware of the limitations of his powers as Commander in Chief of Military Forces of liberation or subsequent conqueror. Not only the Hague Regulations, but also the principles of international law, as they result from the usages established between civilized nations, the laws of humanity and the requirements of the public of conscience, constitute or from the law of nations. (Preamble of the Hague Conventions; Westlake, International Law, 2d ed., Part II, p. 61.) Article 43, section III, of the Hague Regulations or Conventions which we have already quoted in discussing the first question, imposes upon the occupant the obligation to establish courts; and Article 23 ( h), section II, of the same Conventions, which prohibits the belligerent occupant "to declare . . . suspended . . . in a Court of Law the rights and action of the nationals of the hostile party," forbids him to make any declaration preventing the inhabitants from using their courts to assert or enforce their civil rights. (Decision of the Court of Appeals

of England in the case of Porter vs. Fruedenburg, L.R. [1915], 1 K.B., 857.) If a belligerent occupant is required to establish courts of justice in the territory occupied, and forbidden to prevent the nationals thereof from asserting or enforcing therein their civil rights, by necessary implication, the military commander of the forces of liberation or the restored government is restrained from nullifying or setting aside the judgments rendered by said courts in their litigation during the period of occupation. Otherwise, the purpose of these precepts of the Hague Conventions would be thwarted, for to declare them null and void would be tantamount to suspending in said courts the right and action of the nationals of the territory during the military occupation thereof by the enemy. It goes without saying that a law that enjoins a person to do something will not at the same time empower another to undo the same. Although the question whether the President or commanding officer of the United States Army has violated restraints imposed by the constitution and laws of his country is obviously of a domestic nature, yet, in construing and applying limitations imposed on the executive authority, the Supreme Court of the United States, in the case of Ochoa, vs. Hernandez (230 U.S., 139), has declared that they "arise from general rules of international law and from fundamental principles known wherever the American flag flies." In the case of Raymond vs. Thomas (91 U.S., 712), a special order issued by the officer in command of the forces of the United States in South Carolina after the end of the Civil War, wholly annulling a decree rendered by a court of chancery in that state in a case within its jurisdiction, was declared void, and not warranted by the acts approved respectively March 2, 1867 (14 Stat., 428), and July 19 of the same year (15 id., 14), which defined the powers and duties of military officers in command of the several states then lately in rebellion. In the course of its decision the court said; "We have looked carefully through the acts of March 2, 1867 and July 19, 1867. They give very large governmental powers to the military commanders designated, within the States committed respectively to their jurisdiction; but we have found nothing to warrant the order here in question. . . . The clearest language would be necessary to satisfy us that Congress intended that the power given by these acts

should be so exercised. . . . It was an arbitrary stretch of authority, needful to no good end that can be imagined. Whether Congress could have conferred the power to do such an act is a question we are not called upon to consider. It is an unbending rule of law that the exercise of military power, where the rights of the citizen are concerned, shall never be pushed beyond what the exigency requires. (Mithell vs. Harmony, 13 How., 115; Warden vs. Bailey, 4 Taunt., 67; Fabrigas vs. Moysten, 1 Cowp., 161; s.c., 1 Smith's L.C., pt. 2, p. 934.) Viewing the subject before us from the standpoint indicated, we hold that the order was void." It is, therefore, evident that the proclamation of General MacArthur of October 23, 1944, which declared that "all laws, regulations and processes of any other government in the Philippines than that of the said Commonwealth are null and void without legal effect in areas of the Philippines free of enemy occupation and control," has not invalidated the judicial acts and proceedings, which are not a political complexion, of the courts of justice in the Philippines that were continued by the Philippine Executive Commission and the Republic of the Philippines during the Japanese military occupation, and that said judicial acts and proceedings were good and valid before and now good and valid after the reoccupation of liberation of the Philippines by the American and Filipino forces. 3. The third and last question is whether or not the courts of the Commonwealth, which are the same as those existing prior to, and continued during, the Japanese military occupation by the Philippine Executive Commission and by the so-called Republic of the Philippines, have jurisdiction to continue now the proceedings in actions pending in said courts at the time the Philippine Islands were reoccupied or liberated by the American and Filipino forces, and the Commonwealth Government was restored. Although in theory the authority the authority of the local civil and judicial administration is suspended as a matter of course as soon as military occupation takes place, in practice the invader does not usually take the administration of justice into his own hands, but continues the ordinary courts or tribunals to administer the laws of

the country which he is enjoined, unless absolutely prevented, to respect. As stated in the above-quoted Executive Order of President McKinley to the Secretary of War on May 19, 1898, "in practice, they (the municipal laws) are not usually abrogated but are allowed to remain in force and to be administered by the ordinary tribunals substantially as they were before the occupation. This enlightened practice is, so far as possible, to be adhered to on the present occasion." And Taylor in this connection says: "From a theoretical point of view it may be said that the conqueror is armed with the right to substitute his arbitrary will for all preexisting forms of government, legislative, executive and judicial. From the stand-point of actual practice such arbitrary will is restrained by the provision of the law of nations which compels the conqueror to continue local laws and institution so far as military necessity will permit." (Taylor, International Public Law, p.596.) Undoubtedly, this practice has been adopted in order that the ordinary pursuits and business of society may not be unnecessarily deranged, inasmuch as belligerent occupation is essentially provisional, and the government established by the occupant of transient character. Following these practice and precepts of the law of nations, Commander in Chief of the Japanese Forces proclaimed on January 3, 1942, when Manila was occupied, the military administration under martial law over the territory occupied by the army, and ordered that "all the laws now in force in the Commonwealth, as well as executive and judicial institutions, shall continue to be affective for the time being as in the past," and "all public officials shall remain in their present post and carry on faithfully their duties as before." When the Philippine Executive Commission was organized by Order No. 1 of the Japanese Commander in Chief, on January 23, 1942, the Chairman of the Executive Commission, by Executive Orders Nos. 1 and 4 of January 30 and February 5, respectively, continued the Supreme Court, Court of Appeals, Court of First Instance, and justices of the peace of courts, with the same jurisdiction in conformity with the instructions given by the Commander in Chief of the Imperial Japanese Army in Order No. 3 of February 20, 1942. And on October 14, 1943 when the so-called Republic of the Philippines was inaugurated, the same courts were

continued with no substantial change in organization and jurisdiction thereof. If the proceedings pending in the different courts of the Islands prior to the Japanese military occupation had been continued during the Japanese military administration, the Philippine Executive Commission, and the so-called Republic of the Philippines, it stands to reason that the same courts, which had become reestablished and conceived of as having in continued existence upon the reoccupation and liberation of the Philippines by virtue of the principle of postliminy (Hall, International Law, 7th ed., p. 516), may continue the proceedings in cases then pending in said courts, without necessity of enacting a law conferring jurisdiction upon them to continue said proceedings. As Taylor graphically points out in speaking of said principles "a state or other governmental entity, upon the removal of a foreign military force, resumes its old place with its right and duties substantially unimpaired. . . . Such political resurrection is the result of a law analogous to that which enables elastic bodies to regain their original shape upon removal of the external force, and subject to the same exception in case of absolute crushing of the whole fibre and content." (Taylor, International Public Law, p. 615.) The argument advanced by the respondent judge in his resolution in support in his conclusion that the Court of First Instance of Manila presided over by him "has no authority to take cognizance of, and continue said proceedings (of this case) to final judgment until and unless the Government of the Commonwealth of the Philippines . . . shall have provided for the transfer of the jurisdiction of the courts of the now defunct Republic of the Philippines, and the cases commenced and the left pending therein," is "that said courts were a government alien to the Commonwealth Government. The laws they enforced were, true enough, laws of the Commonwealth prior to Japanese occupation, but they had become the laws and the courts had become the institutions of Japan by adoption (U.S. vs. Reiter. 27 F. Cases, No. 16146), as they became later on the laws and institutions of the Philippine Executive Commission and the Republic of the Philippines."

The court in the said case of U.S. vs. Reiter did not and could not say that the laws and institutions of the country occupied if continued by the conqueror or occupant, become the laws and the courts, by adoption, of the sovereign nation that is militarily occupying the territory. Because, as already shown, belligerent or military occupation is essentially provisional and does not serve to transfer the sovereignty over the occupied territory to the occupant. What the court said was that, if such laws and institutions are continued in use by the occupant, they become his and derive their force from him, in the sense that he may continue or set them aside. The laws and institution or courts so continued remain the laws and institutions or courts of the occupied territory. The laws and the courts of the Philippines, therefore, did not become, by being continued as required by the law of nations, laws and courts of Japan. The provision of Article 45, section III, of the Hague Conventions of 1907 which prohibits any compulsion of the population of occupied territory to swear allegiance to the hostile power, "extends to prohibit everything which would assert or imply a change made by the invader in the legitimate sovereignty. This duty is neither to innovate in the political life of the occupied districts, nor needlessly to break the continuity of their legal life. Hence, so far as the courts of justice are allowed to continue administering the territorial laws, they must be allowed to give their sentences in the name of the legitimate sovereign " (Westlake, Int. Law, Part II, second ed., p. 102). According to Wheaton, however, the victor need not allow the use of that of the legitimate government. When in 1870, the Germans in France attempted to violate that rule by ordering, after the fall of the Emperor Napoleon, the courts of Nancy to administer justice in the name of the "High German Powers occupying Alsace and Lorraine," upon the ground that the exercise of their powers in the name of French people and government was at least an implied recognition of the Republic, the courts refused to obey and suspended their sitting. Germany originally ordered the use of the name of "High German Powers occupying Alsace and Lorraine," but later offered to allow use of the name of the Emperor or a compromise. (Wheaton, International Law, War, 7th English ed. 1944, p. 244.)

Furthermore, it is a legal maxim, that excepting that of a political nature, "Law once established continues until changed by the some competent legislative power. It is not change merely by change of sovereignty." (Joseph H. Beale, Cases on Conflict of Laws, III, Summary Section 9, citing Commonwealth vs. Chapman, 13 Met., 68.) As the same author says, in his Treatise on the Conflict on Laws (Cambridge, 1916, Section 131): "There can no break or interregnum in law. From the time the law comes into existence with the first-felt corporateness of a primitive people it must last until the final disappearance of human society. Once created, it persists until a change take place, and when changed it continues in such changed condition until the next change, and so forever. Conquest or colonization is impotent to bring law to an end; in spite of change of constitution, the law continues unchanged until the new sovereign by legislative acts creates a change." As courts are creatures of statutes and their existence defends upon that of the laws which create and confer upon them their jurisdiction, it is evident that such laws, not being a political nature, are not abrogated by a change of sovereignty, and continue in force "ex proprio vigore" unless and until repealed by legislative acts. A proclamation that said laws and courts are expressly continued is not necessary in order that they may continue in force. Such proclamation, if made, is but a declaration of the intention of respecting and not repealing those laws. Therefore, even assuming that Japan had legally acquired sovereignty over these Islands, which she had afterwards transferred to the so-called Republic of the Philippines, and that the laws and the courts of these Islands had become the courts of Japan, as the said courts of the laws creating and conferring jurisdiction upon them have continued in force until now, it necessarily follows that the same courts may continue exercising the same jurisdiction over cases pending therein before the restoration of the Commonwealth Government, unless and until they are abolished or the laws creating and conferring jurisdiction upon them are repealed by the said government. As a consequence, enabling laws or acts providing that proceedings pending in one court be continued by or transferred to another court, are not required by the mere change of government or sovereignty. They

are necessary only in case the former courts are abolished or their jurisdiction so change that they can no longer continue taking cognizance of the cases and proceedings commenced therein, in order that the new courts or the courts having jurisdiction over said cases may continue the proceedings. When the Spanish sovereignty in the Philippine Islands ceased and the Islands came into the possession of the United States, the "Audiencia" or Supreme Court was continued and did not cease to exist, and proceeded to take cognizance of the actions pending therein upon the cessation of the Spanish sovereignty until the said "Audiencia" or Supreme Court was abolished, and the Supreme Court created in Chapter II of Act No. 136 was substituted in lieu thereof. And the Courts of First Instance of the Islands during the Spanish regime continued taking cognizance of cases pending therein upon the change of sovereignty, until section 65 of the same Act No. 136 abolished them and created in its Chapter IV the present Courts of First Instance in substitution of the former. Similarly, no enabling acts were enacted during the Japanese occupation, but a mere proclamation or order that the courts in the Island were continued. On the other hand, during the American regime, when section 78 of Act No. 136 was enacted abolishing the civil jurisdiction of the provost courts created by the military government of occupation in the Philippines during the Spanish-American War of 1898, the same section 78 provided for the transfer of all civil actions then pending in the provost courts to the proper tribunals, that is, to the justices of the peace courts, Court of First Instance, or Supreme Court having jurisdiction over them according to law. And later on, when the criminal jurisdiction of provost courts in the City of Manila was abolished by section 3 of Act No. 186, the same section provided that criminal cases pending therein within the jurisdiction of the municipal court created by Act No. 183 were transferred to the latter. That the present courts as the same courts which had been functioning during the Japanese regime and, therefore, can continue the proceedings in cases pending therein prior to the restoration of the Commonwealth of the Philippines, is confirmed by Executive

Order No. 37 which we have already quoted in support of our conclusion in connection with the second question. Said Executive Order provides"(1) that the Court of Appeals created and established under Commonwealth Act No. 3 as amended, be abolished, as it is hereby abolished," and "(2) that all cases which have heretofore been duly appealed to the Court of Appeals shall be transmitted to the Supreme Court for final decision. . . ." In so providing, the said Order considers that the Court of Appeals abolished was the same that existed prior to, and continued after, the restoration of the Commonwealth Government; for, as we have stated in discussing the previous question, almost all, if not all, of the cases pending therein, or which had theretofore (that is, up to March 10, 1945) been duly appealed to said court, must have been cases coming from the Courts of First Instance during the so-called Republic of the Philippines. If the Court of Appeals abolished by the said Executive Order was not the same one which had been functioning during the Republic, but that which had existed up to the time of the Japanese occupation, it would have provided that all the cases which had, prior to and up to that occupation on January 2, 1942, been dully appealed to the said Court of Appeals shall be transmitted to the Supreme Court for final decision. It is, therefore, obvious that the present courts have jurisdiction to continue, to final judgment, the proceedings in cases, not of political complexion, pending therein at the time of the restoration of the Commonwealth Government. Having arrived at the above conclusions, it follows that the Court of First Instance of Manila has jurisdiction to continue to final judgment the proceedings in civil case No. 3012, which involves civil rights of the parties under the laws of the Commonwealth Government, pending in said court at the time of the restoration of the said Government; and that the respondent judge of the court, having refused to act and continue him does a duty resulting from his office as presiding judge of that court, mandamus is the speedy and adequate remedy in the ordinary course of law, especially taking into consideration the fact that the question of jurisdiction herein

involved does affect not only this particular case, but many other cases now pending in all the courts of these Islands. In view of all the foregoing it is adjudged and decreed that a writ of mandamus issue, directed to the respondent judge of the Court of First Instance of Manila, ordering him to take cognizance of and continue to final judgment the proceedings in civil case No. 3012 of said court. No pronouncement as to costs. So ordered. -LAWYERS LEAGUE FOR A BETTER PHILIPPINES AND/OR OLIVER A. LOZANO VS. PRESIDENT CORAZON C. AQUINO FACTS: On February 25, 1986, President Corazon Aquino issued Proclamation No. 1 announcing that she and Vice President Laurel were taking power. On March 25, 1986, proclamation No.3 was issued providing the basis of the Aquino government assumption of power by stating that the "new government was installed through a direct exercise of the power of the Filipino people assisted by units of the New Armed Forces of the Philippines." ISSUE: Whether or not the government of Corazon Aquino is legitimate. HELD: Yes. The legitimacy of the Aquino government is not a justiciable matter but belongs to the realm of politics where only the people are the judge. The Court further held that the people have accepted the Aquino government which is in effective control of the entire country. It is not merely a de facto government but in fact and law a de jure government. The community of nations has recognized the legitimacy of the new government. FACTS: President Corazon Aquino issued Proclamation No. 1 on February 25, 1986 announcing that she and Vice President Laurel were taking power. On March 25, 1986, proclamation No.3 was issued providing the basis of the Aquino government assumption of power by stating that the "new government was installed through a

direct exercise of the power of the Filipino people assisted by units of the New Armed Forces of the Philippines." Petitioners alleged that the Aquino government is illegal because it was not established pursuant to the 1973 Constitution. ISSUE:Whether or not the government of Corazon Aquino is legitimate. HELD: Yes. The legitimacy of the Aquino government is not a justiciable matter but belongs to the realm of politics where only the people are the judge. The Supreme Court further held that: 1.The people have accepted the Aquino government which is in effective control of the entire country; 2.It is not merely a de facto government but in fact and law a de jure government; and 3.The community of nations has recognized the legitimacy of the new government. -IN RE: LETTER OF REYNATO PUNO FACTS: Petitioner Associate Justice Reynato S. Puno, a member of the Court of Appeals, wrote a letter dated 14 November 1990 addressed to this Court, seeking the correction of his seniority ranking in the Court of Appeals. It appears from the records that petitioner was first appointed Associate Justice of the Court of Appeals on 20 June 1980 but took his oath of office for said position only on 29 November 1982, after serving as Assistant Solicitor General in the Office of the Solicitor General since 1974. On 17 January 1983, the Court of Appeals was reorganized and became the Intermediate Appellate Court pursuant to Batas

Pambansa Blg. 129 entitled An Act Reorganizing the Judiciary, Appropriating Funds Therefor and For Other Purposes. Petitioner was appointed Appellate Justice in the First Special Cases Division of the Intermediate Appellate Court. On 7 November 1984, petitioner accepted an appointment to be Deputy Minister of Justice in the Ministry of Justice; he thus ceased to be a member of the Judiciary. The aftermath of the EDSA Revolution in February 1986 brought about a reorganization of the entire government, including the Judiciary. To effect the reorganization of the Intermediate Appellate Court and other lower courts, a Screening Committee was created, with the then Minister of Justice, now Senator Neptali Gonzales as Chairman and then Solicitor General, now Philippine Ambassador to the United Nations Sedfrey Ordoez as Vice Chairman. President Corazon C. Aquino, exercising legislative powers by virtue of the revolution, issued Executive Order No. 33 to govern the aforementioned reorganization of the Judiciary. The Screening Committee recommended the return of petitioner as Associate Justice of the new Court of Appeals and assigned him the rank of number eleven (11) in the roster of appellate court justices. When the appointments were signed by President Aquino on 28 July 1986, petitioners seniority ranking changed, however, from number eleven (11) to number twenty six (26). Petitioner now alleges that the change in his seniority ranking could only be attributed to inadvertence for, otherwise, it would run counter to the provisions of Section 2 of Executive Order No. 33. Petitioner elaborates that President Aquino is presumed to have intended to comply with her own Executive Order No. 33 so much so that the correction of the inadvertent error would only implement

the intent of the President as well as the spirit of Executive Order No. 33 and will not provoke any kind of constitutional confrontation (between the President and the Supreme Court). In a resolution of the Court en banc dated 29 November 1990, the Court granted Justice Punos request. The Presiding Justice of the Court of Appeals, the Honorable Rodolfo A. Nocon, is directed to correct the seniority rank of Justice Puno from number twelve (12) to number five (5). However, a motion for reconsideration of the resolution of the Court en banc dated 29 November 1990 was later filed by Associate Justices Jose C. Campos, Jr. and Luis A. Javellana, two (2) of the Associate Justices affected by the ordered correction. They contend that the present Court of Appeals is a new Court with fifty one (51) members and that petitioner could not claim a reappointment to a prior court; neither can he claim that he was returning to his former court, for the courts where he had previously been appointed ceased to exist at the date of his last appointment. Petitioner argues that, by virtue of Executive Order No. 33 read in relation to B.P. Blg. 129, his seniority ranking in the Court of Appeals is now number five (5) for, though President Aquino rose to power by virtue of a revolution, she had pledged at the issuance of Proclamation No. 3 (otherwise known as the Freedom Constitution) that no right provided under the unratified 1973 Co nstitution (shall) be absent in the Freedom Constitution. Moreover, since the last sentence of Section 2 of Executive Order No. 33 virtually re-enacted the last sentence of Sec. 3, Chapter 1 of B.P. Blg. 129, statutory construction rules on simultaneous repeal and re-enactment mandate, according to positioner, the preservation and enforcement of all rights and liabilities which had accrued under the original statute.

Furthermore, petitioner avers that, although the power of appointment is executive in character and cannot be usurped by any other branch of the Government, such power can still be regulated by the Constitution and by the appropriate law, in this case, by the limits set by Executive Order No. 33 for the power of appointment cannot be wielded in violation of law ISSUE: Whether or not the present Court of Appeals is a new court such that it would negate any claim to precedence or seniority admittedly enjoyed by petitioner in the Court of Appeals and Intermediate Appellate Court which existing prior to Executive Order No. 33. HELD: It is the holding of the Court that the present Court of Appeals is a new entity, different and distinct from the Court of Appeals or the Intermediate Appellate Court existing prior to Executive Order No. 33, for it was created in the wake of the massive reorganization launched by the revolutionary government of Corazon C. Aquino in the aftermath of the people power (EDSA) revolution in 1986. A revolution has been defined as the complete overthrow of the established government in any country or state by those who were previously subject to it, or as a sudden, radical and fundamental change in the government or political system usually effected with violence or at least some acts of violence. It has been said that the locus of positive law-making power lies with the people of the state and from there is derived the right of the people to abolish, to reform and to alter any existing form of government without regard to the existing constitution. These summarize the Aquino governments position that its mandate is taken from a direct exercise of the power of the Filipino people.

A question which naturally comes to mind is whether the then existing legal order was overthrown by the Aquino government. A legal order is the authoritative code of a polity. Such code consists of all the rules found in the enactments of the organs of the polity. Where the state operates under a written constitution, its organs may be readily determined from a reading of its provisions. Once such organs are ascertained, it becomes an easy matter to locate their enactments. The rules in such enactments, along with those in the constitution, comprise the legal order of that constitutional state. It is assumed that the legal order remains as a culture system of the polity as long as the latter endures and that a point may be reached, however, where the legal system ceases to be operative as a whole for it is no longer obeyed by the population nor enforced by the officials. It is widely known that Mrs. Aquinos rise to the presidency was not due to constitutional processes; in fact, it was achieved in violation of the provisions of the 1973 Constitution as a Batasang Pambansa resolution had earlier declared Mr. Marcos as the winner in the 1986 presidential election. Thus it can be said that the organization of Mrs. Aquinos Government which was met by little resistance and her control of the state evidenced by the appointment of the Cabinet and other key officers of the administration, the departure of the Marcos Cabinet officials, revamp of the Judiciary and the Military signalled the point where the legal system then in effect, had ceased to be obeyed by the Filipino. The Court GRANTS the Motion for Reconsideration and the seniority rankings of members of the Court of Appeals, including that of the petitioner, at the time the appointments were made by the President in 1986, are recognized and upheld. --

REPUBLIC OF THE PHILIPPINES VS. SANDIGANBAYAN, MAJOR GENERAL JOSEPHUS Q. RAMAS AND ELIZABETH DIMAANO The Case Before this Court is a petition for review on certiorari seeking to set aside the Resolutions of the Sandiganbayan (First Division)[1] dated 18 November 1991 and 25 March 1992 in Civil Case No. 0037. The first Resolution dismissed petitioners Amended Comp laint and ordered the return of the confiscated items to respondent Elizabeth Dimaano, while the second Resolution denied petitioners Motion for Reconsideration. Petitioner prays for the grant of the reliefs sought in its Amended Complaint, or in the alternative, for the remand of this case to the Sandiganbayan (First Division) for further proceedings allowing petitioner to complete the presentation of its evidence. Antecedent Facts Immediately upon her assumption to office following the successful EDSA Revolution, then President Corazon C. Aquino issued Executive Order No. 1 (EO No. 1) creating the Presidential Commission on Good Government (PCGG). EO No. 1 primarily tasked the PCGG to recover all ill-gotten wealth of former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates. EO No. 1 vested the PCGG with the power (a) to conduct investigation as may be necessary in order to accomplish and carry out the purposes of this order and the power (h) to p romulgate such rules and regulations as may be necessary to carry out the purpose of this order. Accordingly, the PCGG, through its then Chairman Jovito R. Salonga, created an AFP Anti-Graft Board (AFP Board) tasked to investigate reports of unexplained wealth and

corrupt practices by AFP personnel, whether in the active service or retired.[2] Based on its mandate, the AFP Board investigated various reports of alleged unexplained wealth of respondent Major General Josephus Q. Ramas (Ramas). On 27 Jul y 1987, the AFP Board issued a Resolution on its findings and recommendation on the reported unexplained wealth of Ramas. The relevant part of the Resolution reads: III. FINDINGS and EVALUATION: Evidence in the record showed that respondent is the owner of a house and lot located at 15-Yakan St., La Vista, Quezon City. He is also the owner of a house and lot located in Cebu City. The lot has an area of 3,327 square meters. The value of the property located in Quezon City may be estimated modestly at P700,000.00. The equipment/items and communication facilities which were found in the premises of Elizabeth Dimaano and were confiscated by elements of the PC Command of Batangas were all covered by invoice receipt in the name of CAPT. EFREN SALIDO, RSO Command Coy, MSC, PA. These items could not have been in the possession of Elizabeth Dimaano if not given for her use by respondent Commanding General of the Philippine Army. Aside from the military equipment/items and communications equipment, the raiding team was also able to confiscate money in the amount of P2,870,000.00 and $50,000 US Dollars in the house of Elizabeth Dimaano on 3 March 1986.

Affidavits of members of the Military Security Unit, Military Security Command, Philippine Army, stationed at Camp Eldridge, Los Baos, Laguna, disclosed that Elizabeth Dimaano is the mistress of respondent. That respondent usually goes and stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga, Itaas, Batangas City and when he arrives, Elizabeth Dimaano embraces and kisses respondent. That on February 25, 1986, a person who rode in a car went to the residence of Elizabeth Dimaano with four (4) attache cases filled with money and owned by MGen Ramas. Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible means of income and is supported by respondent for she was formerly a mere secretary. Taking in toto the evidence, Elizabeth Dimaano could not have used the military equipment/items seized in her house on March 3, 1986 without the consent of respondent, he being the Commanding General of the Philippine Army. It is also impossible for Elizabeth Dimaano to claim that she owns the P2,870,000.00 and $50,000 US Dollars for she had no visible source of income. This money was never declared in the Statement of Assets and Liabilities of respondent. There was an intention to cover the existence of these money because these are all ill-gotten and unexplained wealth. Were it not for the affidavits of the members of the Military Security Unit assigned at Camp Eldridge, Los Baos, Laguna, the existence and ownership of these money would have never been known. The Statement of Assets and Liabilities of respondent were also submitted for scrutiny and analysis by the Boards consultant. Although the amount of P2,870,000.00 and $50,000 US Dollars were

not included, still it was disclosed unexplained wealth of P104,134. 60. IV. CONCLUSION:

that

respondent

has

an

In view of the foregoing, the Board finds that a prima facie case exists against respondent for ill-gotten and unexplained wealth in the amount of P2,974,134.00 and $50,000 US Dollars. V. RECOMMENDATION: Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted and tried for violation of RA 3019, as amended, otherwise known as Anti-Graft and Corrupt Practices Act and RA 1379, as amended, otherwise known as The Act for the Forfeiture of Unlawfully Acquired Property.[3] Thus, on 1 August 1987, the PCGG filed a petition for forfeiture under Republic Act No. 1379 (RA No. 1379) [4] against Ramas. Before Ramas could answer the petition, then Solicitor General Francisco I. Chavez filed an Amended Complaint naming the Republic of the Philippines (petitioner), represented by the PCGG, as plaintiff and Ramas as defendant. The Amended Complaint also impleaded Elizabeth Dimaano (Dimaano) as co-defendant. The Amended Complaint alleged that Ramas was the Commanding General of the Philippine Army until 1986. On the other hand, Dimaano was a confidential agent of the Military Security Unit, Philippine Army, assigned as a clerk-typist at the office of Ramas from 1 January 1978 to February 1979. The Amended Complaint further alleged that Ramas acquired funds, assets and properties manifestly out of proportion to his salary as an army officer and his

other income from legitimately acquired property by taking undue advantage of his public office and/or using his power, authority and influence as such officer of the Armed Forces of the Philippines and as a subordinate and close associate of the deposed President Ferdinand Marcos.[5] The Amended Complaint also alleged that the AFP Board, after a previous inquiry, found reasonable ground to believe that respondents have violated RA No. 1379.[6] The Amended Complaint prayed for, among others, the forfeiture of respondents properties, funds and equipment in favor of the State. Ramas filed an Answer with Special and/or Affirmative Defenses and Compulsory Counterclaim to the Amended Complaint. In his Answer, Ramas contended that his property consisted only of a residential house at La Vista Subdivision, Quezon City, valued at P700,000, which was not out of proportion to his salary and other legitimate income. He denied ownership of any mansion in Cebu City and the cash, communications equipment and other items confiscated from the house of Dimaano. Dimaano filed her own Answer to the Amended Complaint. Admitting her employment as a clerk-typist in the office of Ramas from January-November 1978 only, Dimaano claimed ownership of the monies, communications equipment, jewelry and land titles taken from her house by the Philippine Constabulary raiding team. After termination of the pre-trial,[7] the court set the case for trial on the merits on 9-11 November 1988. On 9 November 1988, petitioner asked for a deferment of the hearing due to its lack of preparation for trial and the absence of

witnesses and vital documents to support its case. The court reset the hearing to 17 and 18 April 1989. On 13 April 1989, petitioner filed a motion for leave to amend the complaint in order to charge the delinquent properties with being subject to forfeiture as having been unlawfully acquired by defendant Dimaano alone x x x.[8] Nevertheless, in an order dated 17 April 1989, the Sandiganbayan proceeded with petitioners presentation of evidence on the ground that the motion for leave to amend complaint did not state when petitioner would file the amended complaint. The Sandiganbayan further stated that the subject matter of the amended complaint was on its face vague and not related to the existing complaint. The Sandiganbayan also held that due to the time that the case had been pending in court, petitioner should proceed to present its evidence. After presenting only three witnesses, petitioner asked for a postponement of the trial. On 28 September 1989, during the continuation of the trial, petitioner manifested its inability to proceed to trial because of the absence of other witnesses or lack of further evidence to present. Instead, petitioner reiterated its motion to amend the complaint to conform to the evidence already presented or to change the averments to show that Dimaano alone unlawfully acquired the monies or properties subject of the forfeiture. The Sandiganbayan noted that petitioner had already delayed the case for over a year mainly because of its many postponements. Moreover, petitioner would want the case to revert to its preliminary stage when in fact the case had long been ready for trial. The

Sandiganbayan ordered petitioner to prepare for presentation of its additional evidence, if any. During the trial on 23 March 1990, petitioner again admitted its inability to present further evidence. Giving petitioner one more chance to present further evidence or to amend the complaint to conform to its evidence, the Sandiganbayan reset the trial to 18 May 1990. The Sandiganbayan, however, hinted that the re-setting was without prejudice to any action that private respondents might take under the circumstances. However, on 18 May 1990, petitioner again expressed its inability to proceed to trial because it had no further evidence to present. Again, in the interest of justice, the Sandiganbayan granted petitioner 60 days within which to file an appropriate pleading. The Sandiganbayan, however, warned petitioner that failure to act would constrain the court to take drastic action. Private respondents then filed their motions to dismiss based on Republic v. Migrino.[9] The Court held in Migrino that the PCGG does not have jurisdiction to investigate and prosecute military officers by reason of mere position held without a showing that they are subordinates of former President Marcos. On 18 November 1991, the Sandiganbayan rendered a resolution, the dispositive portion of which states: WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint, without pronouncement as to costs. The counterclaims are likewise dismissed for lack of merit, but the confiscated sum of money, communications equipment, jewelry and land titles are ordered returned to Elizabeth Dimaano.

The records of this case are hereby remanded and referred to the Hon. Ombudsman, who has primary jurisdiction over the forfeiture cases under R.A. No. 1379, for such appropriate action as the evidence warrants. This case is also referred to the Commissioner of the Bureau of Internal Revenue for a determination of any tax liability of respondent Elizabeth Dimaano in connection herewith. SO ORDERED. On 4 December 1991, petitioner filed its Motion for Reconsideration. In answer to the Motion for Reconsideration, private respondents filed a Joint Comment/Opposition to which petitioner filed its Reply on 10 January 1992. On 25 March 1992, the Sandiganbayan rendered a Resolution denying the Motion for Reconsideration. Ruling of the Sandiganbayan The Sandiganbayan dismissed the Amended Complaint on the following grounds: (1.) The actions taken by the PCGG are not in accordance with the rulings of the Supreme Court in Cruz, Jr. v. Sandiganbayan[10] and Republic v. Migrino[11] which involve the same issues. (2.) No previous inquiry similar to preliminary investigations in criminal cases was conducted against Ramas and Dimaano. (3.) The evidence adduced against Ramas does not constitute a prima facie case against him.

(4.) There was an illegal search and seizure of the items confiscated. The Issues Petitioner raises the following issues: A. RESPONDENT COURT SERIOUSLY ERRED IN CONCLUDING THAT PETITIONERS EVIDENCE CANNOT MAKE A CASE FOR FORFEITURE AND THAT THERE WAS NO SHOWING OF CONSPIRACY, COLLUSION OR RELATIONSHIP BY CONSANGUINITY OR AFFINITY BY AND BETWEEN RESPONDENT RAMAS AND RESPONDENT DIMAANO NOTWITHSTANDING THE FACT THAT SUCH CONCLUSIONS WERE CLEARLY UNFOUNDED AND PREMATURE, HAVING BEEN RENDERED PRIOR TO THE COMPLETION OF THE PRESENTATION OF THE EVIDENCE OF THE PETITIONER. B. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE ACTIONS TAKEN BY THE PETITIONER, INCLUDING THE FILING OF THE ORIGINAL COMPLAINT AND THE AMENDED COMPLAINT, SHOULD BE STRUCK OUT IN LINE WITH THE RULINGS OF THE SUPREME COURT IN CRUZ, JR. v. SANDIGANBAYAN, 194 SCRA 474 AND REPUBLIC v. MIGRINO, 189 SCRA 289, NOTWITHSTANDING THE FACT THAT: 1. The cases of Cruz, Jr. v. Sandiganbayan, supra, and Republic v. Migrino, supra, are clearly not applicable to this case; 2. Any procedural defect in the institution of the complaint in Civil Case No. 0037 was cured and/or waived by respondents with the filing of their respective answers with counterclaim; and

3. The separate motions to dismiss were evidently improper considering that they were filed after commencement of the presentation of the evidence of the petitioner and even before the latter was allowed to formally offer its evidence and rest its case; C. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE ARTICLES AND THINGS SUCH AS SUMS OF MONEY, COMMUNICATIONS EQUIPMENT, JEWELRY AND LAND TITLES CONFISCATED FROM THE HOUSE OF RESPONDENT DIMAANO WERE ILLEGALLY SEIZED AND THEREFORE EXCLUDED AS EVIDENCE.[12] The Courts Ruling First Issue: PCGGs Jurisdiction to Investigate Private Respondents This case involves a revisiting of an old issue already decided by this Court in Cruz, Jr. v. Sandiganbayan[13] and Republic v. Migrino.[14] The primary issue for resolution is whether the PCGG has the jurisdiction to investigate and cause the filing of a forfeiture petition against Ramas and Dimaano for unexplained wealth under RA No. 1379. We hold that PCGG has no such jurisdiction. The PCGG created the AFP Board to investigate the unexplained wealth and corrupt practices of AFP personnel, whether in the active service or retired.[15] The PCGG tasked the AFP Board to make the necessary recommendations to appropriate government agencies on the action to be taken based on its findings.[16] The PCGG gave this task to the AFP Board pursuant to the PCGGs power under Section 3 of EO No. 1 to conduct investigation as ma y be necessary

in order to accomplish and to carry out the purposes of this order. EO No. 1 gave the PCGG specific responsibilities, to wit: SEC. 2. The Commission shall be charged with the task of assisting the President in regard to the following matters: (a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover and sequestration of all business enterprises and entities owned or controlled by them, during his administration, directly or through nominees, by taking undue advantage of their public office and/ or using their powers, authority, influence, connections or relationship.

Petitioner, however, does not claim that the President assigned Ramas case to the PCGG. Therefore, Ramas case should fall under the first category of AFP personnel before the PCGG could exercise its jurisdiction over him. Petitioner argues that Ramas was undoubtedly a subordinate of former President Marcos because of his position as the Commanding General of the Philippine Army. Petitioner claims that Ramas position enabled him to receive orders directly from his commander-in-chief, undeniably making him a subordinate of former President Marcos. We hold that Ramas was not a subordinate of former President Marcos in the sense contemplated under EO No. 1 and its amendments. Mere position held by a military officer does not automatically make him a subordinate as this term is used in EO Nos. 1, 2, 14 and 14 A absent a showing that he enjoyed close association with former President Marcos. Migrino discussed this issue in this wise: A close reading of EO No. 1 and related executive orders will readily show what is contemplated within the term subordinate. The Whereas Clauses of EO No. 1 express the urgent need to recover the ill-gotten wealth amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad. EO No. 2 freezes all assets and properties in the Philippines in which former President Marcos and/or his wife, Mrs. Imelda Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees have any interest or participation. Applying the rule in statutory construction known as ejusdem generis that is-

(b) The investigation of such cases of graft and corruption as the President may assign to the Commission from time to time. x x x. The PCGG, through the AFP Board, can only investigate the unexplained wealth and corrupt practices of AFP personnel who fall under either of the two categories mentioned in Section 2 of EO No. 1. These are: (1) AFP personnel who have accumulated ill-gotten wealth during the administration of former President Marcos by being the latters immediate family, relative, subordinate or close associate, taking undue advantage of their public office or using their powers, influence x x x;[17] or (2) AFP personnel involved in other cases of graft and corruption provided the President assigns their cases to the PCGG.[18]

[W]here general words follow an enumeration of persons or things by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned [Smith, Bell & Co, Ltd. vs. Register of Deeds of Davao, 96 Phil. 53, 58, citing Black on Interpretation of Laws, 2nd Ed., 203]. [T]he term subordinate as used in EO Nos. 1 & 2 refers to one who enjoys a close association with former President Marcos and/or his wife, similar to the immediate family member, relative, and close associate in EO No. 1 and the close relative, business associate, dummy, agent, or nominee in EO No. 2. xxx It does not suffice, as in this case, that the respondent is or was a government official or employee during the administration of former President Marcos. There must be a prima facie showing that the respondent unlawfully accumulated wealth by virtue of his close association or relation with former Pres. Marcos and/or his wife. (Emphasis supplied) Ramas position alone as Commanding General of the Philippine Army with the rank of Major General[19] does not suffice to make him a subordinate of former President Marcos for purposes of EO No. 1 and its amendments. The PCGG has to provide a prima facie showing that Ramas was a close associate of former President Marcos, in the same manner that business associates, dummies, agents or nominees of former President Marcos were close to him. Such close association is manifested either by Ramas complicity with former President Marcos in the accumulation of ill-gotten wealth

by the deposed President or by former President Marcos acquiescence in Ramas own accumulation of ill -gotten wealth if any. This, the PCGG failed to do. Petitioners attempt to differentiate the instant case from Migrino does not convince us. Petitioner argues that unlike in Migrino, the AFP Board Resolution in the instant case states that the AFP Board conducted the investigation pursuant to EO Nos. 1, 2, 14 and 14-A in relation to RA No. 1379. Petitioner asserts that there is a presumption that the PCGG was acting within its jurisdiction of investigating crony-related cases of graft and corruption and that Ramas was truly a subordinate of the former President. However, the same AFP Board Resolution belies this contention. Although the Resolution begins with such statement, it ends with the following recommendation: V. RECOMMENDATION: Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted and tried for violation of RA 3019, as amended, otherwise known as Anti-Graft and Corrupt Practices Act and RA 1379, as amended, otherwise known as The Act for the Forfeiture of Unlawfully Acquired Property.[20] Thus, although the PCGG sought to investigate and prosecute private respondents under EO Nos. 1, 2, 14 and 14-A, the result yielded a finding of violation of Republic Acts Nos. 3019 and 1379 without any relation to EO Nos. 1, 2, 14 and 14-A. This absence of relation to EO No. 1 and its amendments proves fatal to petitioners case. EO No. 1 created the PCGG for a specific and limited purpose, and necessarily its powers must be construed to address such specific and limited purpose.

Moreover, the resolution of the AFP Board and even the Amended Complaint do not show that the properties Ramas allegedly owned were accumulated by him in his capacity as a subordinate of his commander-in-chief. Petitioner merely enumerated the properties Ramas allegedly owned and suggested that these properties were disproportionate to his salary and other legitimate income without showing that Ramas amassed them because of his close association with former President Marcos. Petitioner, in fact, admits that the AFP Board resolution does not contain a finding that Ramas accumulated his wealth because of his close association with former President Marcos, thus: 10. While it is true that the resolution of the Anti-Graft Board of the New Armed Forces of the Philippines did not categorically find a prima facie evidence showing that respondent Ramas unlawfully accumulated wealth by virtue of his close association or relation with former President Marcos and/or his wife, it is submitted that such omission was not fatal. The resolution of the Anti-Graft Board should be read in the context of the law creating the same and the objective of the investigation which was, as stated in the above, pursuant to Republic Act Nos. 3019 and 1379 in relation to Executive Order Nos. 1, 2, 14 and 14-a;[21] (Emphasis supplied) Such omission is fatal. Petitioner forgets that it is precisely a prima facie showing that the ill-gotten wealth was accumulated by a subordinate of former President Marcos that vests jurisdiction on PCGG. EO No. 1[22] clearly premises the creation of the PCGG on the urgent need to recover all ill-gotten wealth amassed by former President Marcos, his immediate family, relatives, subordinates and close associates. Therefore, to say that such omission was not fatal is clearly contrary to the intent behind the creation of the PCGG.

In Cruz, Jr. v. Sandiganbayan,[23] the Court outlined the cases that fall under the jurisdiction of the PCGG pursuant to EO Nos. 1, 2,[24] 14,[25] 14-A:[26] A careful reading of Sections 2(a) and 3 of Executive Order No. 1 in relation with Sections 1, 2 and 3 of Executive Order No. 14, shows what the authority of the respondent PCGG to investigate and prosecute covers: (a) the investigation and prosecution of the civil action for the recovery of ill-gotten wealth under Republic Act No. 1379, accumulated by former President Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the take-over or sequestration of all business enterprises and entities owned or controlled by them, during his administration, directly or through his nominees, by taking undue advantage of their public office and/or using their powers, authority and influence, connections or relationships; and (b) the investigation and prosecution of such offenses committed in the acquisition of said ill-gotten wealth as contemplated under Section 2(a) of Executive Order No. 1. However, other violations of the Anti-Graft and Corrupt Practices Act not otherwise falling under the foregoing categories, require a previous authority of the President for the respondent PCGG to investigate and prosecute in accordance with Section 2 (b) of Executive Order No. 1. Otherwise, jurisdiction over such cases is vested in the Ombudsman and other duly authorized investigating agencies such as the provincial and city prosecutors, their assistants, the Chief State Prosecutor and his assistants and the state prosecutors. (Emphasis supplied)

The proper government agencies, and not the PCGG, should investigate and prosecute forfeiture petitions not falling under EO No. 1 and its amendments. The preliminary investigation of unexplained wealth amassed on or before 25 February 1986 falls under the jurisdiction of the Ombudsman, while the authority to file the corresponding forfeiture petition rests with the Solicitor General.[27] The Ombudsman Act or R epublic Act No. 6770 (RA No. 6770) vests in the Ombudsman the power to conduct preliminary investigation and to file forfeiture proceedings involving unexplained wealth amassed after 25 February 1986.[28] After the pronouncements of the Court in Cruz, the PCGG still pursued this case despite the absence of a prima facie finding that Ramas was a subordinate of former President Marcos. The petition for forfeiture filed with the Sandiganbayan should be dismissed for lack of authority by the PCGG to investigate respondents since there is no prima facie showing that EO No. 1 and its amendments apply to respondents. The AFP Board Resolution and even the Amended Complaint state that there are violations of RA Nos. 3019 and 1379. Thus, the PCGG should have recommended Ramas case to the Ombudsman who has jurisdiction to conduct the preliminary investigation of ordinary unexplained wealth and graft cases. As stated in Migrino: [But] in view of the patent lack of authority of the PCGG to investigate and cause the prosecution of private respondent for violation of Rep. Acts Nos. 3019 and 1379, the PCGG must also be enjoined from proceeding with the case, without prejudice to any action that may be taken by the proper prosecutory agency. The rule of law mandates that an agency of government be allowed to exercise only the powers granted to it.

Petitioners argument that private respondents have waived any defect in the filing of the forfeiture petition by submitting their respective Answers with counterclaim deserves no merit as well. Petitioner has no jurisdiction over private respondents. Thus, there is no jurisdiction to waive in the first place. The PCGG cannot exercise investigative or prosecutorial powers never granted to it. PCGGs powers are specific and limited. Unless given additional assignment by the President, PCGGs sole task is only to recover the ill-gotten wealth of the Marcoses, their relatives and cronies.[29] Without these elements, the PCGG cannot claim jurisdiction over a case. Private respondents questioned the authority and jurisdiction of the PCGG to investigate and prosecute their cases by filing their Motion to Dismiss as soon as they learned of the pronouncement of the Court in Migrino. This case was decided on 30 August 1990, which explains why private respondents only filed their Motion to Dismiss on 8 October 1990. Nevertheless, we have held that the parties may raise lack of jurisdiction at any stage of the proceeding.[30] Thus, we hold that there was no waiver of jurisdiction in this case. Jurisdiction is vested by law and not by the parties to an action.[31] Consequently, the petition should be dismissed for lack of jurisdiction by the PCGG to conduct the preliminary investigation. The Ombudsman may still conduct the proper preliminary investigation for violation of RA No. 1379, and if warranted, the Solicitor General may file the forfeiture petition with the Sandiganbayan.[32] The right of the State to forfeit unexplained wealth under RA No. 1379 is not subject to prescription, laches or estoppel.[33] Second Issue: Propriety of Dismissal of Case

Before Completion of Presentation of Evidence Petitioner also contends that the Sandiganbayan erred in dismissing the case before completion of the presentation of petitioners evidence. We disagree. Based on the findings of the Sandiganbayan and the records of this case, we find that petitioner has only itself to blame for noncompletion of the presentation of its evidence. First, this case has been pending for four years before the Sandiganbayan dismissed it. Petitioner filed its Amended Complaint on 11 August 1987, and only began to present its evidence on 17 April 1989. Petitioner had almost two years to prepare its evidence. However, despite this sufficient time, petitioner still delayed the presentation of the rest of its evidence by filing numerous motions for postponements and extensions. Even before the date set for the presentation of its evidence, petitioner filed, on 13 April 1989, a Motion for Leave to Amend the Complaint.[34] The motion sought to charge the delinquent properties (which comprise most of petitioners evidenc e) with being subject to forfeiture as having been unlawfully acquired by defendant Dimaano alone x x x. The Sandiganbayan, however, refused to defer the presentation of petitioners evidence since petitioner did not state when it would file the amended complaint. On 18 April 1989, the Sandiganbayan set the continuation of the presentation of evidence on 28-29 September and 9-11 October 1989, giving petitioner ample time to prepare its evidence. Still, on 28 September 1989, petitioner manifested its inability to proceed with the presentation of its

evidence. The Sandiganbayan issued an Order expressing its view on the matter, to wit: The Court has gone through extended inquiry and a narration of the above events because this case has been ready for trial for over a year and much of the delay hereon has been due to the inability of the government to produce on scheduled dates for pre-trial and for trial documents and witnesses, allegedly upon the failure of the military to supply them for the preparation of the presentation of evidence thereon. Of equal interest is the fact that this Court has been held to task in public about its alleged failure to move cases such as this one beyond the preliminary stage, when, in view of the developments such as those of today, this Court is now faced with a situation where a case already in progress will revert back to the preliminary stage, despite a five-month pause where appropriate action could have been undertaken by the plaintiff Republic.[35] On 9 October 1989, the PCGG manifested in court that it was conducting a preliminary investigation on the unexplained wealth of private respondents as mandated by RA No. 1379.[36] The PCGG prayed for an additional four months to conduct the preliminary investigation. The Sandiganbayan granted this request and scheduled the presentation of evidence on 26-29 March 1990. However, on the scheduled date, petitioner failed to inform the court of the result of the preliminary investigation the PCGG supposedly conducted. Again, the Sandiganbayan gave petitioner until 18 May 1990 to continue with the presentation of its evidence and to inform the court of what lies ahead insofar as the status of the case is concerned x x x.[37] Still on the date set, petitioner failed to present its evidence. Finally, on 11 July 1990, petitioner filed its ReAmended Complaint.[38] The Sandiganbayan correctly observed that a case already pending for years would revert to its preliminary stage if the court were to accept the Re-Amended Complaint.

Based on these circumstances, obviously petitioner has only itself to blame for failure to complete the presentation of its evidence. The Sandiganbayan gave petitioner more than sufficient time to finish the presentation of its evidence. The Sandiganbayan overlooked petitioners delays and yet petitioner ended the long -string of delays with the filing of a Re-Amended Complaint, which would only prolong even more the disposition of the case. Moreover, the pronouncements of the Court in Migrino and Cruz prompted the Sandiganbayan to dismiss the case since the PCGG has no jurisdiction to investigate and prosecute the case against private respondents. This alone would have been sufficient legal basis for the Sandiganbayan to dismiss the forfeiture case against private respondents. Thus, we hold that the Sandiganbayan did not err in dismissing the case before completion of the presentation of petitioners evidence. Third Issue: Legality of the Search and Seizure Petitioner claims that the Sandiganbayan erred in declaring the properties confiscated from Dimaanos house as illegally seized and therefore inadmissible in evidence. This issue bears a significant effect on petitioners case since these properties comprise most of petitioners evidence against private respondents. Petitioner will not have much evidence to support its case against private respondents if these properties are inadmissible in evidence. On 3 March 1986, the Constabulary raiding team served at Dimaanos residence a search warrant captioned Illegal Possession of Firearms and Ammunition. Dimaano was not present during the raid but Dimaanos cousins witnessed the raid. The raiding team

seized the items detailed in the seizure receipt together with other items not included in the search warrant. The raiding team seized these items: one baby armalite rifle with two magazines; 40 rounds of 5.56 ammunition; one pistol, caliber .45; communications equipment, cash consisting of P2,870,000 and US$50,000, jewelry, and land titles. Petitioner wants the Court to take judicial notice that the raiding team conducted the search and seizure on March 3, 1986 or five days after the successful EDSA revolution.[39] Petitioner argues that a revolutionary government was operative at that time by virtue of Proclamation No. 1 announcing that President Aquino and Vice President Laurel were taking power in the name and by the will of the Filipino people.[40] Petitioner asserts that the revolutionary government effectively withheld the operation of the 1973 Constitution which guaranteed private respondents exclusionary right. Moreover, petitioner argues that the exclusionary right arising from an illegal search applies only beginning 2 February 1987, the date of ratification of the 1987 Constitution. Petitioner contends that all rights under the Bill of Rights had already reverted to its embryonic stage at the time of the search. Therefore, the government may confiscate the monies and items taken from Dimaano and use the same in evidence against her since at the time of their seizure, private respondents did not enjoy any constitutional right. Petitioner is partly right in its arguments. The EDSA Revolution took place on 23-25 February 1986. As succinctly stated in President Aquinos Proclamation No. 3 dated 25 March 1986, the EDSA Revolution was done in defiance of the provisions of the 1973 Constitution.[41] The resulting government

was indisputably a revolutionary government bound by no constitution or legal limitations except treaty obligations that the revolutionary government, as the de jure government in the Philippines, assumed under international law. The correct issues are: (1) whether the revolutionary government was bound by the Bill of Rights of the 1973 Constitution during the interregnum, that is, after the actual and effective take-over of power by the revolutionary government following the cessation of resistance by loyalist forces up to 24 March 1986 (immediately before the adoption of the Provisional Constitution); and (2) whether the protection accorded to individuals under the International Covenant on Civil and Political Rights (Covenant) and the Universal Declaration of Human Rights (Declaration) remained in effect during the interregnum. We hold that the Bill of Rights under the 1973 Constitution was not operative during the interregnum. However, we rule that the protection accorded to individuals under the Covenant and the Declaration remained in effect during the interregnum. During the interregnum, the directives and orders of the revolutionary government were the supreme law because no constitution limited the extent and scope of such directives and orders. With the abrogation of the 1973 Constitution by the successful revolution, there was no municipal law higher than the directives and orders of the revolutionary government. Thus, during the interregnum, a person could not invoke any exclusionary right under a Bill of Rights because there was neither a constitution nor a Bill of Rights during the interregnum. As the Court explained in Letter of Associate Justice Reynato S. Puno:[42]

A revolution has been defined as the complete overthrow of the established government in any country or state by those who were previously subject to it or as a sudden, radical and fundamental change in the government or political system, usually effected with violence or at least some acts of violence. In Kelsen's book, General Theory of Law and State, it is defined as that which occurs whenever the legal order of a community is nullified and replaced by a new order . . . a way not prescribed by the first order itself. It was through the February 1986 revolution, a relatively peaceful one, and more popularly known as the people power revolution that the Filipino people tore themselves away from an existing regime. This revolution also saw the unprecedented rise to power of the Aquino government. From the natural law point of view, the right of revolution has been defined as an inherent right of a people to cast out their rulers, change their policy or effect radical reforms in their system of government or institutions by force or a general uprising when the legal and constitutional methods of making such change have proved inadequate or are so obstructed as to be unavailable. It has been said that the locus of positive law-making power lies with the people of the state and from there is derived the right of the people to abolish, to reform and to alter any existing form of government without regard to the existing constitution. xxx It is widely known that Mrs. Aquinos rise to the presidency was not due to constitutional processes; in fact, it was achieved in violation of the provisions of the 1973 Constitution as a Batasang Pambansa resolution had earlier declared Mr. Marcos as the winner in the 1986 presidential election. Thus it can be said that the organization of

Mrs. Aquinos Government which was met by little resistance and her control of the state evidenced by the appointment of the Cabinet and other key officers of the administration, the departure of the Marcos Cabinet officials, revamp of the Judiciary and the Military signaled the point where the legal system then in effect, had ceased to be obeyed by the Filipino. (Emphasis supplied) To hold that the Bill of Rights under the 1973 Constitution remained operative during the interregnum would render void all sequestration orders issued by the Philippine Commission on Good Government (PCGG) before the adoption of the Freedom Constitution. The sequestration orders, which direct the freezing and even the take-over of private property by mere executive issuance without judicial action, would violate the due process and search and seizure clauses of the Bill of Rights. During the interregnum, the government in power was concededly a revolutionary government bound by no constitution. No one could validly question the sequestration orders as violative of the Bill of Rights because there was no Bill of Rights during the interregnum. However, upon the adoption of the Freedom Constitution, the sequestered companies assailed the sequestration orders as contrary to the Bill of Rights of the Freedom Constitution. In Bataan Shipyard & Engineering Co. Inc. vs. Presidential Commission on Good Government,[43] petitioner Baseco, while conceding there was no Bill of Rights during the interregnum, questioned the continued validity of the sequestration orders upon adoption of the Freedom Constitution in view of the due process clause in its Bill of Rights. The Court ruled that the Freedom Constitution, and later the 1987 Constitution, expressly recognized the validity of sequestration orders, thus:

If any doubt should still persist in the face of the foregoing considerations as to the validity and propriety of sequestration, freeze and takeover orders, it should be dispelled by the fact that these particular remedies and the authority of the PCGG to issue them have received constitutional approbation and sanction. As already mentioned, the Provisional or Freedom Constitution recognizes the power and duty of the President to enact measures to achieve the mandate of the people to . . . (r)ecover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the interest of the people through orders of sequestration or freezing of assets or accounts. And as also already adverted to, Section 26, Article XVIII of the 1987 Constitution treats of, and ratifies the authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986. The framers of both the Freedom Constitution and the 1987 Constitution were fully aware that the sequestration orders would clash with the Bill of Rights. Thus, the framers of both constitutions had to include specific language recognizing the validity of the sequestration orders. The following discourse by Commissioner Joaquin G. Bernas during the deliberations of the Constitutional Commission is instructive: FR. BERNAS: Madam President, there is something schizophrenic about the arguments in defense of the present amendment. For instance, I have carefully studied Minister Salongas lecture in the Gregorio Araneta University Foundation, of which all of us have been given a copy. On the one hand, he argues that everything the Commission is doing is traditionally legal. This is repeated by Commissioner Romulo also. Minister Salonga spends a major portion of his lecture developing that argument. On the other hand, almost

as an afterthought, he says that in the end what matters are the results and not the legal niceties, thus suggesting that the PCGG should be allowed to make some legal shortcuts, another word for niceties or exceptions. Now, if everything the PCGG is doing is legal, why is it asking the CONCOM for special protection? The answer is clear. What they are doing will not stand the test of ordinary due process, hence they are asking for protection, for exceptions. Grandes malos, grandes remedios, fine, as the saying stands, but let us not say grandes malos, grande y malos remedios. That is not an allowable extrapolation. Hence, we should not give the exceptions asked for, and let me elaborate and give three reasons: First, the whole point of the February Revolution and of the work of the CONCOM is to hasten constitutional normalization. Very much at the heart of the constitutional normalization is the full effectivity of the Bill of Rights. We cannot, in one breath, ask for constitutional normalization and at the same time ask for a temporary halt to the full functioning of what is at the heart of constitutionalism. That would be hypocritical; that would be a repetition of Marcosian protestation of due process and rule of law. The New Society word for that is backsliding. It is tragic when we begin to back slide even before we get there. Second, this is really a corollary of the first. Habits tend to become ingrained. The committee report asks for extraordinary exceptions from the Bill of Rights for six months after the convening of Congress, and Congress may even extend this longer. Good deeds repeated ripen into virtue; bad deeds repeated become vice. What the committee report is asking for is that we should allow

the new government to acquire the vice of disregarding the Bill of Rights. Vices, once they become ingrained, become difficult to shed. The practitioners of the vice begin to think that they have a vested right to its practice, and they will fight tooth and nail to keep the franchise. That would be an unhealthy way of consolidating the gains of a democratic revolution. Third, the argument that what matters are the results and not the legal niceties is an argument that is very disturbing. When it comes from a staunch Christian like Commissioner Salonga, a Minister, and repeated verbatim by another staunch Christian like Commissioner Tingson, it becomes doubly disturbing and even discombobulating. The argument makes the PCGG an auctioneer, placing the Bill of Rights on the auction block. If the price is right, the search and seizure clause will be sold. Open your Swiss bank account to us and we will award you the search and seizure clause. You can keep it in your private safe. Alternatively, the argument looks on the present government as hostage to the hoarders of hidden wealth. The hoarders will release the hidden health if the ransom price is paid and the ransom price is the Bill of Rights, specifically the due process in the search and seizure clauses. So, there is something positively revolving about either argument. The Bill of Rights is not for sale to the highest bidder nor can it be used to ransom captive dollars. This nation will survive and grow strong, only if it would become convinced of the values enshrined in the Constitution of a price that is beyond monetary estimation. For these reasons, the honorable course for the Constitutional Commission is to delete all of Section 8 of the committee report and

allow the new Constitution to take effect in full vigor. If Section 8 is deleted, the PCGG has two options. First, it can pursue the Salonga and the Romulo argument that what the PCGG has been doing has been completely within the pale of the law. If sustained, the PCGG can go on and should be able to go on, even without the support of Section 8. If not sustained, however, the PCGG has only one honorable option, it must bow to the majesty of the Bill of Rights. The PCGG extrapolation of the law is defended by staunch Christians. Let me conclude with what another Christian replied when asked to toy around with the law. From his prison cell, Thomas More said, "I'll give the devil benefit of law for my nations safety sake. I ask the Commission to give the devil benefit of law for our nations sake. And we should delete Section 8. Thank you, Madam President. (Emphasis supplied) Despite the impassioned plea by Commissioner Bernas against the amendment excepting sequestration orders from the Bill of Rights, the Constitutional Commission still adopted the amendment as Section 26,[44] Article XVIII of the 1987 Constitution. The framers of the Constitution were fully aware that absent Section 26, sequestration orders would not stand the test of due process under the Bill of Rights. Thus, to rule that the Bill of Rights of the 1973 Constitution remained in force during the interregnum, absent a constitutional provision excepting sequestration orders from such Bill of Rights, would clearly render all sequestration orders void during the interregnum. Nevertheless, even during the interregnum the Filipino people continued to enjoy, under the Covenant and the

Declaration, almost the same rights found in the Bill of Rights of the 1973 Constitution. The revolutionary government, after installing itself as the de jure government, assumed responsibility for the States good faith compliance with the Covenant to which the Philippines is a signatory. Article 2(1) of the Covenant requires each signatory State to respect and to ensure to all individuals within its territory and subject to its jurisdiction the rights[45] recognized in the present Covenant. Under Article 17(1) of the Covenant, the revolutionary government had the duty to insure that [n]o one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence. The Declaration, to which the Philippines is also a signatory, provides in its Article 17(2) that [n]o one shall be arbitrarily deprived of his property. Although the signatories to the Declaration did not intend it as a legally binding document, being only a declaration, the Court has interpreted the Declaration as part of the generally accepted principles of international law and binding on the State.[46] Thus, the revolutionary government was also obligated under international law to observe the rights[47] of individuals under the Declaration. The revolutionary government did not repudiate the Covenant or the Declaration during the interregnum. Whether the revolutionary government could have repudiated all its obligations under the Covenant or the Declaration is another matter and is not the issue here. Suffice it to say that the Court considers the Declaration as part of customary international law, and that Filipinos as human beings are proper subjects of the rules of international law laid down in the Covenant. The fact is the revolutionary government did not repudiate the Covenant or the Declaration in the same way it

repudiated the 1973 Constitution. As the de jure government, the revolutionary government could not escape responsibility for the States good faith compliance with its treaty obligations under international law. It was only upon the adoption of the Provisional Constitution on 25 March 1986 that the directives and orders of the revolutionary government became subject to a higher municipal law that, if contravened, rendered such directives and orders void. The Provisional Constitution adopted verbatim the Bill of Rights of the 1973 Constitution.[48] The Provisional Constitution served as a selflimitation by the revolutionary government to avoid abuses of the absolute powers entrusted to it by the people. During the interregnum when no constitution or Bill of Rights existed, directives and orders issued by government officers were valid so long as these officers did not exceed the authority granted them by the revolutionary government. The directives and orders should not have also violated the Covenant or the Declaration. In this case, the revolutionary government presumptively sanctioned the warrant since the revolutionary government did not repudiate it. The warrant, issued by a judge upon proper application, specified the items to be searched and seized. The warrant is thus valid with respect to the items specifically described in the warrant. However, the Constabulary raiding team seized items not included in the warrant. As admitted by petitioners witnesses, the raiding team confiscated items not included in the warrant, thus: Direct Examination of Capt. Rodolfo Sebastian AJ AMORES

Q. According to the search warrant, you are supposed to seize only for weapons. What else, aside from the weapons, were seized from the house of Miss Elizabeth Dimaano? A. The communications equipment, money in Philippine currency and US dollars, some jewelries, land titles, sir. Q. Now, the search warrant speaks only of weapons to be seized from the house of Elizabeth Dimaano. Do you know the reason why your team also seized other properties not mentioned in said search warrant? A. During the conversation right after the conduct of said raid, I was informed that the reason why they also brought the other items not included in the search warrant was because the money and other jewelries were contained in attach cases and cartons with markings Sony Trinitron, and I think three (3) vaults or steel safes. Believing that the attach cases and the steel safes were containing firearms, they forced open these containers only to find out that they contained money. xxx Q. You said you found money instead of weapons, do you know the reason why your team seized this money instead of weapons? A. I think the overall team leader and the other two officers assisting him decided to bring along also the money because at that time it was already dark and they felt most secured if they will bring that because they might be suspected also of taking money out of those items, your Honor.[49] Cross-examination

Atty. Banaag Q. Were you present when the search warrant in connection with this case was applied before the Municipal Trial Court of Batangas, Branch 1? A. Yes, sir.

Q. But they did not mention to you, the applicant for the search warrant, any other properties or contraband which could be found in the residence of Miss Elizabeth Dimaano? A. They just gave us still unconfirmed report about some hidden items, for instance, the communications equipment and money. However, I did not include that in the application for search warrant considering that we have not established concrete evidence about that. So when Q. So that when you applied for search warrant, you had reason to believe that only weapons were in the house of Miss Elizabeth Dimaano? A. xxx Q. You stated that a .45 caliber pistol was seized along with one armalite rifle M-16 and how many ammunition? A. Forty, sir. Yes, your Honor.[50]

Q. And the search warrant applied for by you was for the search and seizure of five (5) baby armalite rifles M-16 and five (5) boxes of ammunition? A. xxx AJ AMORES Q. Before you applied for a search warrant, did you conduct surveillance in the house of Miss Elizabeth Dimaano? A. The Intelligence Operatives conducted surveillance together with the MSU elements, your Honor. Q. And this party believed there were weapons deposited in the house of Miss Elizabeth Dimaano? A. Q. A. Yes, your Honor. And they so swore before the Municipal Trial Judge? Yes, your Honor. Yes, sir.

Q. And this became the subject of your complaint with the issuing Court, with the fiscals office who charged Elizabeth Dimaano for Illegal Possession of Firearms and Ammunition? A. Q. A. Yes, sir. Do you know what happened to that case? I think it was dismissed, sir.

Q. A.

In the fiscals office? Yes, sir.

this considering that they believed that if they will just leave the money behind, it might get lost also. Q. That holds true also with respect to the other articles that were seized by your raiding team, like Transfer Certificates of Title of lands? A. Yes, sir. I think they were contained in one of the vaults that were opened.[51] It is obvious from the testimony of Captain Sebastian that the warrant did not include the monies, communications equipment, jewelry and land titles that the raiding team confiscated. The search warrant did not particularly describe these items and the raiding team confiscated them on its own authority. The raiding team had no legal basis to seize these items without showing that these items could be the subject of warrantless search and seizure.[52] Clearly, the raiding team exceeded its authority when it seized these items. The seizure of these items was therefore void, and unless these items are contraband per se,[53] and they are not, they must be returned to the person from whom the raiding seized them. However, we do not declare that such person is the lawful owner of these items, merely that the search and seizure warrant could not be used as basis to seize and withhold these items from the possessor. We thus hold that these items should be returned immediately to Dimaano. WHEREFORE, the petition for certiorari is DISMISSED. The questioned Resolutions of the Sandiganbayan dated 18 November 1991 and 25 March 1992 in Civil Case No. 0037, remanding the records of this case to the Ombudsman for such appropriate action as the evidence may warrant, and referring this case to the

Q. Because the armalite rifle you seized, as well as the .45 caliber pistol had a Memorandum Receipt in the name of Felino Melegrito, is that not correct? A. I think that was the reason, sir.

Q. There were other articles seized which were not included in the search warrant, like for instance, jewelries. Why did you seize the jewelries? A. I think it was the decision of the overall team leader and his assistant to bring along also the jewelries and other items, sir. I do not really know where it was taken but they brought along also these articles. I do not really know their reason for bringing the same, but I just learned that these were taken because they might get lost if they will just leave this behind. xxx Q. How about the money seized by your raiding team, they were not also included in the search warrant? A. Yes sir, but I believe they were also taken considering that the money was discovered to be contained in attach cases. These attach cases were suspected to be containing pistols or other high powered firearms, but in the course of the search the contents turned out to be money. So the team leader also decided to take

Commissioner of the Bureau of Internal Revenue for a determination of any tax liability of respondent Elizabeth Dimaano, are AFFIRMED. --

of State Webster Report to the President of the United States in the case of Thraser, 6 Web. Works, 526); Considering that the absolute and permanent allegiance of the inhabitants of a territory occupied by the enemy of their legitimate government or sovereign is not abrogated or severed by the enemy occupation, because the sovereignty of the government or sovereign de jure is not transferred thereby to the occupier, as we have held in the cases of Co Kim Cham vs. Valdez Tan Keh and Dizon (75 Phil., 113) and of Peralta vs. Director of Prisons (75 Phil., 285), and if it is not transferred to the occupant it must necessarily remain vested in the legitimate government; that the sovereignty vested in the titular government (which is the supreme power which governs a body politic or society which constitute the state) must be distinguished from the exercise of the rights inherent thereto, and may be destroyed, or severed and transferred to another, but it cannot be suspended because the existence of sovereignty cannot be suspended without putting it out of existence or divesting the possessor thereof at least during the so-called period of suspension; that what may be suspended is the exercise of the rights of sovereignty with the control and government of the territory occupied by the enemy passes temporarily to the occupant; that the subsistence of the sovereignty of the legitimate government in a territory occupied by the military forces of the enemy during the war, "although the former is in fact prevented from exercising the supremacy over them" is one of the "rules of international law of our times"; (II Oppenheim, 6th Lauterpacht ed., 1944, p. 482), recognized, by necessary implication, in articles 23, 44, 45, and 52 of Hague Regulation; and that, as a corollary of the conclusion that the sovereignty itself is not suspended and subsists during the enemy

ANASTACIO LAUREL vs. ERIBERTO MISA RESOLUTION In G.R. No. L-409, Anastacio Laurel vs. Eriberto Misa, etc., the Court, acting on the petition for habeas corpus filed by Anastacio Laurel and based on a theory that a Filipino citizen who adhered to the enemy giving the latter aid and comfort during the Japanese occupation cannot be prosecuted for the crime of treason defined and penalized by article 114 of the Revised Penal Code, for the reason (1) that the sovereignty of the legitimate government in the Philippines and, consequently, the correlative allegiance of Filipino citizens thereto was then suspended; and (2) that there was a change of sovereignty over these Islands upon the proclamation of the Philippine Republic: (1) Considering that a citizen or subject owes, not a qualified and temporary, but an absolute and permanent allegiance, which consists in the obligation of fidelity and obedience to his government or sovereign; and that this absolute and permanent allegiance should not be confused with the qualified and temporary allegiance which a foreigner owes to the government or sovereign of the territory wherein he resides, so long as he remains there, in return for the protection he receives, and which consists in the obedience to the laws of the government or sovereign. (Carlisle vs. Unite States, 21 Law. ed., 429; Secretary

occupation, the allegiance of the inhabitants to their legitimate government or sovereign subsists, and therefore there is no such thing as suspended allegiance, the basic theory on which the whole fabric of the petitioner's contention rests; Considering that the conclusion that the sovereignty of the United State was suspended in Castine, set forth in the decision in the case of United States vs. Rice, 4 Wheaton, 246, 253, decided in 1819, and quoted in our decision in the cases of Co Kim Cham vs. Valdez Tan Keh and Dizon and Peralta vs. Director of Prisons, supra, in connection with the question, not of sovereignty, but of the existence of a government de facto therein and its power to promulgate rules and laws in the occupied territory, must have been based, either on the theory adopted subsequently in the Hague Convention of 1907, that the military occupation of an enemy territory does not transfer the sovereignty to the occupant; that, in the first case, the word "sovereignty" used therein should be construed to mean the exercise of the rights of sovereignty, because as this remains vested in the legitimate government and is not transferred to the occupier, it cannot be suspended without putting it out of existence or divesting said government thereof; and that in the second case, that is, if the said conclusion or doctrine refers to the suspension of the sovereignty itself, it has become obsolete after the adoption of the Hague Regulations in 1907, and therefore it can not be applied to the present case; Considering that even adopting the words "temporarily allegiance," repudiated by Oppenheim and other publicists, as descriptive of the relations borne by the inhabitants of the territory occupied by the enemy toward the military government established over them, such allegiance may, at most,

be considered similar to the temporary allegiance which a foreigner owes to the government or sovereign of the territory wherein he resides in return for the protection he receives as above described, and does not do away with the absolute and permanent allegiance which the citizen residing in a foreign country owes to his own government or sovereign; that just as a citizen or subject of a government or sovereign may be prosecuted for and convicted of treason committed in a foreign country, in the same way an inhabitant of a territory occupied by the military forces of the enemy may commit treason against his own legitimate government or sovereign if he adheres to the enemies of the latter by giving them aid and comfort; and that if the allegiance of a citizen or subject to his government or sovereign is nothing more than obedience to its laws in return for the protection he receives, it would necessarily follow that a citizen who resides in a foreign country or state would, on one hand, ipso facto acquire the citizenship thereof since he has enforce public order and regulate the social and commercial life, in return for the protection he receives, and would, on the other hand, lose his original citizenship, because he would not be bound to obey most of the laws of his own government or sovereign, and would not receive, while in a foreign country, the protection he is entitled to in his own; Considering that, as a corollary of the suspension of the exercise of the rights of sovereignty by the legitimate government in the territory occupied by the enemy military forces, because the authority of the legitimate power to govern has passed into the hands of the occupant (Article 43, Hague Regulations), the political laws which prescribe the reciprocal rights, duties and obligation of government and citizens, are suspended or in abeyance during military occupation

(Co Kim cham vs. Valdez Tan Keh and dizon, supra), for the only reason that as they exclusively bear relation to the ousted legitimate government, they are inoperative or not applicable to the government established by the occupant; that the crimes against national security, such as treason and espionage; inciting to war, correspondence with hostile country, flight to enemy's country, as well as those against public order, such as rebellion, sedition, and disloyalty, illegal possession of firearms, which are of political complexion because they bear relation to, and are penalized by our Revised Penal Code as crimes against the legitimate government, are also suspended or become inapplicable as against the occupant, because they can not be committed against the latter (Peralta vs. Director of Prisons, supra); and that, while the offenses against public order to be preserved by the legitimate government were inapplicable as offenses against the invader for the reason above stated, unless adopted by him, were also inoperative as against the ousted government for the latter was not responsible for the preservation of the public order in the occupied territory, yet article 114 of the said Revised Penal Code, was applicable to treason committed against the national security of the legitimate government, because the inhabitants of the occupied territory were still bound by their allegiance to the latter during the enemy occupation; Considering that, although the military occupant is enjoined to respect or continue in force, unless absolutely prevented by the circumstances, those laws that enforce public order and regulate the social and commercial life of the country, he has, nevertheless, all the powers of de facto government and may, at his pleasure, either change the existing laws or make new ones when the exigencies of the military service demand such action, that is, when it is necessary for

the occupier to do so for the control of the country and the protection of his army, subject to the restrictions or limitations imposed by the Hague Regulations, the usages established by civilized nations, the laws of humanity and the requirements of public conscience (Peralta vs. Director of Prisons, supra; 1940 United States Rules of Land Warfare 76, 77); and that, consequently, all acts of the military occupant dictated within these limitations are obligatory upon the inhabitants of the territory, who are bound to obey them, and the laws of the legitimate government which have not been adopted, as well and those which, though continued in force, are in conflict with such laws and orders of the occupier, shall be considered as suspended or not in force and binding upon said inhabitants; Considering that, since the preservation of the allegiance or the obligation of fidelity and obedience of a citizen or subject to his government or sovereign does not demand from him a positive action, but only passive attitude or forbearance from adhering to the enemy by giving the latter aid and comfort, the occupant has no power, as a corollary of the preceding consideration, to repeal or suspend the operation of the law of treason, essential for the preservation of the allegiance owed by the inhabitants to their legitimate government, or compel them to adhere and give aid and comfort to him; because it is evident that such action is not demanded by the exigencies of the military service or not necessary for the control of the inhabitants and the safety and protection of his army, and because it is tantamount to practically transfer temporarily to the occupant their allegiance to the titular government or sovereign; and that, therefore, if an inhabitant of the occupied territory were compelled illegally by the military occupant, through force, threat or intimidation, to give him aid and

comfort, the former may lawfully resist and die if necessary as a hero, or submit thereto without becoming a traitor; Considering that adoption of the petitioner's theory of suspended allegiance would lead to disastrous consequences for small and weak nations or states, and would be repugnant to the laws of humanity and requirements of public conscience, for it would allow invaders to legally recruit or enlist the Quisling inhabitants of the occupied territory to fight against their own government without the latter incurring the risk of being prosecuted for treason, and even compel those who are not aid them in their military operation against the resisting enemy forces in order to completely subdue and conquer the whole nation, and thus deprive them all of their own independence or sovereignty such theory would sanction the action of invaders in forcing the people of a free and sovereign country to be a party in the nefarious task of depriving themselves of their own freedom and independence and repressing the exercise by them of their own sovereignty; in other words, to commit a political suicide; (2) Considering that the crime of treason against the government of the Philippines defined and penalized in article 114 of the Penal Code, though originally intended to be a crime against said government as then organized by authority of the sovereign people of the United States, exercised through their authorized representative, the Congress and the President of the United States, was made, upon the establishment of the Commonwealth Government in 1935, a crime against the Government of the Philippines established by authority of the people of the Philippines, in whom the sovereignty resides according to section 1, Article II, of the Constitution of the Philippines, by virtue of

the provision of section 2, Article XVI thereof, which provides that "All laws of the Philippine Islands . . . shall remain operative, unless inconsistent with this Constitution . . . and all references in such laws to the Government or officials of the Philippine Islands, shall be construed, in so far as applicable, to refer to the Government and corresponding officials under this constitution; Considering that the Commonwealth of the Philippines was a sovereign government, though not absolute but subject to certain limitations imposed in the Independence Act and incorporated as Ordinance appended to our Constitution, was recognized not only by the Legislative Department or Congress of the United States in approving the Independence Law above quoted and the Constitution of the Philippines, which contains the declaration that "Sovereignty resides in the people and all government authority emanates from them" (section 1, Article II), but also by the Executive Department of the United States; that the late President Roosevelt in one of his messages to Congress said, among others, "As I stated on August 12, 1943, the United States in practice regards the Philippines as having now the status as a government of other independent nations in fact all the attributes of complete and respected nationhood" (Congressional Record, Vol. 29, part 6, page 8173); and that it is a principle upheld by the Supreme Court of the United States in many cases, among them in the case of Jones vs. United States (137 U.S., 202; 34 Law. ed., 691, 696) that the question of sovereignty is "a purely political question, the determination of which by the legislative and executive departments of any government conclusively binds the judges, as well as all other officers, citizens and subjects of the country.

Considering that section I (1) of the Ordinance appended to the Constitution which provides that pending the final and complete withdrawal of the sovereignty of the United States "All citizens of the Philippines shall owe allegiance to the United States", was one of the few limitations of the sovereignty of the Filipino people retained by the United States, but these limitations do not away or are not inconsistent with said sovereignty, in the same way that the people of each State of the Union preserves its own sovereignty although limited by that of the United States conferred upon the latter by the States; that just as to reason may be committed against the Federal as well as against the State Government, in the same way treason may have been committed during the Japanese occupation against the sovereignty of the United States as well as against the sovereignty of the Philippine Commonwealth; and that the change of our form of government from Commonwealth to Republic does not affect the prosecution of those charged with the crime of treason committed during the Commonwealth, because it is an offense against the same government and the same sovereign people, for Article XVIII of our Constitution provides that "The government established by this constitution shall be known as the Commonwealth of the Philippines. Upon the final and complete withdrawal of the sovereignty of the United States and the proclamation of Philippine independence, the Commonwealth of the Philippines shall thenceforth be known as the Republic of the Philippines"; This Court resolves, without prejudice to write later on a more extended opinion, to deny the petitioner's petition, as it is hereby denied, for the reasons above set forth and for others to be stated in the said opinion, without prejudice to concurring opinion therein, if any. Messrs. Justices Paras and Hontiveros

dissent in a separate opinion. Mr. justice Perfecto concurs in a separate opinion. -WILLIAM F. PERALTA vs. THE DIRECTOR OF PRISONS FERIA, J.: Petitioner-defendant, a member of the Metropolitan Constabulary of Manila charged with the supervision and control of the production, procurement and distribution of goods and other necessaries as defined in section 1 of Act No. 9 of the National Assembly of the socalled Republic of the Philippines, was prosecuted for the crime of robbery as defined and penalized by section 2 ( a) of Act No. 65 of the same Assembly. He was found guilty and sentenced to life imprisonment, which he commenced to serve on August 21, 1944, by the Court of Special and Exclusive Criminal Jurisdiction, created in section 1 of Ordinance No. 7 promulgated by the President of the so-called Republic of the Philippines, pursuant to the authority conferred upon him by the Constitution and laws of the said Republic. And the procedure followed in the trial was the summary one established in Chapter II of Executive Order No. 157 of the Chairman of the Executive Commission, made applicable to the trial violations of said Act No. 65 by section 9 thereof and section 5 of said Ordinance No. 7. The petition for habeas corpus is based on the ground that the Court of Special and Executive Criminal Jurisdiction created by Ordinance No. 7 "was a political instrumentality of the military forces of the Japanese Imperial Army, the aims and purposes of which are repugnant to those aims and political purposes of the Commonwealth of the Philippines, as well as those of the United States of America, and therefore, null and void ab initio," that the provisions of said Ordinance No. 7 are violative of the fundamental laws of the Commonwealth of the Philippines and "the petitioner has been deprived of his constitutional rights"; that the petitioner herein

is being punished by a law created to serve the political purpose of the Japanese Imperial Army in the Philippines, and "that the penalties provided for are much (more) severe than the penalties provided for in the Revised Penal Code." The Solicitor General, in his answer in behalf of the respondent, states that, in his own opinion, for the reasons expressed in his brief in the case of People of the Philippines, plaintiff-appellant, vs. Benedicto Jose y Santos, defendant-appellee, G. R. No. L-22 (p. 612, post), the acts and proceedings taken and had before the said Court of Special and Exclusive Criminal Jurisdiction which resulted in the conviction and imprisonment of the herein petitioner, should now be denied force and efficacy, and therefore the petition for habeas corpus should be granted. The reasons advanced by the Solicitor General in said brief and in his reply memorandum in support of his contention are, that the Court of Special and Exclusive Criminal Jurisdiction created, and the summary procedure prescribed therefor, by said Ordinance No. 7 in connection with Executive Order No. 157 of the Chairman of the Executive Commission are tinged with political complexion; that the procedure prescribed in Ordinance No. 7 does not afford a fair trial, violates the Constitution of the Commonwealth, and impairs the Constitutional rights of accused persons under their legitimate Constitution. And he cites, in support of this last proposition, the decisions of the Supreme Court of the United States in the cases of Texas vs. White (7 Wall., 700, 743); Horn vs. Lockart (17 Wall., 570, 581); United States vs. Home Insurance Co. (22 Wall., 99, 104); Sprott vs. United States (20 Wall., 459). The City Fiscal of Manila appeared before this Court as amicus curiae. In his memorandum he submits that the petition for habeas corpus be denied on the following grounds: That the Court of Special and Exclusive Criminal Jurisdiction and the Acts, Ordinances and Executive Orders, creating it are not of a political complexion, for said Court was created, and the crimes and offenses placed under its jurisdiction were penalized heavily, in response to an urgent necessity, according to the preamble of Ordinance No. 7; that the right to appeal in a criminal case is not a constitutional right; and

that the summary procedure established in said Ordinance No. 7 is not violative of the provision of Article III, section 1 (18) of the Constitution of the Commonwealth, to the effect that no person shall be compelled to be a witness against himself, nor of the provision of section 1 (1) of the same Article that no person shall be deprived of life, liberty, or property without due process of law. The features of the summary procedure adopted by Ordinance No. 7, assailed by the petitioner and the Solicitor General as impairing the constitutional rights of an accused are: that court may interrogate the accused and witnesses before trial in order to clarify the points in dispute; that the refusal of the accused to answer the questions may be considered unfavorable to him; that if from the facts admitted at the preliminary interrogatory it appears that the defendant is guilty, he may be immediately convicted; and that the sentence of the sentence of the court is not appealable, except in case of death penalty which cannot be executed unless and until reviewed and affirmed by a special division of the Supreme Court composed of three Justices. Before proceeding further, and in order to determine the law applicable to the questions involved in the present case, it is necessary to bear in mind the nature and status of the government established in these Islands by the Japanese forces of occupation under the designation of Republic of the Philippines. In the case of Co Kim Cham vs. Valdez Tan Keh and Dizon (G. R. No. L-5, pp. 113, 127, ante), recently decided, this Court, speaking through the Justice who pens this decision, held: In view of the foregoing, it is evident that the Philippines Executive Commission, which was organized by Order No. 1, issued on January 23, 1942, by the Commander of the Japanese forces, was a civil government established by the military forces of occupation and therefore a de facto government of the second kind. It was not different from the

government established by the British in Castine, Maine, or by the United States in Tanpico, Mexico. As Halleck says, "the government established over an enemy's territory during the military occupation may exercise all the powers given by the laws of war to the conqueror over the conquered, and is subject to all restrictions which that code imposes. It is of little consequence whether such government be called a military or civil government. Its character is the same and the source of its authority the same. In either case it is a government imposed by the laws of war and so far as it concerns the inhabitants of such territory or the rest of the world those laws alone determine the legality or illegality of its acts." (vol. 2 p. 466.) The fact that the Philippine Executive Commission was a civil and not a military government and was run by Filipinos and not by Japanese nationals is of no consequence. And speaking of the so-called Republic of the Philippines in the same decision, this Court said: The so-called Republic of the Philippines, apparently established and organized as a sovereign state independent from any other government by the Filipino people, was, in truth and reality, a government established by the belligerent occupant or the Japanese forces of occupation. It was of the same character as the Philippine Executive Commission, and the ultimate source of its authority was the same the Japanese military authority and government. As General MacArthur stated in his proclamation of October 23, 1944, a portion of which has been already quoted, "under enemy duress, a so-called government styled as the 'Republic of the Philippines' was established on October 14, 1943, based upon neither the free expression of the peoples" will nor the sanction of the Government of the United States.'

Japan had no legal power to grant independence to the Philippines or transfer the sovereignty of the United States to, or recognize the latent sovereignty of the Filipino people, before its military occupation and possession of the Islands had matured into an absolute and permanent dominion or sovereignty by a treaty of peace or other means recognized in the law of nations. As the so-called Republic of the Philippines was a de facto government of the second kind (of paramount force), as the government established in Castine, Maine, during its occupation by the British forces and as that of Tampico, Mexico, occupied during the war with that the country by the United State Army, the question involved in the present case cannot be decided in the light of the Constitution of the Commonwealth Government; because the belligerent occupant was totally independent of the constitution of the occupied territory in carrying out the administration over said territory; and the doctrine laid down by the Supreme Court of the United States in the cases involving the validity of judicial and legislative acts of the Confederate States, considered as de facto governments of the third kind, does not apply to the acts of the socalled Republic of the Philippines which is a de facto government of paramount force. The Constitution of the so-called Republic of the Philippines can neither be applied, since the validity of an act of a belligerent occupant cannot be tested in the light of another act of the same occupant, whose criminal jurisdiction is drawn entirely from the law martial as defined in the usages of nations. In the case of United States vs. Rice (4 Wheaton, 246), the Supreme Court of the United States held that, by the military occupation of Castine, Maine, the sovereignty of the United States in the territory was, of course, suspended, and the laws of the United States could no longer be rightfully enforced there or be obligatory upon the inhabitants who remained and submitted to the belligerent occupant. By the surrender the inhabitants passed under a temporary allegiance to the British government, and were bound by such laws, and such only, as it chose to recognize and impose. And

Oppenheim, in his Treatise on International Law, says that, in carrying out the administration over the occupied territory and its inhabitants, "the (belligerent) occupant is totally independent of the constitution and the laws of the territory, since occupation is an aim of warfare, and the maintenance and safety of his forces, and the purpose of war, stand in the foreground of his interest and must be promoted under all circumstances or conditions. (Vol. II, Sixth Edition, Revised, 1944, p. 342.) The doctrine laid down in the decisions of the Supreme Court of the United States (in the cases of Texas vs. White, 7 Wall., 700; Horn vs. Lockart, 17 Wall., 570; Williams vs. Bruffy, 96 U. S., 176 United States vs. Home Insurance Co., 20 Wall., 249; Sprott vs. United States, 20 Wall., 459, and others) that the judicial and legislative acts of the Confederate States which impaired the rights of the citizens under the Constitution of the United States or of the States, or were in conflict with those constitutions, were null and void, is not applicable to the present case. Because that doctrine rests on the propositions that "the concession (of belligerency) made to the Confederate Government . . . sanctioned no hostile legislation . . . and it impaired in no respect the rights of loyal and citizens as they existed at the commencement of hostilities" (Williams vs. Bruffy, supra);that the Union is perpetual and indissoluble, and the obligation of allegiance to the to the estate and obedience to her laws and the estate constitution, subject to the Constitution of the United States, remained unimpaired during the War of Secession (Texas vs. White, supra) and that the Confederate States "in most, if not in all instances, merely transferred the existing state organizations to the support of a new and different national head. the same constitution, the same laws for the protection of the property and personal rights remained and were administered by the same officers." (Sprott vs. United States, supra). In fine, because in the case of the Confederate States, the constitution of each state and that of the United States or the Union continued in force in those states during the War of Secession; while the Constitution of the Commonwealth Government was suspended during the occupation of the Philippines by the Japanese forces of the belligerent occupant at regular war with the United States.

The question which we have to resolve in the present case in the light of the law of nations are, first, the validity of the creation of the Court of Special and Exclusive Criminal Jurisdiction, and of the summary procedure adopted for that court; secondly, the validity of the sentence which imprisonment during the Japanese military occupation; and thirdly, if they were then valid, the effect on said punitive sentence of the reoccupation of the Philippines and the restoration therein of the Commonwealth Government. (1) As to the validity of the creation of the Court of Special and Exclusive Criminal Jurisdiction by Ordinance No. 7, the only factor to be considered is the authority of the legislative power which promulgated said law or ordinance. It is well established in International Law that "The criminal jurisdiction established by the invader in the occupied territory finds its source neither in the laws of the conquering or conquered state, it is drawn entirely form the law martial as defined in the usages of nations. The authority thus derived can be asserted either through special tribunals, whose authority and procedure is defined in the military code of the conquering state, or through the ordinary courts and authorities of the occupied district." (Taylor, International Public Law, p. 598.) The so-called Republic of the Philippines, being a governmental instrumentality of the belligerent occupant, had therefore the power or was competent to create the Court of Special and Exclusive Criminal Jurisdiction. No question may arise as to whether or not a court is of political complexion, for it is mere a governmental agency charged with the duty of applying the law to cases falling within its jurisdiction. Its judgments and sentences may be of political complexion, or not depending upon the nature or character of the law so applied. There is no room for doubt, therefore, as to the validity of the creation of the court in question. With respect to the Summary procedure adopted by Ordinance No. 7, and followed in the trial of the case which resulted in the conviction of the herein petitioner, there is also no question as to the power or competence of the belligerent occupant to promulgate the law providing for such procedure. For "the invader deals freely with the relations of the inhabitants of the occupied territory towards

himself . . . for his security also, he declares certain acts, not forbidden by the ordinary laws of the country, to be punishable; and he so far suspends the laws which guard personal liberty as is required for the summary punishment of any one doing such acts." (Hall's International Law, seventh ed., p. 5000). A belligerent "occupant may where necessary, set up military courts instead of the ordinary courts; and in case, and in so far as, he admits the administration of justice by the ordinary courts, he may nevertheless, so far as is necessary for military purposes, or for the maintenance of public order and safety temporarily alter the laws, especially the Criminal Law, on the basis of which justice is administered as well as the laws regarding procedure." (Oppenheim's International Law, Vol. II, sixth edition, 1944, p.349.) No objection can be set up to the legality of its provisions in the light of the precepts of our Commonwealth Constitution relating to the rights of accused under that Constitution, because the latter was not in force during the period of the Japanese military occupation, as we have already stated. Nor may said Constitution be applied upon its revival at the time of the re-occupation of the Philippines by virtue of the principle of postliminium because "a constitution should operate prospectively only, unless the words employed show a clear intention that it should have a retrospective effect" (Cooley's Constitutional Limitations, seventh edition, page 97, and cases quoted and cited in the footnote), especially as regards laws of procedure applied to cases already terminated completely. The only restrictions or limitations imposed upon the power of a belligerent occupant to alter the laws or promulgate new ones, especially the criminal law as well as the laws regarding procedure, so far as it is necessary for military purposes, that is, for his control of the territory and the safety and protection of his army, are those imposed by the Hague Regulations, the usages established by civilized nations, the laws of humanity and the requirements of public conscience. It is obvious that the summary procedure under consideration does not violate those precepts. It cannot be considered as violating the laws of humanity and public conscience, for it is less objectionable, even from the point of view of those who

are used to the accusatory system of criminal procedure than the procedural laws based on the semi-inquisitorial or mixed system prevailing in France and other countries in continental Europe. (2) The validity of the sentence rendered by the Court of Special and Exclusive Criminal Jurisdiction which imposes life imprisonment upon the herein petitioner, depends upon the competence or power of the belligerent occupant to promulgate Act No. 65 which punishes the crime of which said petitioner was convicted. Westlake says that Article XLIII, Section III, of the Hague Conventions of 1907 "indicates that the laws to be enforced by the occupant consist of, first, the territorial law in general, as that which stands to the public order and social and commercial life of the district in a relation of mutual adaptation, so that any needless displacement of it would defeat the object which the invader is enjoined to have in view, and secondly, such variations of the territorial law as may be required by real necessity and are not expressly prohibited by any of the rules which will come before us. Such variations will naturally be greatest in what concerns the relation of the communities and individuals within the district to the invading army and its followers, it being necessary for the protection of the latter, and for the unhindered prosecution of the war by them, that acts committed to their detriment shall not only lose what justification the territorial law might give them as committed against enemies, but shall be repressed more severely than the territorial law would repress acts committed against fellow subjects. Indeed the entire relation between the invaders and the invaded, so far as it may fall within the criminal department whether by the intrinsic nature of the acts done or in consequence of the regulations made by the invaders, may be considered as taken out of the territorial law and referred to what is called martial law." (Westlake, International Law, Part II, War, p. 96.) According to Hyde (International Law, Vol. II, p. 386), the term "martial law," in so far as it is used to describe any fact in relation to belligerent occupation, does not refer to a particular code or system of law, or to a special agency entrusted with its administration. The

term merely signifies that the body of law actually applied, having the sanction of military authority, is essentially martial. All law, by whomsoever administered, in an occupied district martial law; and it is none the less so when applied by civil courts in matters devoid of special interest to the occupant. The words "martial law" are doubtless suggestive of the power of the occupant to share the law as he sees fit; that is, to determine what shall be deemed lawful or unlawful acts, to establish tests for ascertaining the guilt of offenders, to fix penalties, and generally to administer justice through such agencies as the found expedient. And the United States Rules of Land Warfare provide that the belligerent occupant may promulgate such new laws and regulations as military necessity demands, and in this class will be included those laws which come into being as a result of military rule; that is, those which establish new crimes and offenses incident to a state of war and are necessary for the control of the country and the protection of the army, for the principal object of the occupant is to provide for the security of the invading army and to contribute to its support and efficiency and the success of its operations. (Pub. 1940, pp. 76, 77.) From the above it appears clear that it was within the power and competence of the belligerent occupant to promulgate, through the National Assembly of the so-called Republic of the Philippines, Act No. 65 of the said Assembly, which penalizes the crimes of robbery and other offenses by imprisonment ranging from the maximum period of the imprisonment prescribed by the laws and ordinances promulgated by the President of the so-called Republic as minimum, to life imprisonment or death as maximum. Although these crimes are defined in the Revised Penal Code, they were altered and penalized by said Act No. 65 with different and heavier penalties, as new crimes and offenses demanded by military necessity, incident to a state of war, and necessary for the control of the country by the belligerent occupant, the protection and safety of the army of occupation, its support and efficiency, and the success of its operations.

They are not the same ordinary offenses penalized by the Revised Penal Code. The criminal acts penalized by said Act No. 65 are those committed by persons charged or connected with the supervision and control of the production, procurement and distribution of foods and other necessaries; and the penalties imposed upon the violators are different from and much heavier than those provided by the Revised Penal Code for the same ordinary crimes. The acts penalized by said Act were taken out of the territorial law or Revised Penal Code, and referred to what is called martial law by international jurists, defined above by Hyde, in order, not only to prevent food and other necessaries from reaching the "guerrillas" which were harassing the belligerent occupant from every nook and corner of the country, but also to preserve the food supply and other necessaries in order that, in case of necessity, the Imperial Japanese forces could easily requisition them, as they did, and as they had the right to do in accordance with the law of nations for their maintenance and subsistence (Art. LII, Sec. III, Hague Conventions of 1907). Especially taking into consideration the fact, of which this court may take judicial notice, that the Imperial Japanese Army had depended mostly for their supply upon the produce of this country. The crimes penalized by Act No. 65 as well as the crimes against national security and the law of nations, to wit: treason, espionage, inciting war, violation of neutrality, correspondence with hostile country, flight to enemy's country, piracy; and the crimes against public order, such as rebellion, sedition and disloyalty, illegal possession of firearms and other, penalized by Ordinance No. 7 and placed under jurisdiction of the Court of Special and Exclusive Criminal Jurisdiction are all of a political complexion, because the acts constituting those offenses were punished, as are all political offenses, for public rather than private reasons, and were acts in aid or favor of the enemy and against the welfare, safety and security of the belligerent occupant. While it is true that these offenses, when committed against the Commonwealth or United States Government, are defined and also penalized by the territorial law Revised Penal Code, they became inapplicable as crimes against the occupier upon the occupation of the Islands by the Japanese forces.

And they had to be taken out of the territorial law and made punishable by said Ordinance No. 7, for they were not penalized before under the Revised Penal Code when committed against the belligerent occupant or the government established by him in these Island. They are also considered by some writers as war crimes in a broad sense. In this connection Wheaton observes the following: "Of 'war crimes' the number is naturally indefinite, depending as they do on the acts from time to time ordered to be done or forbidden to be done in the martial law proclamation or regulations of the invading or occupying commander. Thus, in the Anglo-Boer war, the British military authorities proclaimed the following to be offenses against their martial law; Being in possession of arms, ammunition, etc.; traveling without a permit; sending prohibited goods; holding meetings other than those allowed; using seditious language; spreading alarmist reports; overcharging for goods; wearing uniforms without due authority; going out of doors between certain hours; injuring military animals or stores; being in possession, without a permit, of horses, vehicles, cycles, etc.; hindering those in execution of military orders; trespassing on defense works. Such offenses, together with several others, were specified in the Japanese regulations made in the Russo-Japanese war." (Wheaton's International Law, War, seventh edition, 1944, p. 242.) It is, therefore, evident that the sentence rendered by the Court of Special and Exclusive Criminal Jurisdiction against the petitioner, imposing upon him the penalty of life imprisonment, was good and valid, since it was within the admitted power or competence of the belligerent occupant to promulgate the law penalizing the crime of which petitioner was convicted. (3) The last question is the legal effect of the reoccupation of the Philippines and restoration of the Commonwealth Government; that is whether or not, by the principle of postliminy, the punitive sentence which petitioner is now serving fell through or ceased to be valid from that time.

In order to resolve this last question, it is not necessary to enter into an elaborate discussion on the matter. It is sufficient to quote the opinion on the subject of several international jurists and our recent decision in the case of Co Kim Cham vs. Valdez Tan Keh and Dizon, supra. Hall, commenting on the effect of the principle of postliminy upon sentences of the tribunals continued or created by the belligerent occupant, opines "that judicial acts done under this control, when they are not of a political complexion, administrative acts so done, to the extent that they take effect during the continuance of his control, and the various acts done during the same time by private persons under the sanction of municipal law, remain good. . . . Political acts on the other hand fall through as of course, whether they introduce any positive change into the organization of the country, or whether they only suspend the working of that already in existence. The execution also of punitive sentences ceases as of course when they have had reference to acts not criminal by the municipal law of the state, such for example as acts directed against the security or control of the invader." (Hall's International Law, seventh edition, p. 518.) Westlake, speaking of the duration of the validity of punitive sentences for offenses such as the one in question, which is within the admitted power or competence of the belligerent occupant to punish, says that: "To the extent to which the legal power of the occupant is admitted he can make law for the duration of his occupation. Like any other legislator he is morally subject to the duty of giving sufficient notice of his enactments or regulations, not indeed so as to be debarred from carrying out his will without notice, when required by military necessity and so far as practically carrying out his will can be distinguished from punishment, but always remembering that to punish for breach of a regulation a person who was justifiably ignorant of it would be outrageous. But the law made by the occupant within his admitted power, whether morally justifiable or not, will bind any member of the occupied population as against any other member of it, and will bind as between them all and their national government, so far as it produces an effect during

the occupation. When the occupation comes to an end the authority of the national government is restored, either by the progress of operations during the war or by the conclusion of a peace, no redress can be had for what has been actually carried out but nothing further can follow from the occupant's legislation. A prisoner detained under it must be released, and no civil right conferred by it can be further enforced. The enemy's law depends on him for enforcement as well as for enactment. The invaded state is not subject to the indignity of being obliged to execute his commands. (Westlake, International Law, Part II, War, pp. 97, 98.) And Wheaton, who, as above stated, considers as war crimes such offenses as those penalized in Ordinance No. 7 and Act No. 65, says: "In general, the cast of the occupant possess legal validity, and under international law should not be abrogated by the subsequent government. But this rule does not necessarily apply to acts that exceed the occupant's power (e.g., alienation of the domains of the State or the sovereign), to sentences for 'war treason' and 'war crimes,' to acts of a political character, and to those that beyond the period of occupation. When occupation ceases, no reparation is legally due for what has already been carried out." (Wheaton's International Law, supra, p. 245.) We have already held in our recent decision in the case of Co Kim Cham vs. Valdez Tan Keh and Dizon, supra, that all judgments of political complexion of the courts during the Japanese regime, ceased to be valid upon the reoccupation of the islands by virtue of the principle or right of postliminium. Applying that doctrine to the present case, the sentence which convicted the petitioner of a crime of a political complexion must be considered as having ceased to be valid ipso facto upon the reoccupation or liberation of the Philippines by General Douglas MacArthur. It may not be amiss to say in this connection that it is not necessary and proper to invoke the proclamation of General Douglas MacArthur declaring null and void all laws, among them Act No. 65, of the socalled Republic of the Philippines under which petitioner was convicted, in order to give retroactive effect to the nullification of

said penal act and invalidate sentence rendered against petitioner under said law, a sentence which, before the proclamation, had already become null and of no effect. We therefore hold that the punitive sentence under consideration, although good and valid during the military occupation of the Philippines by the Japanese forces, ceased to be good and valid ipso facto upon the reoccupation of these Island and the restoration therein of the Commonwealth Government. In view of all the foregoing, the writ of habeas corpus prayed for is hereby granted and it is ordered that the petitioner be released forthwith, without pronouncement as to costs. So ordered. -ANICETO ALCANTARA vs. DIRECTOR OF PRISONS FERIA, J.: This is a petition for the issuance of a writ of habeas corpus and for the release of the petitioner on the ground that the latter is unlawfully imprisoned and restrained of his liberty by the respondent Director of Prison in the provincial jail at Vigan, Ilocos Sur. Petitioner was convicted by the Court First Instance of Ilocos Sur (Criminal case No. 23) of the crime of illegal discharge of firearms with less serious physical injuries. Upon appeal, the Court of Appeals of Northern Luzon at Baguio modified said sentence (CA- G.R. No. 790)and sentence the petitioner to an indeterminate penalty of from four months four months and twenty-one days of arresto mayor to three years, nine months and three days of prison correccional. The sentence as modified became final on September 12, 1944, and June 23, 1945, petitioner commenced serving his sentence.

Petitioner now questions the validity of the decision of the Court of Appeals of Northern Luzon, on the sole ground that said court was only a creation of the so-called Republic of the Philippines during the Japanese military occupation of the Islands; that the Court of Appeals was not authorized by Commonwealth Act No. 3 to hold sessions in Baguio, and that only the two Justices constituted the majority which promulgated the decision in question. The petitioner does not question the validity of said decision on the strength of the Proclamation of General Douglas McArthur of October 23, 1944, which according to our decision in the case of Co Kim Cham vs. Valdez Tan Keh and Dizon, G.R. No. L-5 (p. 113, ante), does not refer to judicial processes. In the said case of Co Kim Cham vs. Valdez Tan Keh and Dizon , this Court ruled that the so-called Republic of the Philippines and the Philippine Executive Commission established in the Philippines during the Japanese regime were governments de facto organized by the belligerent occupant by the judicial acts thereof were good and valid and remained good and valid after the restoration of the Commonwealth Government, except those a political complexion. In that the same case this Court held that the Court of Appeals which was continued throughout the Japanese occupation, was the same Court of Appeals existed prior to the Japanese occupation and was lately abolished by Executive Order No. 37. The division of the Court of Appeals into several District Court of Appeals, and the reduction of the number of Justices sitting in each division, the regime of the so-called Republic effected no substantial change in its nature and jurisdiction. Even assuming that the Court of Appeals of Northern Luzon was a new court created by the belligerent occupant or the de facto governments established by him, the judgments of such court, like those of the court which were continued during the Japanese occupation, were good and valid and remain good and valid, and therefore enforceable now after the liberation or occupation of the Philippines, provided that such judgments do not have a political complexion, as this court held in its decision in the abovementioned

case of Co Kim Cham vs. Valdez Tan Keh and Dizon supra , in accordance with the authorities therein cited. Obviously, the sentence which petitioner is now serving has no political complexion. He was charged with and convicted of an offense punishable under the municipal law of the Commonwealth, the Revised Penal Code. Therefore, the sentence of the Court of First Instance of Ilocos Sur, as modified by the Court of Appeals of Northern Luzon, is valid and enforceable. A punitive or penal sentence is said to of a political complexion when it penalizes either a new act not defined in the municipal laws, or acts already penalized by the latter as a crime against the legitimate government, but taken out of the territorial law and penalized as a new offenses committed against belligerent occupant, incident to a state of a war and necessary for the control of the occupied territory and the protection of the army of the occupier. They are acts penalized for public rather than private reasons, acts which tend, directly or indirectly, to aid or favor the enemy and are directed against the welfare, safety and security, of the belligerent occupant. As example, the crimes against national security , such as treason, espionage, etc., and against public order, such as rebellion, sedition, etc., were crimes against the Commonwealth or United States Government under the Revised Penal Code, which were made crimes against the belligerent occupant. In view of the foregoing, the petitioner for the writ of habeas corpus is denied. -THE PEOPLE OF THE PHILIPPINES vs. LORETA GOZO FERNANDO, J.: Appellant seeks to set aside a judgment of the Court of First Instance of Zambales, convicting her of a violation of an ordinance

of Olongapo, Zambales, requiring a permit from the municipal mayor for the construction or erection of a building, as well as any modification, alteration, repair or demolition thereof. She questions its validity, or at the very least, its applicability to her, by invoking due process, 1 a contention she would premise on what for her is the teaching of People v. Fajardo. 2 If such a ground were far from being impressed with solidity, she stands on quicksand when she would deny the applicability of the ordinance to her, on the pretext that her house was constructed within the naval base leased to the American armed forces. While yielding to the well-settled doctrine that it does not thereby cease to be Philippine territory, she would, in effect, seek to emasculate our sovereign rights by the assertion that we cannot exercise therein administrative jurisdiction. To state the proposition is to make patent how much it is tinged with unorthodoxy. Clearly then, the lower court decision must be affirmed with the sole modification that she is given thirty days from the finality of a judgment to obtain a permit, failing which, she is required to demolish the same. The facts are undisputed. As set forth in the decision of the lower court: "The accused bought a house and lot located inside the United States Naval Reservation within the territorial jurisdiction of Olongapo City. She demolished the house and built another one in its place, without a building permit from the City Mayor of Olongapo City, because she was told by one Ernesto Evalle, an assistant in the City Mayor's office, as well as by her neighbors in the area, that such building permit was not necessary for the construction of the house. On December 29, 1966, Juan Malones, a building and lot inspector of the City Engineer's Office, Olongapo City, together with Patrolman Ramon Macahilas of the Olongapo City police force apprehended four carpenters working on the house of the accused and they brought the carpenters to the Olongapo City police headquarters for interrogation. ... After due investigation, Loreta Gozo was charged with violation of Municipal Ordinance No. 14, S. of 1964 with the City Fiscal's Office." 3 The City Court of Olongapo City found her guilty of violating Municipal Ordinance No. 14, Series of 1964 and sentenced her to an imprisonment of one month as well as to pay the costs. The Court of Instance of Zambales, on appeal,

found her guilty on the above facts of violating such municipal ordinance but would sentence her merely to pay a fine of P200.00 and to demolish the house thus erected. She elevated the case to the Court of Appeals but in her brief, she would put in issue the validity of such an ordinance on constitutional ground or at the very least its applicability to her in view of the location of her dwelling within the naval base. Accordingly, the Court of Appeals, in a resolution of January 29, 1973, noting the constitutional question raised, certified the case to this Court. There is, as mentioned in the opening paragraph of this petition, no support in law for the stand taken by appellant. 1. It would be fruitless for her to assert that local government units are devoid of authority to require building permits. This Court, from Switzer v. Municipality of Cebu, 4 decided in 1911, has sanctioned the validity of such measures. It is much too late in the day to contend that such a requirement cannot be validly imposed. Even appellant, justifiably concerned about the unfavorable impression that could be created if she were to deny that such competence is vested in municipal corporations and chartered cities, had to concede in her brief: "If, at all; the questioned ordinance may be predicated under the general welfare clause ... ." 5 Its scope is wide, well-nigh all embracing, covering every aspect of public health, public morals, public safety, and the well being and good order of the community. 6 It goes without saying that such a power is subject to limitations. Certainly, if its exercise is violative of any constitutional right, then its validity could be impugned, or at the very least, its applicability to the person adversely affected could be questioned. So much is settled law. Apparently, appellant has adopted the view that a due process question may indeed be raised in view of what for her is its oppressive character. She is led to such a conclusion, relying on People v. Fajardo. 7 A more careful scrutiny of such a decision would not have led her astray, for that case is easily distinguishable. The facts as set forth in the opinion follow: "It appears that on August 15, 1950, during the incumbency of defendant-appellant Juan F.

Fajardo as mayor of the municipality of Baao, Camarines Sur, the municipal council passed the ordinance in question providing as follows: "... 1. Any person or persons who will construct or repair a building should, before constructing or repairing, obtain a written permit from the Municipal Mayor. ... 2. A fee of not less than P2.00 should be charged for each building permit and P1.00 for each repair permit issued. ... 3. [Penalty]-Any violation of the provisions of the above, this ordinance, shall make the violator liable to pay a fine of not less than P25 nor more than P50 or imprisonment of not less than 12 days nor more than 24 days or both, at the discretion of the court. If said building destroys the view of the Public Plaza or occupies any public property, it shall be removed at the expense of the owner of the building or house. ... ." Four years later, after the term of appellant Fajardo as mayor had expired, he and his son-inlaw, appellant Babilonia, filed a written request with the incumbent municipal mayor for a permit to construct a building adjacent to their gasoline station on a parcel of land registered in Fajardo's name, located along the national highway and separated from the public plaza by a creek ... . On January 16, 1954, the request was denied, for the reason among others that the proposed building would destroy the view or beauty of the public plaza ... . On January 18, 1954, defendants reiterated their request for a building permit ..., but again the request was turned down by the mayor. Whereupon, appellants proceeded with the construction of the building without a permit, because they needed a place of residence very badly, their former house having been destroyed by a typhoon and hitherto they had been living on leased property." 8 Clearly then, the application of such an ordinance to Fajardo was oppressive. A conviction therefore for a violation thereof both in the justice of the peace court of Baao, Camarines Sur as well as in the Court of First Instance could not be sustained. In this case, on the contrary, appellant never bothered to comply with the ordinance. Perhaps aware of such a crucial distinction, she would assert in her brief: "The evidence showed that even if the accused were to secure a permit from the Mayor, the same would not have been granted. To require the accused to obtain a permit before constructing her house would be an exercise in futility. The law will not require anyone to

perform an impossibility, neither in law or in fact: ... ." 9 It would be from her own version, at the very least then, premature to anticipate such an adverse result, and thus to condemn an ordinance which certainly lends itself to an interpretation that is neither oppressive, unfair, or unreasonable. That kind of interpretation suffices to remove any possible question of its validity, as was expressly announced in Primicias v. Fugoso. 10 So it appears from this portion of the opinion of Justice Feria, speaking for the Court: "Said provision is susceptible of two constructions: one is that the Mayor of the City of Manila is vested with unregulated discretion to grant or refuse to grant permit for the holding of a lawful assembly or meeting, parade, or procession in the streets and other public places of the City of Manila; and the other is that the applicant has the right to a permit which shall be granted by the Mayor, subject only to the latter's reasonable discretion to determine or specify the streets or public places to be used for the purpose, with a view to prevent confusion by overlapping, to secure convenient use of the streets and public places by others, and to provide adequate and proper policing to minimize the risk of disorder. After a mature deliberation, we have arrived at the conclusion that we must adopt the second construction, that is, construe the provisions of the said ordinance to mean that it does not confer upon the Mayor the power to refuse to grant the permit, but only the discretion, in issuing the permit, to determine or specify the streets or public places where the parade or procession may pass or the meeting may be held." 11 If, in a case affecting such a preferred freedom as the right to assembly, this Court could construe an ordinance of the City of Manila so as to avoid offending against a constitutional provision, there is nothing to preclude it from a similar mode of approach in order to show the lack of merit of an attack against an ordinance requiring a permit. Appellant cannot therefore take comfort from any broad statement in the Fajardo opinion, which incidentally is taken out of context, considering the admitted oppressive application of the challenged measure in that litigation. So much then for the contention that she could not have been validly convicted for a violation of such ordinance. Nor should it be forgotten that she did suffer the same

fate twice, once from the City Court and thereafter from the Court of First Instance. The reason is obvious.Such ordinance applies to her. 2. Much less is a reversal indicated because of the alleged absence of the rather novel concept of administrative jurisdiction on the part of Olongapo City. Nor is novelty the only thing that may be said against it. Far worse is the assumption at war with controlling and authoritative doctrines that the mere existence of military or naval bases of a foreign country cuts deeply into the power to govern. Two leading cases may be cited to show how offensive is such thinking to the juristic concept of sovereignty, People v. Acierto, 12 and Reagan v. Commissioner of Internal Revenue. 13 As was so emphatically set forth by Justice Tuason in Acierto: "By the Agreement, it should be noted, the Philippine Government merely consents that the United States exercise jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or expediency. The Philippine Government has not abdicated its sovereignty over the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed therein. Under the terms of the treaty, the United States Government has prior or preferential but not exclusive jurisdiction of such offenses. The Philippine Government retains not only jurisdictional rights not granted, but also all such ceded rights as the United States Military authorities for reasons of their own decline to make use of. The first proposition is implied from the fact of Philippine sovereignty over the bases; the second from the express provisions of the treaty." 14 There was a reiteration of such a view in Reagan. Thus: "Nothing is better settled than that the Philippines being independent and sovereign, its authority may be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of sovereignty." 15 Then came this paragraph dealing with the principle of auto-limitation: "It is to be admitted any state may, by its consent, express or implied, submit to a restriction of its sovereign rights. There may thus be a curtailment of what otherwise

is a power plenary in character. That is the concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is the property of a state-force due to which it has the exclusive capacity of legal self-determination and self-restriction." A state then, if it chooses to, may refrain from the exercise of what otherwise is illimitable competence." 16 The opinion was at pains to point out though that even then, there is at the most diminution of jurisdictional rights, not its disappearance. The words employed follow: "Its laws may as to some persons found within its territory no longer control. Nor does the matter end there. It is not precluded from allowing another power to participate in the exercise of jurisdictional right over certain portions of its territory. If it does so, it by no means follows that such areas become impressed with an alien character. They retain their status as native soil. They are still subject to its authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the bases under lease to the American armed forces by virtue of the military bases agreement of 1947. They are not and cannot be foreign territory." 17 Can there be anything clearer, therefore, than that only a turnabout, unwarranted and unjustified, from what is settled and orthodox law can lend the slightest degree of plausibility to the contention of absence of administrative jurisdiction. If it were otherwise, what was aptly referred to by Justice Tuason "as a matter of comity, courtesy, or expediency" becomes one of obeisance and submission. If on a concern purely domestic in its implications, devoid of any connection with national security, the Military-Bases Agreement could be thus interpreted, then sovereignty indeed becomes a mockery and an illusion. Nor does appellant's thesis rest on less shaky foundation by the mere fact that Acierto and Reagan dealt with the competence of the national government, while what is sought to be emasculated in this case is the so-called administrative jurisdiction of a municipal corporation. Within the limits of its territory, whatever statutory powers are vested upon it may be validly exercised. Any residual authority and therein conferred, whether expressly or impliedly, belongs to the national government, not to an alien country. What is even more to be deplored in this stand of appellant is that no such claim is made by the American naval authorities, not that it would

do them any good if it were so asserted. To quote from Acierto anew: "The carrying out of the provisions of the Bases Agreement is the concern of the contracting parties alone. Whether, therefore, a given case which by the treaty comes within the United States jurisdiction should be transferred to the Philippine authorities is a matter about which the accused has nothing to do or say. In other words, the rights granted to the United States by the treaty insure solely to that country and can not be raised by the offender." 18 If an accused would suffer from such disability, even if the American armed forces were the beneficiary of a treaty privilege, what is there for appellant to take hold of when there is absolutely no showing of any alleged grant of what is quaintly referred to as administrative jurisdiction? That is all, and it is more than enough, to make manifest the futility of seeking a reversal. WHEREFORE, the appealed decision of November 11, 1969 is affirmed insofar as it found the accused, Loreta Gozo, guilty beyond reasonable doubt of a violation of Municipal Ordinance No. 14, series of 1964 and sentencing her to pay a fine of P200.00 with subsidiary imprisonment in case of insolvency, and modified insofar as she is required to demolish the house that is the subject matter of the case, she being given a period of thirty days from the finality of this decision within which to obtain the required permit. Only upon her failure to do so will that portion of the appealed decision requiringdemolition be enforced. Costs against the accused. -PEDRO SYQUIA, GONZALO SYQUIA, and LEOPOLDO SYQUIA vs. NATIVIDAD ALMEDA LOPEZ, Judge of Municipal Court of Manila, CONRADO V. SANCHEZ, Judge of Court of First Instance of Manila, GEORGE F. MOORE, ET AL. MONTEMAYOR, J.: For the purposes of this decision, the following facts gathered from and based on the pleadings, may be stated. The plaintiffs named

Pedro, Gonzalo, and Leopoldo, all surnamed Syquia, are the undivided joint owners of three apartment buildings situated in the City of Manila known as the North Syquia Apartments, South Syquia Apartments and Michel Apartments located at 1131 M. H. del Pilar, 1151 M. H. del Pilar and 1188 A. Mabini Streets, respectively. About the middle of the year 1945, said plaintiffs executed three lease contracts, one for each of the three apartments, in favor of the United States of America at a monthly rental of P1,775 for the North Syquia Apartments, P1,890 for the South Syquia Apartment, and P3,335 for the Michel Apartments. The term or period for the three leases was to be "for the duration of the war and six months thereafter, unless sooner terminated by the United States of America." The apartment buildings were used for billeting and quartering officers of the U. S. armed forces stationed in the Manila area. In March 1947, when these court proceedings were commenced, George F. Moore was the Commanding General, United States Army, Philippine Ryukus Command, Manila, and as Commanding General of the U. S. Army in the Manila Theatre, was said to control the occupancy of the said apartment houses and had authority in the name of the United States Government to assign officers of the U. S. Army to said apartments or to order said officers to vacate the same. Erland A. Tillman was the Chief, Real Estate Division, Office of the District Engineers, U. S. Army, Manila, who, under the command of defendant Moore was in direct charge and control of the lease and occupancy of said three apartment buildings. Defendant Moore and Tillman themselves did not occupy any part of the premises in question. Under the theory that said leases terminated six months after September 2, 1945, when Japan surrendered, plaintiffs sometime in March, 1946, approached the predecessors in office of defendants Moore and Tillman and requested the return of the apartment buildings to them, but were advised that the U. S. Army wanted to continue occupying the premises. On May 11, 1946, said plaintiffs requested the predecessors in office of Moore and Tillman to

renegotiate said leases, execute lease contract for a period of three years and to pay a reasonable rental higher than those payable under the old contracts. The predecessors in office of Moore in a letter dated June 6, 1946, refused to execute new leases but advised that "it is contemplated that the United States Army will vacate subject properties prior to 1 February 1947." Not being in conformity with the continuance of the old leases because of the alleged comparatively low rentals being paid thereunder, plaintiffs formally requested Tillman to cancel said three leases and to release the apartment buildings on June 28, 1946. Tillman refused to comply with the request. Because of the alleged representation and assurance that the U.S. Government would vacate the premises before February 1, 1947, the plaintiffs took no further steps to secure possession of the buildings and accepted the monthly rentals tendered by the predecessors in office of Moore and Tillman on the basis of a month to month lease subject to cancellation upon thirty days notice. Because of the failure to comply with the alleged representation and assurance that the three apartment buildings will be vacated prior to February 1, 1947, plaintiffs on February 17, 1947, served formal notice upon defendants Moore and Tillman and 64 other army officers or members of the United States Armed Forces who were then occupying apartments in said three buildings, demanding (a) cancellation of said leases; (b) increase in rentals to P300 per month per apartment effective thirty days from notice; ( c) execution of new leases for the three or any one or two of the said apartment buildings for a definite term, otherwise, ( d) release of said apartment buildings within thirty days of said notice in the event of the failure to comply with the foregoing demands. The thirty-day period having expired without any of the defendants having complied with plaintiffs' demands, the plaintiffs commenced the present action in the Municipal Court of Manila in the form of an action for unlawful detainer (desahucio) against Moore and Tillman and the 64 persons occupying apartments in the three buildings for the purpose of having them vacate the apartments, each occupants to pay P300 a month for his particular apartment from January 1, 1947 until each of said particular defendant had vacated said apartment; to permit plaintiffs access to said apartment buildings for the purpose of appraising the damages sustained as the result of the

occupancy by defendants; that defendants be ordered to pay plaintiffs whatever damages may have been actually caused on said property; and that in the event said occupants are unable to pay said P300 a month and/or the damages sustained by said property, the defendants Moore and Tillman jointly and severally be made to pay said monthly rentals of P300 per month per apartment from January 1, 1947 to March 19, 1947, inclusive, and/or the damages sustained by said apartments, and that defendants Moore and Tillman be permanently enjoined against ordering any additional parties in the future from entering and occupying said premises. Acting upon a motion to dismiss filed through the Special Assistant of the Judge Advocate, Philippine Ryukus Command on the ground that the court had no jurisdiction over the defendants and over the subject matter of the action, because the real party in interest was the U.S. Government and not the individual defendants named in the complaint, and that the complaint did not state a cause of action, the municipal court of Manila in an order dated April 29, 1947, found that the war between the United States of America and her allies on one side and Germany and Japan on the other, had not yet terminated and, consequently, the period or term of the three leases had not yet expired; that under the well settled rule of International Law, a foreign government like the United States Government cannot be sued in the courts of another state without its consent; that it was clear from the allegations of the complaint that although the United States of America has not been named therein as defendant, it is nevertheless the real defendant in this case, as the parties named as defendants are officers of the United States Army and were occupying the buildings in question as such and pursuant to orders received from that Government. The municipal court dismissed the action with costs against the plaintiffs with the suggestion or opinion that a citizen of the Philippines, who feels aggrieved by the acts of the Government of a foreign country has the right to demand that the Philippine Government study his claim and if found meritorious, take such diplomatic steps as may be necessary for the vindication of rights of that citizen, and that the matter included or involved in the action should be a proper subject matter of representations between the Government of the

Government of the United States of America and the Philippines. Not being satisfied with the order, plaintiffs appealed to the Court of Manila, where the motion to dismiss was renewed. The Court of First Instance of Manila in an order dated July 12, 1947, affirmed the order of the municipal court dismissing plaintiffs' complaint. It conceded that under the doctrine laid down in the case of U. S. vs. Lee, 106 U. S., 196 and affirmed in the case of Tindal vs. Wesley, 167 U. S., 204 ordinarily, courts have jurisdiction over cases where private parties sue to recover possession of property being held by officers or agents acting in the name of the U. S. Government even though no suit can be brought against the Government itself, but inasmuch as the plaintiffs in the present case are bringing this action against officers and agents of the U. S. Government not only to recover the possession of the three apartment houses supposedly being held illegally by them in the name of their government, but also to collect back rents, not only at the rate agreed upon in the lease contracts entered into by the United States of America but in excess of said rate, to say nothing of the damages claimed, as a result of which, a judgment in these proceedings may become a charge against the U. S. Treasury, then under the rule laid down in the case of Land vs. Dollar, 91 Law. ed., 1209, the present suit must be regarded as one against the United States Government itself, which cannot be sued without its consent, specially by citizens of another country. The plaintiffs as petitioners have brought this case before us on a petition for a writ of mandamus seeking to order the Municipal Court of Manila to take jurisdiction over the case. On October 30, 1947, counsel for respondents Almeda Lopez, Sanchez, Moore and Tillman filed a motion to dismiss on several grounds. The case was orally argued on November 26, 1947. On March 4, 1948, petitioners filed a petition which, among other things, informed this Court that the North Syquia Apartments, the South Syquia Apartments and Michel Apartments would be vacated by their occupants on February 29, March 31, and May 31, 1948, respectively. As a matter of fact, said apartments were actually vacated on the dates already mentioned and were received by the plaintiff-owners.

On the basis of this petition and because of the return of the three apartment houses to the owners, counsel for respondents Almeda Lopez, Sanchez, Moore and Tillman filed a petition to dismiss the present case on the ground that it is moot. Counsel for the petitioners answering the motion, claimed that the plaintiffs and petitioners possession of the three apartment houses, reserving all of their rights against respondents including the right to collect rents and damages; that they have not been paid rents since January 1, 1947; that respondents admitted that there is a total of P109,895 in rentals due and owing to petitioners; that should this case be now dismissed, the petitioners will be unable to enforce collection; that the question of law involved in this case may again come up before the courts when conflicts arise between Filipino civilian property owners and the U.S. Army authorities concerning contracts entered into in the Philippines between said Filipinos and the U.S. Government. Consequently, this Court, according to the petitioners, far from dismissing the case, should decide it, particularly the question of jurisdiction. On June 18, 1949, through a "petition to amend complaint" counsel for the petitioners informed this court that petitioners had already received the U. S. Army Forces in the Western Pacific the sum of P109,895 as rentals for the three apartments, but with the reservation that said acceptance should not be construed as jeopardizing the rights of the petitioners in the case now pending in the courts of the Philippines or their rights against the U. S. Government with respect to the three apartment houses. In view of this last petition, counsel for respondents alleging that both respondent Moore and Tillman had long left the Islands for other Army assignments, and now that both the possession of the three apartments in question as well as the rentals for their occupation have already been received by the petitioners renew their motion for dismissal on the ground that this case has now become moot. The main purpose of the original action in the municipal court was to recover the possession of the three apartment houses in question. The recovery of rentals as submitted by the very counsel for the petitioner was merely incidental to the main action. Because the

prime purpose of the action had been achieved, namely, the recovery of the possession of the premises, apart from the fact that the rentals amounting to P109,895 had been paid to the petitioners and accepted by them though under reservations, this Court may now well dismiss the present proceedings on the ground that the questions involved therein have become academic and moot. Counsel for the petitioners however, insists that a decision be rendered on the merits, particularly on the question of jurisdiction of the municipal court over the original action, not only for the satisfaction of the parties involved but also to serve as a guide in future cases involving cases of similar nature such as contracts of lease entered into between the Government of the United States of America on one side and Filipino citizens on the other regarding properties of the latter. We accept the suggestion of petitioners and shall proceed to discuss the facts and law involved and rule upon them. We shall concede as correctly did the Court of First Instance, that following the doctrine laid down in the cases of U. S. vs. Lee and U. S. vs. Tindal, supra, a private citizen claiming title and right of possession of a certain property may, to recover possession of said property, sue as individuals, officers and agents of the Government who are said to be illegally witholding the same from him, though in doing so, said officers and agents claim that they are acting for the Government, and the court may entertain such a suit altho the Government itself is not included as a party-defendant. Of course, the Government is not bound or concluded by the decision. The philosophy of this ruling is that unless the courts are permitted to take cognizance and to assume jurisdiction over such a case, a private citizen would be helpless and without redress and protection of his rights which may have been invaded by the officers of the government professing to act in its name. In such a case the officials or agents asserting rightful possession must prove and justify their claim before the courts, when it is made to appear in the suit against them that the title and right of possession is in the private citizen. 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. (See case of Land vs. Dollar, 91 Law. ed., 1209.) From a careful study of this case, considering the facts involved therein as well as those of public knowledge of which we take judicial cognizance, we are convinced that the real party in interest as defendant in the original case is the United States of America. The lessee in each of the three lease agreements was the United States of America and the lease agreement themselves were executed in her name by her officials acting as her agents. The considerations or rentals was always paid by the U. S. Government. The original action in the municipal court was brought on the basis of these three lease contracts and it is obvious in the opinion of this court that any back rentals or increased rentals will have to be paid by the U. S. Government not only because, as already stated, the contracts of lease were entered into by such Government but also because the premises were used by officers of her armed forces during the war and immediately after the terminations of hostilities. We cannot see how the defendants and respondents Moore and Tillman could be held individually responsible for the payments of rentals or damages in relation to the occupancy of the apartment houses in question. Both of these army officials had no intervention whatsoever in the execution of the lease agreements nor in the initial occupancy of the premises both of which were effected thru the intervention of and at the instance of their predecessors in office. The original request made by the petitioners for the return of the apartment buildings after the supposed termination of the leases, was made to, and denied not by Moore and Tillman but by their predecessors in office. The notice and decision that the U. S. Army wanted and in fact continued to occupy the premises was made not by Moore and Tillman but by predecessors in office. The refusal to renegotiate the leases as requested by the petitioners was made not by Moore but by his predecessors in office according to the very complaint filed in the municipal court. The assurance that the

U. S. Army will vacate the premises prior to February 29, 1947, was also made by the predecessors in office of Moore. As to the defendant Tillman, according to the complaint he was Chief, Real State Division, Office of the District Engineer, U. S. Army, and was in direct charge and control of the leases and occupancy of the apartment buildings, but he was under the command of defendant Moore, his superior officer. We cannot see how said defendant Tillman in assigning new officers to occupy apartments in the three buildings, in obedience to order or direction from his superior, defendant Moore, could be held personally liable for the payment of rentals or increase thereof, or damages said to have been suffered by the plaintiffs. With respect to defendant General Moore, when he assumed his command in Manila, these lease agreement had already been negotiated and executed and were in actual operation. The three apartment buildings were occupied by army officers assigned thereto by his predecessors in office. All that he must have done was to assign or billet incoming army officers to apartments as they were vacated by outgoing officers due to changes in station. He found these apartment buildings occupied by his government and devoted to the use and occupancy of army officers stationed in Manila under his command, and he had reasons to believe that he could continue holding and using the premises theretofore assigned for that purpose and under contracts previously entered into by his government, as long as and until orders to the contrary were received by him. It is even to be presumed that when demand was made by the plaintiffs for the payment of increased rentals or for vacating the three apartment buildings, defendant Moore, not a lawyer by profession but a soldier, must have consulted and sought the advise of his legal department, and that his action in declining to pay the increased rentals or to eject all his army officers from the three buildings must have been in pursuance to the advice and counsel of his legal division. At least, he was not in a position to pay increased rentals above those set and stipulated in the lease agreements, without the approval of his government, unless he personally assumed financial responsibility therefor. Under these

circumstances, neither do we believe nor find that defendant Moore can be held personally liable for the payment of back or increased rentals and alleged damages. As to the army officers who actually occupied the apartments involved, there is less reason for holding them personally liable for rentals and supposed damages as sought by the plaintiffs. It must be remembered that these army officers when coming to their station in Manila were not given the choice of their dwellings. They were merely assigned quarters in the apartment buildings in question. Said assignments or billets may well be regarded as orders, and all that those officers did was to obey them, and, accordingly, occupied the rooms assigned to them. Under such circumstances, can it be supposed or conceived that such army officers would first inquire whether the rental being paid by the government for the rooms or apartments assigned to them by order of their superior officer was fair and reasonable or not, and whether the period of lease between their government and the owners of the premises had expired, and whether their occupancy of their rooms or apartments was legal or illegal? And if they dismissed these seemingly idle speculations, assuming that they ever entered their minds, and continued to live in their apartments unless and until orders to the contrary were received by them, could they later be held personally liable for any back rentals which their government may have failed to pay to the owners of the building, or for any damages to the premises incident to all leases of property, specially in the absence of proof that such damages to property had been caused by them and not by the previous occupants, also army officers who are not now parties defendant to this suit? Incidentally it may be stated that both defendants Moore and Tillman have long left these Islands to assume other commands or assignments and in all probability none of their 64 co-defendants is still within this jurisdiction. On the basis of the foregoing considerations we are of the belief and we hold that the real party defendant in interest is the Government of the United States of America; that any judgment for back or increased rentals or damages will have to be paid not by defendants

Moore and Tillman and their 64 co-defendants but by the said U. S. Government. On the basis of the ruling in the case of Land vs. Dollar already cited, and on what we have already stated, the present action must be considered as one against the U. S. Government. It is clear that the courts of the Philippines including the Municipal Court of Manila have no jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was raised and interposed at the very beginning of the action. The U. S. Government has not given its consent to the filing of this suit which is essentially against her, though not in name. Moreover, this is not only a case of a citizen filing a suit against his own Government without the latter's consent but it is of citizen filing an action against a foreign government without said government's consent, which renders more obvious the lack of jurisdiction of the courts of his country. The principles of the law behind this rule are so elementary and of such general acceptance that we deem it unnecessary to cite authorities in support thereof. In conclusion we find that the Municipal Court of Manila committed no error in dismissing the case for lack of jurisdiction and that the Court of First Instance acted correctly in affirming the municipal court's order of dismissal. Case dismissed, without pronouncement as to costs. -KHOSROW MINUCHER vs. HON. COURT OF APPEALS and ARTHUR SCALZO VITUG, J.: Sometime in May 1986, an Information for violation of Section 4 of Republic Act No. 6425, otherwise also known as the Dangerous Drugs Act of 1972, was filed against petitioner Khosrow Minucher and one Abbas Torabian with the Regional Trial Court, Branch 151, of Pasig City. The criminal charge followed a buy -bust operation

conducted by the Philippine police narcotic agents in the house of Minucher, an Iranian national, where a quantity of heroin, a prohibited drug, was said to have been seized. The narcotic agents were accompanied by private respondent Arthur Scalzo who would, in due time, become one of the principal witnesses for the prosecution. On 08 January 1988, Presiding Judge Eutropio Migrino rendered a decision acquitting the two accused. On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial Court (RTC), Branch 19, of Manila for damages on account of what he claimed to have been trumped-up charges of drug trafficking made by Arthur Scalzo. The Manila RTC detailed what it had found to be the facts and circumstances surrounding the case. "The testimony of the plaintiff disclosed that he is an Iranian national. He came to the Philippines to study in the University of the Philippines in 1974. In 1976, under the regime of the Shah of Iran, he was appointed Labor Attach for the Iranian Embassies in Tokyo, Japan and Manila, Philippines. When the Shah of Iran was deposed by Ayatollah Khomeini, plaintiff became a refugee of the United Nations and continued to stay in the Philippines. He headed the Iranian National Resistance Movement in the Philippines. He came to know the defendant on May 13, 1986, when the latter was brought to his house and introduced to him by a certain Jose Iigo, an informer of the Intelligence Unit of the military. Jose Iigo, on the other hand, was met by plaintiff at the office of Atty. Crisanto Saruca, a lawyer for several Iranians whom plaintiff assisted as head of the anti-Khomeini movement in the Philippines. During his first meeting with the defendant on May 13, 1986, upon the introduction of Jose Iigo, the defendant expressed his interest

in buying caviar. As a matter of fact, he bought two kilos of caviar from plaintiff and paid P10,000.00 for it. Selling caviar, aside from that of Persian carpets, pistachio nuts and other Iranian products was his business after the Khomeini government cut his pension of over $3,000.00 per month. During their introduction in that meeting, the defendant gave the plaintiff his calling card, which showed that he is working at the US Embassy in the Philippines, as a special agent of the Drug Enforcement Administration, Department of Justice, of the United States, and gave his address as US Embassy, Manila. At the back of the card appears a telephone number in defendants own handwriting, the number of which he can also be contacted. It was also during this first meeting that plaintiff expressed his desire to obtain a US Visa for his wife and the wife of a countryman named Abbas Torabian. The defendant told him that he [could] help plaintiff for a fee of $2,000.00 per visa. Their conversation, however, was more concentrated on politics, carpets and caviar. Thereafter, the defendant promised to see plaintiff again. On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at Mario's Restaurant at Makati. He wanted to buy 200 grams of caviar. Plaintiff brought the merchandize but for the reason that the defendant was not yet there, he requested the restaurant people to x x x place the same in the refrigerator. Defendant, however, came and plaintiff gave him the caviar for which he was paid. Then their conversation was again focused on politics and business. On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18 years at Kapitolyo, Pasig. The defendant wanted to buy a pair of carpets which plaintiff valued at $27,900.00. After some haggling, they agreed at $24,000.00. For the reason that

defendant did not yet have the money, they agreed that defendant would come back the next day. The following day, at 1:00 p.m., he came back with his $24,000.00, which he gave to the plaintiff, and the latter, in turn, gave him the pair of carpets. At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to plaintiff's house and directly proceeded to the latter's bedroom, where the latter and his countryman, Abbas Torabian, were playing chess. Plaintiff opened his safe in the bedroom and obtained $2,000.00 from it, gave it to the defendant for the latter's fee in obtaining a visa for plaintiff's wife. The defendant told him that he would be leaving the Philippines very soon and requested him to come out of the house for a while so that he can introduce him to his cousin waiting in a cab. Without much ado, and without putting on his shirt as he was only in his pajama pants, he followed the defendant where he saw a parked cab opposite the street. To his complete surprise, an American jumped out of the cab with a drawn high-powered gun. He was in the company of about 30 to 40 Filipino soldiers with 6 Americans, all armed. He was handcuffed and after about 20 minutes in the street, he was brought inside the house by the defendant. He was made to sit down while in handcuffs while the defendant was inside his bedroom. The defendant came out of the bedroom and out from defendant's attach case, he took something and placed it on the table in front of the plaintiff. They also took plaintiff's wife who was at that time at the boutique near his house and likewise arrested Torabian, who was playing chess with him in the bedroom and both were handcuffed together. Plaintiff was not told why he was being handcuffed and why the privacy of his house, especially his bedroom was invaded by defendant. He was not allowed to use the telephone. In fact, his telephone was unplugged. He asked for any warrant, but the defendant told him to `shut up. He was

nevertheless told that he would be able to call for his lawyer who can defend him. The plaintiff took note of the fact that when the defendant invited him to come out to meet his cousin, his safe was opened where he kept the $24,000.00 the defendant paid for the carpets and another $8,000.00 which he also placed in the safe together with a bracelet worth $15,000.00 and a pair of earrings worth $10,000.00. He also discovered missing upon his release his 8 pieces hand-made Persian carpets, valued at $65,000.00, a painting he bought for P30,000.00 together with his TV and betamax sets. He claimed that when he was handcuffed, the defendant took his keys from his wallet. There was, therefore, nothing left in his house. That his arrest as a heroin trafficker x x x had been well publicized throughout the world, in various newspapers, particularly in Australia, America, Central Asia and in the Philippines. He was identified in the papers as an international drug trafficker. x x x In fact, the arrest of defendant and Torabian was likewise on television, not only in the Philippines, but also in America and in Germany. His friends in said places informed him that they saw him on TV with said news. After the arrest made on plaintiff and Torabian, they were brought to Camp Crame handcuffed together, where they were detained for three days without food and water."[1] During the trial, the law firm of Luna, Sison and Manas, filed a special appearance for Scalzo and moved for extension of time to file an answer pending a supposed advice from the United States Department of State and Department of Justice on the defenses to be raised. The trial court granted the motion. On 27 October 1988,

Scalzo filed another special appearance to quash the summons on the ground that he, not being a resident of the Philippines and the action being one in personam, was beyond the processes of the court. The motion was denied by the court, in its order of 13 December 1988, holding that the filing by Scalzo of a motion for extension of time to file an answer to the complaint was a voluntary appearance equivalent to service of summons which could likewise be construed a waiver of the requirement of formal notice. Scalzo filed a motion for reconsideration of the court order, contending that a motion for an extension of time to file an answer was not a voluntary appearance equivalent to service of summons since it did not seek an affirmative relief. Scalzo argued that in cases involving the United States government, as well as its agencies and officials, a motion for extension was peculiarly unavoidable due to the need (1) for both the Department of State and the Department of Justice to agree on the defenses to be raised and (2) to refer the case to a Philippine lawyer who would be expected to first review the case. The court a quo denied the motion for reconsideration in its order of 15 October 1989. Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R. No. 17023, assailing the denial. In a decision, dated 06 October 1989, the appellate court denied the petition and affirmed the ruling of the trial court. Scalzo then elevated the incident in a petition for review on certiorari, docketed G.R. No. 91173, to this Court. The petition, however, was denied for its failure to comply with SC Circular No. 1-88; in any event, the Court added, Scalzo had failed to show that the appellate court was in error in its questioned judgment. Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a) declaring Scalzo in default for his failure to file a responsive pleading (answer) and (b) setting the case for the

reception of evidence. On 12 March 1990, Scalzo filed a motion to set aside the order of default and to admit his answer to the complaint. Granting the motion, the trial court set the case for pretrial. In his answer, Scalzo denied the material allegations of the complaint and raised the affirmative defenses (a) of Minuchers failure to state a cause of action in his complaint and (b) that Scalzo had acted in the discharge of his official duties as being merely an agent of the Drug Enforcement Administration of the United States Department of Justice. Scalzo interposed a counterclaim of P100,000.00 to answer for attorneys' fees and expenses of litigation. Then, on 14 June 1990, after almost two years since the institution of the civil case, Scalzo filed a motion to dismiss the complaint on the ground that, being a special agent of the United States Drug Enforcement Administration, he was entitled to diplomatic immunity. He attached to his motion Diplomatic Note No. 414 of the United States Embassy, dated 29 May 1990, addressed to the Department of Foreign Affairs of the Philippines and a Certification, dated 11 June 1990, of Vice Consul Donna Woodward, certifying that the note is a true and faithful copy of its original. In an order of 25 June 1990, the trial court denied the motion to dismiss. On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this Court, docketed G.R. No. 94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao Polo, et al.," asking that the complaint in Civil Case No. 88-45691 be ordered dismissed. The case was referred to the Court of Appeals, there docketed CA-G.R. SP No. 22505, per this Courts resolution of 07 August 1990. On 31 October 1990, the Court of Appeals promulgated its decision sustaining the diplomatic immunity of Scalzo and ordering the dismissal of the complaint against him. Minucher filed a petition for review with this Court, docketed G.R. No. 97765 and entitled "Khosrow Minucher vs. the Honorable Court of Appeals, et. al.

(cited in 214 SCRA 242), appealing the judgment of the Court of Appeals. In a decision, dated 24 September 1992, penned by Justice (now Chief Justice) Hilario Davide, Jr., this Court reversed the decision of the appellate court and remanded the case to the lower court for trial. The remand was ordered on the theses (a) that the Court of Appeals erred in granting the motion to dismiss of Scalzo for lack of jurisdiction over his person without even considering the issue of the authenticity of Diplomatic Note No. 414 and (b) that the complaint contained sufficient allegations to the effect that Scalzo committed the imputed acts in his personal capacity and outside the scope of his official duties and, absent any evidence to the contrary, the issue on Scalzos diplomatic immunity could not be taken up. The Manila RTC thus continued with its hearings on the case. On 17 November 1995, the trial court reached a decision; it adjudged: WHEREFORE, and in view of all the foregoing consid erations, judgment is hereby rendered for the plaintiff, who successfully established his claim by sufficient evidence, against the defendant in the manner following: "`Adjudging defendant liable to plaintiff in actual and compensatory damages of P520,000.00; moral damages in the sum of P10 million; exemplary damages in the sum of P100,000.00; attorney's fees in the sum of P200,000.00 plus costs. `The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of the Court on this judgment to answer for the unpaid docket fees considering that the plaintiff in this case instituted this action as a pauper litigant."[2]

While the trial court gave credence to the claim of Scalzo and the evidence presented by him that he was a diplomatic agent entitled to immunity as such, it ruled that he, nevertheless, should be held accountable for the acts complained of committed outside his official duties. On appeal, the Court of Appeals reversed the decision of the trial court and sustained the defense of Scalzo that he was sufficiently clothed with diplomatic immunity during his term of duty and thereby immune from the criminal and civil jurisdiction of the Receiving State pursuant to the terms of the Vienna Convention. Hence, this recourse by Minucher. The instant petition for review raises a two-fold issue: (1) whether or not the doctrine of conclusiveness of judgment, following the decision rendered by this Court in G.R. No. 97765, should have precluded the Court of Appeals from resolving the appeal to it in an entirely different manner, and (2) whether or not Arthur Scalzo is indeed entitled to diplomatic immunity. The doctrine of conclusiveness of judgment, or its kindred rule of res judicata, would require 1) the finality of the prior judgment, 2) a valid jurisdiction over the subject matter and the parties on the part of the court that renders it, 3) a judgment on the merits, and 4) an identity of the parties, subject matter and causes of action.[3] Even while one of the issues submitted in G.R. No. 97765 - "whether or not public respondent Court of Appeals erred in ruling that private respondent Scalzo is a diplomat immune from civil suit conformably with the Vienna Convention on Diplomatic Relations" - is also a pivotal question raised in the instant petition, the ruling in G.R. No. 97765, however, has not resolved that point with finality. Indeed, the Court there has made this observation "It may be mentioned in this regard that private respondent himself, in his Pre-trial Brief filed on 13 June 1990, unequivocally states that

he would present documentary evidence consisting of DEA records on his investigation and surveillance of plaintiff and on his position and duties as DEA special agent in Manila. Having thus reserved his right to present evidence in support of his position, which is the basis for the alleged diplomatic immunity, the barren self-serving claim in the belated motion to dismiss cannot be relied upon for a reasonable, intelligent and fair resolution of the issue of diplomatic immunity."[4] Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the Philippines is a signatory, grants him absolute immunity from suit, describing his functions as an agent of the United States Drugs Enforcement Agency as conducting surveillance operations on suspected drug dealers in the Philippines believed to be the source of prohibited drugs being shipped to the U.S., (and) having ascertained the target, (he then) would inform the Philippine narcotic agents (to) make the actual arrest." Scalzo has submitted to the trial court a number of documents 1. Exh. '2' May 1990; Diplomatic Note No. 414 dated 29

2. Exh. '1' Certification of Vice Consul Donna K. Woodward dated 11 June 1990; 3. Exh. '5' October 1991; 4. Exh. '6' November 1992; and 5. Exh. '7' October 1988. Diplomatic Note No. 757 dated 25

Diplomatic Note No. 791 dated 17

Diplomatic Note No. 833 dated 21

6. Exh. '3' 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser, Department of Foreign Affairs, dated 27 June 1990 forwarding Embassy Note No. 414 to the Clerk of Court of RTC Manila, Branch 19 (the trial court); 7. Exh. '4' Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3'); and 8. Exh. '8' Letter dated 18 November 1992 from the Office of the Protocol, Department of Foreign Affairs, through Asst. Sec. Emmanuel Fernandez, addressed to the Chief Justice of this Court.[5] The documents, according to Scalzo, would show that: (1) the United States Embassy accordingly advised the Executive Department of the Philippine Government that Scalzo was a member of the diplomatic staff of the United States diplomatic mission from his arrival in the Philippines on 14 October 1985 until his departure on 10 August 1988; (2) that the United States Government was firm from the very beginning in asserting the diplomatic immunity of Scalzo with respect to the case pursuant to the provisions of the Vienna Convention on Diplomatic Relations; and (3) that the United States Embassy repeatedly urged the Department of Foreign Affairs to take appropriate action to inform the trial court of Scalzos diplomatic immunity. The other documentary exhibits were presented to indicate that: (1) the Philippine government itself, through its Executive Department, recognizing and respecting the diplomatic status of Scalzo, formally advised the Judicial Department of his diplomatic status and his entitlement to all diplomatic privileges and immunities under the Vienna Convention; and (2) the Department of Foreign Affairs itself authenticated Diplomatic Note No. 414. Scalzo additionally presented Exhibits "9"

to "13" consisting of his reports of investigation on the surveillance and subsequent arrest of Minucher, the certification of the Drug Enforcement Administration of the United States Department of Justice that Scalzo was a special agent assigned to the Philippines at all times relevant to the complaint, and the special power of attorney executed by him in favor of his previous counsel[6] to show (a) that the United States Embassy, affirmed by its Vice Consul, acknowledged Scalzo to be a member of the diplomatic staff of the United States diplomatic mission from his arrival in the Philippines on 14 October 1985 until his departure on 10 August 1988, (b) that, on May 1986, with the cooperation of the Philippine law enforcement officials and in the exercise of his functions as member of the mission, he investigated Minucher for alleged trafficking in a prohibited drug, and (c) that the Philippine Department of Foreign Affairs itself recognized that Scalzo during his tour of duty in the Philippines (14 October 1985 up to 10 August 1988) was listed as being an Assistant Attach of the United States diplomatic mission and accredited with diplomatic status by the Government of the Philippines. In his Exhibit 12, Scalzo described the functions of the overseas office of the United States Drugs Enforcement Agency, i.e., (1) to provide criminal investigative expertise and assistance to foreign law enforcement agencies on narcotic and drug control programs upon the request of the host country, 2) to establish and maintain liaison with the host country and counterpart foreign law enforcement officials, and 3) to conduct complex criminal investigations involving international criminal conspiracies which affect the interests of the United States. The Vienna Convention on Diplomatic Relations was a codification of centuries-old customary law and, by the time of its ratification on 18 April 1961, its rules of law had long become stable. Among the city states of ancient Greece, among the peoples of the Mediterranean before the establishment of the Roman Empire, and among the

states of India, the person of the herald in time of war and the person of the diplomatic envoy in time of peace were universally held sacrosanct.[7] By the end of the 16th century, when the earliest treatises on diplomatic law were published, the inviolability of ambassadors was firmly established as a rule of customary international law.[8] Traditionally, the exercise of diplomatic intercourse among states was undertaken by the head of state himself, as being the preeminent embodiment of the state he represented, and the foreign secretary, the official usually entrusted with the external affairs of the state. Where a state would wish to have a more prominent diplomatic presence in the receiving state, it would then send to the latter a diplomatic mission. Conformably with the Vienna Convention, the functions of the diplomatic mission involve, by and large, the representation of the interests of the sending state and promoting friendly relations with the receiving state.[9] The Convention lists the classes of heads of diplomatic missions to include (a) ambassadors or nuncios accredited to the heads of state,[10] (b) envoys,[11] ministers or internuncios accredited to the heads of states; and (c) charges d' affairs[12] accredited to the ministers of foreign affairs.[13] Comprising the "staff of the (diplomatic) mission" are the diplomatic staff, the administrative staff and the technical and service staff. Only the heads of missions, as well as members of the diplomatic staff, excluding the members of the administrative, technical and service staff of the mission, are accorded diplomatic rank. Even while the Vienna Convention on Diplomatic Relations provides for immunity to the members of diplomatic missions, it does so, nevertheless, with an understanding that the same be restrictively applied. Only "diplomatic agents," under the terms of the Convention, are vested with blanket diplomatic immunity from civil and criminal suits. The Convention defines "diplomatic agents" as the heads of missions or members of

the diplomatic staff, thus impliedly withholding the same privileges from all others. It might bear stressing that even consuls, who represent their respective states in concerns of commerce and navigation and perform certain administrative and notarial duties, such as the issuance of passports and visas, authentication of documents, and administration of oaths, do not ordinarily enjoy the traditional diplomatic immunities and privileges accorded diplomats, mainly for the reason that they are not charged with the duty of representing their states in political matters. Indeed, the main yardstick in ascertaining whether a person is a diplomat entitled to immunity is the determination of whether or not he performs duties of diplomatic nature. Scalzo asserted, particularly in his Exhibits 9 to 13, that he was an Assistant Attach of the United States diplomatic mission and was accredited as such by the Philippine Government. An attach belongs to a category of officers in the diplomatic establishment who may be in charge of its cultural, press, administrative or financial affairs. There could also be a class of attaches belonging to certain ministries or departments of the government, other than the foreign ministry or department, who are detailed by their respective ministries or departments with the embassies such as the military, naval, air, commercial, agricultural, labor, science, and customs attaches, or the like. Attaches assist a chief of mission in his duties and are administratively under him, but their main function is to observe, analyze and interpret trends and developments in their respective fields in the host country and submit reports to their own ministries or departments in the home government.[14] These officials are not generally regarded as members of the diplomatic mission, nor are they normally designated as having diplomatic rank.

In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes Nos. 414, 757 and 791, all issued post litem motam, respectively, on 29 May 1990, 25 October 1991 and 17 November 1992. The presentation did nothing much to alleviate the Court's initial reservations in G.R. No. 97765, viz: "While the trial court denied the motion to dismiss, the public respondent gravely abused its discretion in dismissing Civil Case No. 88-45691 on the basis of an erroneous assumption that simply because of the diplomatic note, the private respondent is clothed with diplomatic immunity, thereby divesting the trial court of jurisdiction over his person. x x x x xxx xx

"There is of course the claim of private respondent that the acts imputed to him were done in his official capacity. Nothing supports this self-serving claim other than the so-called Diplomatic Note. x x x. The public respondent then should have sustained the trial court's denial of the motion to dismiss. Verily, it should have been the most proper and appropriate recourse. It should not have been overwhelmed by the self-serving Diplomatic Note whose belated issuance is even suspect and whose authenticity has not yet been proved. The undue haste with which respondent Court yielded to the private respondent's claim is arbitrary." A significant document would appear to be Exhibit No. 08, dated 08 November 1992, issued by the Office of Protocol of the Department of Foreign Affairs and signed by Emmanuel C. Fernandez, Assistant Secretary, certifying that "the records of the Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of office in the Philippines (from 14 October 1985 up to 10 August 1988) was listed as an Assistant Attach of the United States diplomatic mission and was, therefore, accredited diplomatic status by the Government of the Philippines." No certified true copy of such "records," the supposed bases for the belated issuance, was presented in evidence. Concededly, vesting a person with diplomatic immunity is a prerogative of the executive branch of the government. In World Health Organization vs. Aquino,[15] the Court has recognized that, in such matters, the hands of the courts are virtually tied. Amidst apprehensions of indiscriminate and incautious grant of immunity, designed to gain exemption from the jurisdiction of courts, it should behoove the Philippine government, specifically its Department of Foreign Affairs, to be most circumspect, that should particularly be no less than compelling, in its post litem motam issuances. It might be recalled that the privilege is not an immunity from the observance of the law of the territorial sovereign or from ensuing

And now, to the core issue - the alleged diplomatic immunity of the private respondent. Setting aside for the moment the issue of authenticity raised by the petitioner and the doubts that surround such claim, in view of the fact that it took private respondent one (1) year, eight (8) months and seventeen (17) days from the time his counsel filed on 12 September 1988 a Special Appearance and Motion asking for a first extension of time to file the Answer because the Departments of State and Justice of the United States of America were studying the case for the purpose of determining his defenses, before he could secure the Diplomatic Note from the US Embassy in Manila, and even granting for the sake of argument that such note is authentic, the complaint for damages filed by petitioner cannot be peremptorily dismissed. x x x xxx x x x

legal liability; it is, rather, an immunity from the exercise of territorial jurisdiction.[16] The government of the United States itself, which Scalzo claims to be acting for, has formulated its standards for recognition of a diplomatic agent. The State Department policy is to only concede diplomatic status to a person who possesses an acknowledged diplomatic title and performs duties of diplomatic nature.[17] Su pplementary criteria for accreditation are the possession of a valid diplomatic passport or, from States which do not issue such passports, a diplomatic note formally representing the intention to assign the person to diplomatic duties, the holding of a non-immigrant visa, being over twenty-one years of age, and performing diplomatic functions on an essentially full-time basis.[18] Diplomatic missions are requested to provide the most accurate and descriptive job title to that which currently applies to the duties performed. The Office of the Protocol would then assign each individual to the appropriate functional category.[19] But while the diplomatic immunity of Scalzo might thus remain contentious, it was sufficiently established that, indeed, he worked for the United States Drug Enforcement Agency and was tasked to conduct surveillance of suspected drug activities within the country on the dates pertinent to this case. If it should be ascertained that Arthur Scalzo was acting well within his assigned functions when he committed the acts alleged in the complaint, the present controversy could then be resolved under the related doctrine of State Immunity from Suit. The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of customary international law then closely identified with the personal immunity of a foreign sovereign from suit[20] and, with the emergence of democratic states, made to attach not just to the person of the head of state, or his

representative, but also distinctly to the state itself in its sovereign capacity.[21] If the acts giving rise to a suit are those of a foreign government done by its foreign agent, although not necessarily a diplomatic personage, but acting in his official capacity, the complaint could be barred by the immunity of the foreign sovereign from suit without its consent. Suing a representative of a state is believed to be, in effect, suing the state itself. The proscription is not accorded for the benefit of an individual but for the State, in whose service he is, under the maxim - par in parem, non habet imperium - that all states are sovereign equals and cannot assert jurisdiction over one another.[22] The implication, in broad terms, is that if the judgment against an official would require the state itself to perform an affirmative act to satisfy the award, such as the appropriation of the amount needed to pay the damages decreed against him, the suit must be regarded as being against the state itself, although it has not been formally impleaded.[23] In United States of America vs. Guinto,[24] involving officers of the United States Air Force and special officers of the Air Force Office of Special Investigators charged with the duty of preventing the distribution, possession and use of prohibited drugs, this Court has ruled "While the doctrine (of state immunity) 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. x x x. It cannot for a moment be imagined that they were acting in their private or unofficial capacity when they apprehended and later testified against the complainant. It follows that for discharging their duties as agents of the United States, they cannot be directly impleaded for acts imputable to their principal, which has not given its consent to be sued. x x x As they have acted on behalf of the government, and

within the scope of their authority, it is that government, and not the petitioners personally, [who were] responsible for their acts."[25] This immunity principle, however, has its limitations. vs. Court of Appeals[26] elaborates: Thus, Shauf

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 the plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al., vs. Aligaen, et al. (33 SCRA 368): `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. The rationale for this ruling is that the doctrine of state immunity cannot be used as an instrument for perpetrating an injustice. x x x xxx x x x

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 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 and jurisdiction.[27] A foreign agent, operating within a territory, can be cloaked with immunity from suit but only as long as it can be established that he is acting within the directives of the sending state. The consent of the host state is an indispensable requirement of basic courtesy between the two sovereigns. Guinto and Shauf both involve officers and personnel of the United States, stationed within Philippine territory, under the RP-US Military Bases Agreement. While evidence is wanting to show any similar agreement between the governments of the Philippines and of the United States (for the latter to send its agents and to conduct surveillance and related activities of suspected drug dealers in the Philippines), the consent or imprimatur of the Philippine government to the activities of the United States Drug Enforcement Agency, however, can be gleaned from the facts heretofore elsewhere mentioned. The official exchanges of communication between agencies of the government of the two countries, certifications from officials of both the Philippine Department of Foreign Affairs and the United States Embassy, as well as the participation of members of the Philippine Narcotics Command in the buy-bust operation conducted at the residence of Minucher at the behest of Scalzo, may be inadequate to support the "diplomatic status" of the latter but they give enough indication that the Philippine government has given its imprimatur, if not consent, to the activities within Philippine territory of agent

(T)he doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued in his private and

Scalzo of the United States Drug Enforcement Agency. The job description of Scalzo has tasked him to conduct surveillance on suspected drug suppliers and, after having ascertained the target, to inform local law enforcers who would then be expected to make the arrest. In conducting surveillance activities on Minucher, later acting as the poseur-buyer during the buy-bust operation, and then becoming a principal witness in the criminal case against Minucher, Scalzo hardly can be said to have acted beyond the scope of his official function or duties. All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of the United States Drug Enforcement Agency allowed by the Philippine government to conduct activities in the country to help contain the problem on the drug traffic, is entitled to the defense of state immunity from suit. WHEREFORE, on the foregoing premises, the petition is DENIED. No costs. --

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.1wph1.t 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

MARIANO E. GARCIA vs.THE CHIEF OF STAFF and THE ADJUTANT GENERAL, ARMED FORCES OF THE PHILIPPINES and/or THE CHAIRMAN, PHILIPPINE VETERANS BOARD and/or THE AUDITOR GENERAL OF THE PHILIPPINES REGALA, J.: 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

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: xxx xxx 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. --

DALE SANDERS, AND A.S. MOREAU, JR vs. HON. REGINO T. VERIDIANO II, as Presiding Judge, Branch I, Court of First Instance of Zambales, Olongapo City, ANTHONY M. ROSSI and RALPH L. WYERS CRUZ, J.: The basic issue to be resolved in this case is whether or not the petitioners were performing their official duties when they did the acts for which they have been sued for damages by the private respondents. Once this question is decided, the other answers will fall into place and this petition need not detain us any longer than it already has. Petitioner Sanders was, at the time the incident in question occurred, the special services director of the U.S. Naval Station (NAVSTA) in Olongapo City. 1 Petitioner Moreau was the commanding officer of the Subic Naval Base, which includes the said station. 2 Private respondent Rossi is an American citizen with permanent residence in the Philippines, 3 as so was private respondent Wyer, who died two years ago. 4 They were both employed as gameroom attendants in the special services department of the NAVSTA, the former having been hired in 1971 and the latter in 1969. 5 On October 3, 1975, the private respondents were advised that their employment had been converted from permanent full-time to permanent part-time, effective October 18, 1975. 6 Their reaction was to protest this conversion and to institute grievance proceedings conformably to the pertinent rules and regulations of the U.S. Department of Defense. The result was a recommendation from the hearing officer who conducted the proceedings for the reinstatement of the private respondents to permanent full-time status plus backwages. The report on the hearing contained the observation that "Special Services management practices an autocratic form of supervision." 7

In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of the complaint), Sanders disagreed with the hearing officer's report and asked for the rejection of the abovestated recommendation. The letter contained the statements that: a ) "Mr. Rossi tends to alienate most co-workers and supervisors;" b) "Messrs. Rossi and Wyers have proven, according to their immediate supervisors, to be difficult employees to supervise;" and c) "even though the grievants were under oath not to discuss the case with anyone, (they) placed the records in public places where others not involved in the case could hear." On November 7, 1975, before the start of the grievance hearings, aletter (Annex "B" of the complaint) purportedly corning from petitioner Moreau as the commanding general of the U.S. Naval Station in Subic Bay was sent to the Chief of Naval Personnel explaining the change of the private respondent's employment status and requesting concurrence therewith. The letter did not carry his signature but was signed by W.B. Moore, Jr. "by direction," presumably of Moreau. On the basis of these antecedent facts, the private respondent filed in the Court of First Instance of Olongapo City a for damages against the herein petitioners on November 8, 1976. 8 The plaintiffs claimed that the letters contained libelous imputations that had exposed them to ridicule and caused them mental anguish and that the prejudgment of the grievance proceedings was an invasion of their personal and proprietary rights. The private respondents made it clear that the petitioners were being sued in their private or personal capacity. However, in a motion to dismiss filed under a special appearance, the petitioners argued that the acts complained of were performed by them in the discharge of their official duties and that, consequently, the court had no jurisdiction over them under the doctrine of state immunity. After extensive written arguments between the parties, the motion was denied in an order dated March 8, 1977, 9 on the main ground

that the petitioners had not presented any evidence that their acts were official in nature and not personal torts, moreover, the allegation in the complaint was that the defendants had acted maliciously and in bad faith. The same order issued a writ of preliminary attachment, conditioned upon the filing of a P10,000.00 bond by the plaintiffs, against the properties of petitioner Moreau, who allegedly was then about to leave the Philippines. Subsequently, to make matters worse for the defendants, petitioner Moreau was declared in a default by the trial court in its order dated August 9, 1977. The motion to lift the default order on the ground that Moreau's failure to appear at the pre-trial conference was the result of some misunderstanding, and the motion for reconsideration of the denial of the motion to dismiss, which was filed by the petitioner's new lawyers, were denied by the respondent court on September 7, 1977. This petition for certiorari, prohibition and preliminary injunction was thereafter filed before this Court, on the contention that the abovenarrated acts of the respondent court are tainted with grave abuse of discretion amounting to lack of jurisdiction. We return now to the basic question of whether the petitioners were acting officially or only in their private capacities when they did the acts for which the private respondents have sued them for damages. It is stressed at the outset that the mere allegation that a government functionary is being sued in his personal capacity will not automatically remove him from the protection of the law of public officers and, if appropriate, the doctrine of state immunity. By the same token, the mere invocation of official character will not suffice to insulate him from suability and liability for an act imputed to him as a personal tort committed without or in excess of his authority. These well-settled principles are applicable not only to the officers of the local state but also where the person sued in its courts pertains to the government of a foreign state, as in the present case.

The respondent judge, apparently finding that the complained acts were prima facie personal and tortious, decided to proceed to trial to determine inter alia their precise character on the strength of the evidence to be submitted by the parties. The petitioners have objected, arguing that no such evidence was needed to substantiate their claim of jurisdictional immunity. Pending resolution of this question, we issued a temporary restraining order on September 26, 1977, that has since then suspended the proceedings in this case in the court a quo. In past cases, this Court has held that where the character of the act complained of can be determined from the pleadings exchanged between the parties before the trial, it is not necessary for the court to require them to belabor the point at a trial still to be conducted. Such a proceeding would be superfluous, not to say unfair to the defendant who is subjected to unnecessary and avoidable inconvenience. Thus, in Baer v. Tizon, 10 we held that a motion to dismiss a complaint against the commanding general of the Olongapo Naval Base should not have been denied because it had been sufficiently shown that the act for which he was being sued was done in his official capacity on behalf of the American government. The United States had not given its consent to be sued. It was the reverse situation in Syquia v. Almeda Lopez," where we sustained the order of the lower court granting a where we motion to dismiss a complaint against certain officers of the U.S. armed forces also shown to be acting officially in the name of the American government. The United States had also not waived its immunity from suit. Only three years ago, in United States of America v. Ruiz, 12 we set aside the denial by the lower court of a motion to dismiss a complaint for damages filed against the United States and several of its officials, it appearing that the act complained of was governmental rather than proprietary, and certainly not personal. In these and several other cases 13 the Court found it redundant to prolong the other case proceedings after it had become clear that the suit could not prosper because the acts complained of were covered by the doctrine of state immunity.

It is abundantly clear in the present case that the acts for which the petitioners are being called to account were performed by them in the discharge of their official duties. Sanders, as director of the special services department of NAVSTA, undoubtedly had supervision over its personnel, including the private respondents, and had a hand in their employment, work assignments, discipline, dismissal and other related matters. It is not disputed that the letter he had written was in fact a reply to a request from his superior, the other petitioner, for more information regarding the case of the private respondents. 14 Moreover, even in the absence of such request, he still was within his rights in reacting to the hearing officer's criticismin effect a direct attack against him-that Special Services was practicing "an autocratic form of supervision." As for Moreau,what he is claimed to have done was write the Chief of Naval Personnel for concurrence with the conversion of the private respondents' type of employment even before the grievance proceedings had even commenced. Disregarding for the nonce the question of its timeliness, this act is clearly official in nature, performed by Moreau as the immediate superior of Sanders and directly answerable to Naval Personnel in matters involving the special services department of NAVSTA In fact, the letter dealt with the financial and budgetary problems of the department and contained recommendations for their solution, including the redesignation of the private respondents. There was nothing personal or private about it. Given the official character of the above-described letters, we have to conclude that the petitioners were, legally speaking, being sued as officers of the United States government. As they have acted on behalf of that government, and within the scope of their authority, it is that government, and not the petitioners personally, that is responsible for their acts. Assuming that the trial can proceed and it is proved that the claimants have a right to the payment of damages, such award will have to be satisfied not by the petitioners in their personal capacities but by the United States government as their principal. This will require that government to perform an affirmative act to satisfy the judgment, viz, the appropriation of the

necessary amount to cover the damages awarded, thus making the action a suit against that government without its consent. There should be no question by now that such complaint cannot prosper unless the government sought to be held ultimately liable has given its consent to' be sued. So we have ruled not only in Baer but in many other decisions where we upheld the doctrine of state immunity as applicable not only to our own government but also to foreign states sought to be subjected to the jurisdiction of our courts. 15 The practical justification for the doctrine, as Holmes put it, is that "there can be no legal right against the authority which makes the law on which the right depends. 16 In the case of foreign states, the rule is derived from the principle of the sovereign equality of states which wisely admonishes that par in parem non habet imperium and that a contrary attitude would "unduly vex the peace of nations." 17 Our adherence to this precept is formally expressed in Article II, Section 2, of our Constitution, where we reiterate from our previous charters that the Philippines "adopts the generally accepted principles of international law as part of the law of the land. All this is not to say that in no case may a public officer be sued as such without the previous consent of the state. To be sure, there are a number of well-recognized exceptions. It is clear that a public officer may be sued as such to compel him to do an act required by law, as where, say, a register of deeds refuses to record a deed of sale; 18 or to restrain a Cabinet member, for example, from enforcing a law claimed to be unconstitutional; 19 or to compel the national treasurer to pay damages from an already appropriated assurance fund; 20 or the commissioner of internal revenue to refund tax over-payments from a fund already available for the purpose; 21 or, in general, to secure a judgment that the officer impleaded may satisfy by himself without the government itself having to do a positive act to assist him. We have also held that where the government itself has violated its own laws, the aggrieved party may directly implead the government even without first filing his claim with the Commission on Audit as normally required, as the

doctrine of state immunity "cannot be used as an instrument for perpetrating an injustice." 22 This case must also be distinguished from such decisions as Festejo v. Fernando, 23 where the Court held that a bureau director could be sued for damages on a personal tort committed by him when he acted without or in excess of authority in forcibly taking private property without paying just compensation therefor although he did convert it into a public irrigation canal. It was not necessary to secure the previous consent of the state, nor could it be validly impleaded as a party defendant, as it was not responsible for the defendant's unauthorized act. The case at bar, to repeat, comes under the rule and not under any of the recognized exceptions. The government of the United States has not given its consent to be sued for the official acts of the petitioners, who cannot satisfy any judgment that may be rendered against them. As it is the American government itself that will have to perform the affirmative act of appropriating the amount that may be adjudged for the private respondents, the complaint must be dismissed for lack of jurisdiction. The Court finds that, even under the law of public officers, the acts of the petitioners are protected by the presumption of good faith, which has not been overturned by the private respondents. Even mistakes concededly committed by such public officers are not actionable as long as it is not shown that they were motivated by malice or gross negligence amounting to bad faith. 24 This, to, is well settled . 25 Furthermore, applying now our own penal laws, the letters come under the concept of privileged communications and are not punishable, 26 let alone the fact that the resented remarks are not defamatory by our standards. It seems the private respondents have overstated their case. A final consideration is that since the questioned acts were done in the Olongapo Naval Base by the petitioners in the performance of their official duties and the private respondents are themselves

American citizens, it would seem only proper for the courts of this country to refrain from taking cognizance of this matter and to treat it as coming under the internal administration of the said base. The petitioners' counsel have submitted a memorandum replete with citations of American cases, as if they were arguing before a court of the United States. The Court is bemused by such attitude. While these decisions do have persuasive effect upon us, they can at best be invoked only to support our own jurisprudence, which we have developed and enriched on the basis of our own persuasions as a people, particularly since we became independent in 1946. We appreciate the assistance foreign decisions offer us, and not only from the United States but also from Spain and other countries from which we have derived some if not most of our own laws. But we should not place undue and fawning reliance upon them and regard them as indispensable mental crutches without which we cannot come to our own decisions through the employment of our own endowments We live in a different ambience and must decide our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. The private respondents must, if they are still sominded, pursue their claim against the petitioners in accordance with the laws of the United States, of which they are all citizens and under whose jurisdiction the alleged offenses were committed. Even assuming that our own laws are applicable, the United States government has not decided to give its consent to be sued in our courts, which therefore has not acquired the competence to act on the said claim,. WHEREFORE, the petition is GRANTED. The challenged orders dated March 8,1977, August 9,1977, and September 7, 1977, are SET ASIDE. The respondent court is directed to DISMISS Civil Case No. 2077-O. Our Temporary restraining order of September 26,1977, is made PERMANENT. No costs.

-CARMEN FESTEJO vs. ISAIAS FERNANDO, Director de Obras Publicas DIOKNO, J.: Carmen Festejo, duea de unos terrenos azucareros, de un total de unas 9 hectareas y media de superfice, demando a "Isaias Fernando Director, Bureau of public Works, que como tal Director de Obras Publicas tiene a su cargo los sistemas y proyectos de irrigacion y es el funcionario responsable de la construccion de los sistemas de irrigacion en el pais," alegando que The defendant, as Director of the Bureau of Public Works, without authority obtained first from the Court of First Instance of Ilocos Sur, without obtaining first a right of way, and without the consent and knowledge of the plaintiff, and against her express objection unlawfully took possession of portions of the three parcels of land described above, and caused an irrigation canal to be constructed on the portion of the three parcels of land on or about the month of February 1951 the aggregate area being 24,179 square meters to the damage and prejudice of the plaintiff. ----- R. on A., p. 3. causando a ella variados daos y perjuicios. consecuencia, sentencia condenando el demandado: Pidio, en su

In the remote event that the portions of land unlawfully occupied and appropriated can not be returned to the plaintiff, then to order the defendant to pay to the plaintiff the sum of P19,343.20 as value of the portions totalling an area of 24,179 square meters; ---- R. on A., p. 5. y ademas a pagar P9,756.19 de daos y P5,000 de honorarios de abogado, con las costas R. on A., pp. 5-6. El demandado, por medio del Procurador General, presento mocion de sobreseimiento de la demanda por el fundamento de que el Juzgado no tiene jurisdiccion para dictar sentencia valida contra el, toda vez que judicialmente la reclamacion es contra la Republica de Filipinas, y esta no ha presentado su consentimiento a la demanda. El Juzgado inferior estimo la mocion y sobreseyo la demanda sin perjuicio y sin costas. En apelacion, la demandante sostiene que fue un error considerar la demanda como una contra la Republica y sobreseer en su virtud la demanda. La mocion contra "Isaias Fernando, Director de Obras Publicas, encargado y responsable de la construccion de los sistemas de irrigacion en Filipinas" es una dirigida personalmente contra el, por actos que asumio ejecutar en su concepto oficial. La ley no le exime de responsabilidad por las extralimitaciones que cometa o haga cometer en el desempeo de sus funciones oficiales. Un caso semejante es el de Nelson vs. Bobcock (1933) 18 minn. 584, NW 49, 90 ALR 1472. Alli el Comisionado de Carreteras, al mejorar un trozo de la carretera ocupo o se apropio de terrenos contiguos al derecho de paso. El Tribunal Supremo del Estado declaro que es personalmente responsable al dueo de los daos causados. Declaro ademas que la ratificacion de lo que hicieron sus subordinados era equivalente a una orden a los mismos. He aqui lo dijo el Tribunal.

. . . to return or cause to be returned the possession of the portions of land unlawfully occupied and appropriated in the aggregate area of 24,179 square meters and to return the land to its former condition under the expenses of the defendant. . . .

We think the evidence and conceded facts permitted the jury in finding that in the trespass on plaintiff's land defendant committed acts outside the scope of his authority. When he went outside the boundaries of the right of way upon plaintiff's land and damaged it or destroyed its former condition an dusefulness, he must be held to have designedly departed from the duties imposed on him by law. There can be no claim that he thus invaded plaintiff's land southeasterly of the right of way innocently. Surveys clearly marked the limits of the land appropriated for the right of way of this trunk highway before construction began. . . . "Ratification may be equivalent to command, and cooperation may be inferred from acquiescence where there is power to restrain." It is unnecessary to consider other cases cited, . . ., for as before suggested, the jury could find or infer that, in so far as there was actual trespass by appropriation of plaintiff's land as a dumping place for the rock to be removed from the additional appropriated right of way, defendant planned, approved, and ratified what was done by his subordinates. Nelson vs. Bobcock, 90 A.L.R., 1472, 1476, 1477. La doctrina sobre la responsabilidad civil de los funcionarios en casos parecidos se resume como sigue: Ordinarily the officer or employee committing the tort is personally liable therefor, and may be sued as any other citizen and held answerable for whatever injury or damage results from his tortious act. 49 Am. Jur. 289. . . . If an officer, even while acting under color of his office, exceeds the power conferred on him by law, he

cannot shelter himself under the plea that he is a public agent. 43 Am. Jur. 86. It is a general rule that an officer-executive, administrative quasi-judicial, ministerial, or otherwise who acts outside the scope of his jurisdiction and without authorization of law may thereby render himself amenable to personal liability in a civil suit. If he exceed the power conferred on him by law, he cannot shelter himself by the plea that he is a public agent acting under the color of his office, and not personally. In the eye of the law, his acts then are wholly without authority. 43 Am. Jur. 89-90. El articulo 32 del Codigo Civil dice a su vez: ART. 32. Any public officer or emplyee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: xxx xxx xxx

(6) The right against deprivation of property without due process of law; xxx xxx xxx

In any of the cases referred to this article, whether or not the defendant's acts or omission constitutes a criminal offense, the aggrieved party has a right ot commence an entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted), and may be proved by a preponderance of evidence.

The inmdemnity shall include moral damages Exemplary damages may also be adjudicated. Veanse tambien Lung vs. Aldanese, 45 Phil., 784; Syquia vs. Almeda, No. L-1648, Agosto 17, 1947; Marquez vs. Nelson, No. L-2412, Septiembre 1950. Se revoca la orden apelada y se ordena la continuacion de la tramitacion de la demanda conforme proveen los reglamentos. Sin especial pronunciamiento en cuanto a las costas. Asi se ordena. -USA vs. GUINTO

The bidding was won by Ramon Dizon, over the objection of the private respondents, who claimed that he had made a bid for four facilities, including the Civil Engineering Area, which was not included in the invitation to bid. The private respondents complained to the Philippine Area Exchange (PHAX). The latter, through its representatives, petitioners Yvonne Reeves and Frederic M. Smouse explained that the Civil Engineering concession had not been awarded to Dizon as a result of the February 24, 1986 solicitation. Dizon was already operating this concession, then known as the NCO club concession, and the expiration of the contract had been extended from June 30, 1986 to August 31, 1986. They further explained that the solicitation of the CE barbershop would be available only by the end of June and the private respondents would be notified. On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX and the individual petitioners to cancel the award to defendant Dizon, to conduct a rebidding for the barbershop concessions and to allow the private respondents by a writ of preliminary injunction to continue operating the concessions pending litigation. 1 Upon the filing of the complaint, the respondent court issued an ex parte order directing the individual petitioners to maintain the status quo. On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for preliminary injunction on the ground that the action was in effect a suit against the United States of America, which had not waived its nonsuability. The individual defendants, as official employees of the U.S. Air Force, were also immune from suit.

These cases have been consolidated because they all involve the doctrine of state immunity. The United States of America was not impleaded in the complaints below but has moved to dismiss on the ground that they are in effect suits against it to which it has not consented. It is now contesting the denial of its motions by the respondent judges. In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force stationed in Clark Air Base in connection with the bidding conducted by them for contracts for barber services in the said base. On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S. Air Force, solicited bids for such contracts through its contracting officer, James F. Shaw. Among those who submitted their bids were private respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia had been a concessionaire inside Clark for 34 years; del Pilar for 12 years; and Tanglao for 50 years.

On the same date, July 22, 1986, the trial court denied the application for a writ of preliminary injunction. On October 10, 1988, the trial court denied the petitioners' motion to dismiss, holding in part as follows: From the pleadings thus far presented to this Court by the parties, the Court's attention is called by the relationship between the plaintiffs as well as the defendants, including the US Government, in that prior to the bidding or solicitation in question, there was a binding contract between the plaintiffs as well as the defendants, including the US Government. By virtue of said contract of concession it is the Court's understanding that neither the US Government nor the herein principal defendants would become the employer/s of the plaintiffs but that the latter are the employers themselves of the barbers, etc. with the employer, the plaintiffs herein, remitting the stipulated percentage of commissions to the Philippine Area Exchange. The same circumstance would become in effect when the Philippine Area Exchange opened for bidding or solicitation the questioned barber shop concessions. To this extent, therefore, indeed a commercial transaction has been entered, and for purposes of the said solicitation, would necessarily be entered between the plaintiffs as well as the defendants. The Court, further, is of the view that Article XVIII of the RP-US Bases Agreement does not cover such kind of

services falling under the concessionaireship, such as a barber shop concession. 2 On December 11, 1986, following the filing of the herein petition for certiorari and prohibition with preliminary injunction, we issued a temporary restraining order against further proceedings in the court below. 3 In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony Lamachia, Wilfredo Belsa, Rose Cartalla and Peter Orascion for his dismissal as cook in the U.S. Air Force Recreation Center at the John Hay Air Station in Baguio City. It had been ascertained after investigation, from the testimony of Belsa Cartalla and Orascion, that Genove had poured urine into the soup stock used in cooking the vegetables served to the club customers. Lamachia, as club manager, suspended him and thereafter referred the case to a board of arbitrators conformably to the collective bargaining agreement between the Center and its employees. The board unanimously found him guilty and recommended his dismissal. This was effected on March 5, 1986, by Col. David C. Kimball, Commander of the 3rd Combat Support Group, PACAF Clark Air Force Base. Genove's reaction was to file Ms complaint in the Regional Trial Court of Baguio City against the individual petitioners. 4 On March 13, 1987, the defendants, joined by the United States of America, moved to dismiss the complaint, alleging that Lamachia, as an officer of the U.S. Air Force stationed at John Hay Air Station, was immune from suit for the acts done by him in his official capacity. They argued that the suit was in effect against the United States, which had not given its consent to be sued. This motion was denied by the respondent judge on June 4, 1987, in an order which read in part:

It is the understanding of the Court, based on the allegations of the complaint which have been hypothetically admitted by defendants upon the filing of their motion to dismiss that although defendants acted initially in their official capacities, their going beyond what their functions called for brought them out of the protective mantle of whatever immunities they may have had in the beginning. Thus, the allegation that the acts complained of were illegal, done. with extreme bad faith and with preconceived sinister plan to harass and finally dismiss the plaintiff, gains significance. 5 The petitioners then came to this Court seeking certiorari and prohibition with preliminary injunction. In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp O' Donnell, an extension of Clark Air Base, was arrested following a buy-bust operation conducted by the individual petitioners herein, namely, Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special agents of the Air Force Office of Special Investigators (AFOSI). On the basis of the sworn statements made by them, an information for violation of R.A. 6425, otherwise known as the Dangerous Drugs Act, was filed against Bautista in the Regional Trial Court of Tarlac. The above-named officers testified against him at his trial. As a result of the filing of the charge, Bautista was dismissed from his employment. He then filed a complaint for damages against the individual petitioners herein claiming that it was because of their acts that he was removed. 6 During the period for filing of the answer, Mariano Y. Navarro a special counsel assigned to the International Law Division,

Office of the Staff Judge Advocate of Clark Air Base, entered a special appearance for the defendants and moved for an extension within which to file an "answer and/or other pleadings." His reason was that the Attorney General of the United States had not yet designated counsel to represent the defendants, who were being sued for their official acts. Within the extended period, the defendants, without the assistance of counsel or authority from the U.S. Department of Justice, filed their answer. They alleged therein as affirmative defenses that they had only done their duty in the enforcement of the laws of the Philippines inside the American bases pursuant to the RP-US Military Bases Agreement. On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to represent the defendants, filed with leave of court a motion to withdraw the answer and dismiss the complaint. The ground invoked was that the defendants were acting in their official capacity when they did the acts complained of and that the complaint against them was in effect a suit against the United States without its consent. The motion was denied by the respondent judge in his order dated September 11, 1987, which held that the claimed immunity under the Military Bases Agreement covered only criminal and not civil cases. Moreover, the defendants had come under the jurisdiction of the court when they submitted their answer. 7 Following the filing of the herein petition for certiorari and prohibition with preliminary injunction, we issued on October 14, 1987, a temporary restraining order. 8 In G.R. No. 80258, a complaint for damages was filed by the private respondents against the herein petitioners (except the United States of America), for injuries allegedly sustained by the plaintiffs as a result of the acts of the defendants. 9

There is a conflict of factual allegations here. According to the plaintiffs, the defendants beat them up, handcuffed them and unleashed dogs on them which bit them in several parts of their bodies and caused extensive injuries to them. The defendants deny this and claim the plaintiffs were arrested for theft and were bitten by the dogs because they were struggling and resisting arrest, The defendants stress that the dogs were called off and the plaintiffs were immediately taken to the medical center for treatment of their wounds. In a motion to dismiss the complaint, the United States of America and the individually named defendants argued that the suit was in effect a suit against the United States, which had not given its consent to be sued. The defendants were also immune from suit under the RP-US Bases Treaty for acts done by them in the performance of their official functions. The motion to dismiss was denied by the trial court in its order dated August 10, 1987, reading in part as follows: The defendants certainly cannot correctly argue that they are immune from suit. The allegations, of the complaint which is sought to be dismissed, had to be hypothetically admitted and whatever ground the defendants may have, had to be ventilated during the trial of the case on the merits. The complaint alleged criminal acts against the individuallynamed defendants and from the nature of said acts it could not be said that they are Acts of State, for which immunity should be invoked. If the Filipinos themselves are duty bound to respect, obey and submit themselves to the laws of the country, with more reason, the members of the United States Armed Forces who are being treated as guests of this country should

respect, obey and submit themselves to its laws. 10 and so was the motion for reconsideration. The defendants submitted their answer as required but subsequently filed their petition for certiorari and prohibition with preliminary injunction with this Court. We issued a temporary restraining order on October 27, 1987. 11 II The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law of our land under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and also intended to manifest our resolve to abide by the rules of the international community. Even without such affirmation, we would still be bound by the generally accepted principles of international law under the doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such principles are deemed incorporated in the law of every civilized state as a condition and consequence of its membership in the society of nations. Upon its admission to such society, the state is automatically obligated to comply with these principles in its relations with other states. As applied to the local state, the doctrine of state immunity is based on the justification given by Justice Holmes that "there can be no legal right against the authority which makes the law on which the right depends." 12 There are other practical reasons for the enforcement of the doctrine. In the case of the foreign state sought to be impleaded in the local jurisdiction, the added inhibition is expressed in the maxim

par in parem, non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another. A contrary disposition would, in the language of a celebrated case, "unduly vex the peace of nations." 13 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. 14 In such a situation, the state may move to dismiss the complaint on the ground that it has been filed without its consent. The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the privilege it grants the state to defeat any legitimate claim against it by simply invoking its non-suability. That is hardly fair, at least in democratic societies, for the state is not an unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not absolute and does not say the state may not be sued under any circumstance. On the contrary, the rule says that the state may not be sued without its consent, which clearly imports that it may be sued if it consents. The consent of the state to be sued may be manifested expressly or impliedly. Express consent may be embodied in a general law or a special law. Consent is implied when the state enters into a contract or it itself commences litigation. The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the Philippine government "consents and submits to be sued upon any

moneyed claim involving liability arising from contract, express or implied, which could serve as a basis of civil action between private parties." In Merritt v. Government of the Philippine Islands, 15 a special law was passed to enable a person to sue the government for an alleged tort. When the government enters into a contract, it is deemed to have descended to the level of the other contracting party and divested of its sovereign immunity from suit with its implied consent. 16 Waiver is also implied when the government files a complaint, thus opening itself to a counterclaim. 17 The above rules are subject to qualification. Express consent is effected only by the will of the legislature through the medium of a duly enacted statute. 18 We have held that not all contracts entered into by the government will operate as a waiver of its non-suability; distinction must be made between its sovereign and proprietary acts. 19 As for the filing of a complaint by the government, suability will result only where the government is claiming affirmative relief from the defendant. 20 In the case of the United States of America, the customary rule of international law on state immunity is expressed with more specificity in the RP-US Bases Treaty. Article III thereof provides as follows: It is mutually agreed that the United States shall have the rights, power and authority within the bases which are necessary for the establishment, use, operation and defense thereof or appropriate for the control thereof and all the rights, power and authority within the limits of the territorial waters and air space adjacent to, or in the vicinity of, the bases which are necessary to provide access to them or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, 21 along with several other decisions, to support their position that they are not suable in the cases below, the United States not having waived its sovereign immunity from suit. It is emphasized that in Baer, the Court held: The invocation of the doctrine of immunity from suit of a foreign state without its consent is appropriate. More specifically, insofar as alien armed forces is concerned, the starting point is Raquiza v. Bradford, a 1945 decision. In dismissing a habeas corpus petition for the release of petitioners confined by American army authorities, Justice Hilado speaking for the Court, cited Coleman v. Tennessee, where it was explicitly declared: 'It is well settled that a foreign army, permitted to march through a friendly country or to be stationed in it, by permission of its government or sovereign, is exempt from the civil and criminal jurisdiction of the place.' Two years later, in Tubb and Tedrow v. Griess, this Court relied on the ruling in Raquiza v. Bradford and cited in support thereof excerpts from the works of the following authoritative writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy demands the clarification that after the conclusion of the Philippine-American Military Bases Agreement, the treaty provisions should control on such matter, the assumption being that there was a manifestation of the submission to jurisdiction on the part of the foreign power whenever appropriate. More to the point is Syquia v.

Almeda Lopez, where plaintiffs as lessors sued the Commanding General of the United States Army in the Philippines, seeking the restoration to them of the apartment buildings they owned leased to the United States armed forces stationed in the Manila area. A motion to dismiss on the ground of non-suability was filed and upheld by respondent Judge. The matter was taken to this Court in a mandamus proceeding. It failed. It was the ruling that respondent Judge acted correctly considering that the 4 action must be considered as one against the U.S. Government. The opinion of Justice Montemayor continued: 'It is clear that the courts of the Philippines including the Municipal Court of Manila have no jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was raised and interposed at the very beginning of the action. The U.S. Government has not given its consent to the filing of this suit which is essentially against her, though not in name. Moreover, this is not only a case of a citizen filing a suit against his own Government without the latter's consent but it is of a citizen firing an action against a foreign government without said government's consent, which renders more obvious the lack of jurisdiction of the courts of his country. The principles of law behind this rule are so elementary and of such general acceptance that we deem it unnecessary to cite authorities in support thereof then came Marvel Building Corporation v. Philippine War Damage

Commission, where respondent, a United States Agency established to compensate damages suffered by the Philippines during World War II was held as falling within the above doctrine as the suit against it would eventually be a charge against or financial liability of the United States Government because ... , the Commission has no funds of its own for the purpose of paying money judgments.' The Syquia ruling was again explicitly relied upon in Marquez Lim v. Nelson, involving a complaint for the recovery of a motor launch, plus damages, the special defense interposed being 'that the vessel belonged to the United States Government, that the defendants merely acted as agents of said Government, and that the United States Government is therefore the real party in interest.' So it was in Philippine Alien Property Administration v. Castelo, where it was held that a suit against Alien Property Custodian and the Attorney General of the United States involving vested property under the Trading with the Enemy Act is in substance a suit against the United States. To the same effect is Parreno v. McGranery, as the following excerpt from the opinion of justice Tuazon clearly shows: 'It is a widely accepted principle of international law, which is made a part of the law of the land (Article II, Section 3 of the Constitution), that a foreign state may not be brought to suit before the courts of another state or its own courts without its consent.' Finally, there is Johnson v. Turner, an appeal by the defendant, then

Commanding General, Philippine Command (Air Force, with office at Clark Field) from a decision ordering the return to plaintiff of the confiscated military payment certificates known as scrip money. In reversing the lower court decision, this Tribunal, through Justice Montemayor, relied on Syquia v. Almeda Lopez, explaining why it could not be sustained. It bears stressing at this point that the above observations do not confer on the United States of America a blanket immunity for all acts done by it or its agents in the Philippines. Neither may the other petitioners claim that they are also insulated from suit in this country merely because they have acted as agents of the United States in the discharge of their official functions. There is no question that the United States of America, like any other state, will be deemed to have impliedly waived its non-suability if it has entered into a contract in its proprietary or private capacity. It is only when the contract involves its sovereign or governmental capacity that no such waiver may be implied. This was our ruling in United States of America v. Ruiz, 22 where the transaction in question dealt with the improvement of the wharves in the naval installation at Subic Bay. As this was a clearly governmental function, we held that the contract did not operate to divest the United States of its sovereign immunity from suit. In the words of Justice Vicente Abad Santos: The traditional rule of immunity exempts a State from being sued in the courts of another State without its consent or waiver. This rule is a necessary consequence of the principles of independence and equality of States.

However, the rules of International Law are not petrified; they are constantly developing and evolving. And because the activities of states have multiplied, it has been necessary to distinguish them between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result is that State immunity now extends only to acts jure imperii The restrictive application of State immunity is now the rule in the United States, the United kingdom and other states in Western Europe. xxx xxx xxx The restrictive application of State immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State may be said to have descended to the level of an individual and can thus be deemed to have tacitly given its consent to be sued only when it enters into business contracts. It does not apply where the contract relates to the exercise of its sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the defense of both the United States and the Philippines, indisputably a function of the government of the highest order; they are not utilized for nor dedicated to commercial or business purposes.

The other petitioners in the cases before us all aver they have acted in the discharge of their official functions as officers or agents of the United States. However, this is a matter of evidence. The charges against them may not be summarily dismissed on their mere assertion that their acts are imputable to the United States of America, which has not given its consent to be sued. In fact, the defendants are sought to be held answerable for personal torts in which the United States itself is not involved. If found liable, they and they alone must satisfy the judgment. In Festejo v. Fernando, 23 a bureau director, acting without any authority whatsoever, appropriated private land and converted it into public irrigation ditches. Sued for the value of the lots invalidly taken by him, he moved to dismiss the complaint on the ground that the suit was in effect against the Philippine government, which had not given its consent to be sued. This Court sustained the denial of the motion and held that the doctrine of state immunity was not applicable. The director was being sued in his private capacity for a personal tort. With these considerations in mind, we now proceed to resolve the cases at hand. III It is clear from a study of the records of G.R. No. 80018 that the individually-named petitioners therein were acting in the exercise of their official functions when they conducted the buy-bust operation against the complainant and thereafter testified against him at his trial. The said petitioners were in fact connected with the Air Force Office of Special Investigators and were charged precisely with the function of preventing the distribution, possession and use of prohibited drugs and prosecuting those guilty of such acts. It cannot for a moment be imagined that they were acting in their private

or unofficial capacity when they apprehended and later testified against the complainant. It follows that for discharging their duties as agents of the United States, they cannot be directly impleaded for acts imputable to their principal, which has not given its consent to be sued. As we observed in Sanders v. Veridiano: 24 Given the official character of the abovedescribed letters, we have to conclude that the petitioners were, legally speaking, being sued as officers of the United States government. As they have acted on behalf of that government, and within the scope of their authority, it is that government, and not the petitioners personally, that is responsible for their acts. The private respondent invokes Article 2180 of the Civil Code which holds the government liable if it acts through a special agent. The argument, it would seem, is premised on the ground that since the officers are designated "special agents," the United States government should be liable for their torts. There seems to be a failure to distinguish between suability and liability and a misconception that the two terms are synonymous. Suability depends on the consent of the state to be sued, liability on the applicable law and the established facts. The circumstance that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable.

The said article establishes a rule of liability, not suability. The government may be held liable under this rule only if it first allows itself to be sued through any of the accepted forms of consent. Moreover, the agent performing his regular functions is not a special agent even if he is so denominated, as in the case at bar. No less important, the said provision appears to regulate only the relations of the local state with its inhabitants and, hence, applies only to the Philippine government and not to foreign governments impleaded in our courts. We reject the conclusion of the trial court that the answer filed by the special counsel of the Office of the Sheriff Judge Advocate of Clark Air Base was a submission by the United States government to its jurisdiction. As we noted in Republic v. Purisima, 25 express waiver of immunity cannot be made by a mere counsel of the government but must be effected through a duly-enacted statute. Neither does such answer come under the implied forms of consent as earlier discussed. But even as we are certain that the individual petitioners in G.R. No. 80018 were acting in the discharge of their official functions, we hesitate to make the same conclusion in G.R. No. 80258. The contradictory factual allegations in this case deserve in our view a closer study of what actually happened to the plaintiffs. The record is too meager to indicate if the defendants were really discharging their official duties or had actually exceeded their authority when the incident in question occurred. Lacking this information, this Court cannot directly decide this case. The needed inquiry must first be made by the lower court so it may assess and resolve the conflicting claims of the parties on the basis of the evidence that has yet to be presented at the trial. Only after it shall have determined in what capacity the petitioners were acting at the time of the incident in question will this

Court determine, if still necessary, if the doctrine of state immunity is applicable. In G.R. No. 79470, private respondent Genove was employed as a cook in the Main Club located at the U.S. Air Force Recreation Center, also known as the Open Mess Complex, at John Hay Air Station. As manager of this complex, petitioner Lamachia is responsible for eleven diversified activities generating an annual income of $2 million. Under his executive management are three service restaurants, a cafeteria, a bakery, a Class VI store, a coffee and pantry shop, a main cashier cage, an administrative office, and a decentralized warehouse which maintains a stock level of $200,000.00 per month in resale items. He supervises 167 employees, one of whom was Genove, with whom the United States government has concluded a collective bargaining agreement. From these circumstances, the Court can assume that the restaurant services offered at the John Hay Air Station partake of the nature of a business enterprise undertaken by the United States government in its proprietary capacity. Such services are not extended to the American servicemen for free as a perquisite of membership in the Armed Forces of the United States. Neither does it appear that they are exclusively offered to these servicemen; on the contrary, it is well known that they are available to the general public as well, including the tourists in Baguio City, many of whom make it a point to visit John Hay for this reason. All persons availing themselves of this facility pay for the privilege like all other customers as in ordinary restaurants. Although the prices are concededly reasonable and relatively low, such services are undoubtedly operated for profit, as a commercial and not a governmental activity. The consequence of this finding is that the petitioners cannot invoke the doctrine of state immunity to justify the dismissal of the damage suit against them by Genove. Such defense

will not prosper even if it be established that they were acting as agents of the United States when they investigated and later dismissed Genove. For that matter, not even the United States government itself can claim such immunity. The reason is that by entering into the employment contract with Genove in the discharge of its proprietary functions, it impliedly divested itself of its sovereign immunity from suit. But these considerations notwithstanding, we hold that the complaint against the petitioners in the court below must still be dismissed. While suable, the petitioners are nevertheless not liable. It is obvious that the claim for damages cannot be allowed on the strength of the evidence before us, which we have carefully examined. The dismissal of the private respondent was decided upon only after a thorough investigation where it was established beyond doubt that he had polluted the soup stock with urine. The investigation, in fact, did not stop there. Despite the definitive finding of Genove's guilt, the case was still referred to the board of arbitrators provided for in the collective bargaining agreement. This board unanimously affirmed the findings of the investigators and recommended Genove's dismissal. There was nothing arbitrary about the proceedings. The petitioners acted quite properly in terminating the private respondent's employment for his unbelievably nauseating act. It is surprising that he should still have the temerity to file his complaint for damages after committing his utterly disgusting offense. Concerning G.R. No. 76607, we also find that the barbershops subject of the concessions granted by the United States government are commercial enterprises operated by private person's. They are not agencies of the United States Armed Forces nor are their facilities demandable as a matter of right by the American servicemen. These establishments provide for the grooming needs of their customers and offer not only the basic haircut and shave (as required in most military

organizations) but such other amenities as shampoo, massage, manicure and other similar indulgences. And all for a fee. Interestingly, one of the concessionaires, private respondent Valencia, was even sent abroad to improve his tonsorial business, presumably for the benefit of his customers. No less significantly, if not more so, all the barbershop concessionaires are under the terms of their contracts, required to remit to the United States government fixed commissions in consideration of the exclusive concessions granted to them in their respective areas. This being the case, the petitioners cannot plead any immunity from the complaint filed by the private respondents in the court below. The contracts in question being decidedly commercial, the conclusion reached in the United States of America v. Ruiz case cannot be applied here. The Court would have directly resolved the claims against the defendants as we have done in G.R. No. 79470, except for the paucity of the record in the case at hand. The evidence of the alleged irregularity in the grant of the barbershop concessions is not before us. This means that, as in G.R. No. 80258, the respondent court will have to receive that evidence first, so it can later determine on the basis thereof if the plaintiffs are entitled to the relief they seek. Accordingly, this case must also be remanded to the court below for further proceedings. IV There are a number of other cases now pending before us which also involve the question of the immunity of the United States from the jurisdiction of the Philippines. This is cause for regret, indeed, as they mar the traditional friendship between two countries long allied in the cause of democracy. It is hoped that the so-called "irritants" in their relations will be resolved in a spirit of mutual accommodation and respect,

without the inconvenience and asperity of litigation and always with justice to both parties. WHEREFORE, after considering all the above premises, the Court hereby renders judgment as follows: 1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is directed to proceed with the hearing and decision of Civil Case No. 4772. The temporary restraining order dated December 11, 1986, is LIFTED. 2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is DISMISSED. 3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is DISMISSED. The temporary restraining order dated October 14, 1987, is made permanent. 4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is directed to proceed with the hearing and decision of Civil Case No. 4996. The temporary restraining order dated October 27, 1987, is LIFTED. All without any pronouncement as to costs. --

THE HOLY SEE vs.THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES, INC. QUIASON, J.: This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183. The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion for reconsideration of the June 20,1991 Order. Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is represented in the Philippines by the Papal Nuncio. Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate business. This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of Paraaque, Metro Manila and registered in the name of petitioner. Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of Title Nos. 271108 and 265388 respectively and registered in the name of the Philippine Realty Corporation (PRC). The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as to who of the parties has the responsibility of evicting and clearing the land of squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to Tropicana Properties and Development Corporation (Tropicana). I On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land, and specific performance and damages against petitioner, represented by the Papal Nuncio, and three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No. 90-183). The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per square meters; (2) the agreement to sell was made on the condition that earnest money of P100,000.00 be paid by Licup to the sellers, and that the sellers clear the said lots of squatters who were then occupying the same; (3) Licup paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup assigned his rights over the property to private respondent and informed the sellers of the said assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos that the sellers fulfill their undertaking and clear the property of squatters; however, Msgr. Cirilos informed private respondent of the squatters' refusal to vacate the lots, proposing instead either that private respondent undertake the eviction or that the earnest money be returned to the latter; (6) private respondent counterproposed that if it would undertake the eviction of the squatters, the purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private respondent giving it seven days from receipt of the letter to pay the original purchase price in cash; (8) private respondent sent the earnest money back to the sellers, but

later discovered that on March 30, 1989, petitioner and the PRC, without notice to private respondent, sold the lots to Tropicana, as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer certificate of title over the lots were cancelled, transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner and the PRC to sell the lots to it and thus enriched itself at the expense of private respondent; (10) private respondent demanded the rescission of the sale to Tropicana and the reconveyance of the lots, to no avail; and (11) private respondent is willing and able to comply with the terms of the contract to sell and has actually made plans to develop the lots into a townhouse project, but in view of the sellers' breach, it lost profits of not less than P30,000.000.00. Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance of the lots in question; (3) specific performance of the agreement to sell between it and the owners of the lots; and (4) damages. On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for being an improper party. An opposition to the motion was filed by private respondent. On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into the business contract in question" (Rollo, pp. 20-21). On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for claim of Immunity as a Jurisdictional Defense." So as to facilitate the determination of its defense of sovereign immunity, petitioner prayed that a hearing

be conducted to allow it to establish certain facts upon which the said defense is based. Private respondent opposed this motion as well as the motion for reconsideration. On October 1, 1991, the trial court issued an order deferring the resolution on the motion for reconsideration until after trial on the merits and directing petitioner to file its answer (Rollo, p. 22). Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of sovereign immunity only on its own behalf and on behalf of its official representative, the Papal Nuncio. On December 9, 1991, a Motion for Intervention was filed before us by the Department of Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards the diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained in the petition of the Holy See insofar as they refer to arguments relative to its claim of sovereign immunity from suit" (Rollo, p. 87). Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with the resolution of this Court, both parties and the Department of Foreign Affairs submitted their respective memoranda. II A preliminary matter to be threshed out is the procedural issue of whether the petition for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the order denying petitioner's motion to dismiss. The general rule is that an order denying a motion to dismiss is not reviewable by the appellate courts, the remedy of the movant being to file his answer and to proceed with the hearing before the trial court. But the general rule admits of exceptions, and one of these is when it is very clear in the records that the trial court has no alternative but to dismiss the

complaint (Philippine National Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such a case, it would be a sheer waste of time and energy to require the parties to undergo the rigors of a trial. The other procedural question raised by private respondent is the personality or legal interest of the Department of Foreign Affairs to intervene in the case in behalf of the Holy See ( Rollo, pp. 186-190). In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court that said defendant is entitled to immunity. In the United States, the procedure followed is the process of "suggestion," where the foreign state or the international organization sued in an American court requests the Secretary of State to make a determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]). In the Philippines, the practice is for the foreign government or the international organization to first secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic Migration Commission v. Calleja , 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the latter that the respondent-employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization v.

Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a Manifestation and Memorandum as amicus curiae. In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed the said Department to file its memorandum in support of petitioner's claim of sovereign immunity. In some cases, the defense of sovereign immunity was submitted directly to the local courts by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states bypass the Foreign Office, the courts can inquire into the facts and make their own determination as to the nature of the acts and transactions involved. III The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a foreign state enjoying sovereign immunity. On the other hand, private respondent insists that the doctrine of non-suability is not anymore absolute and that petitioner has divested itself of such a cloak when, of its own free will, it entered into a commercial transaction for the sale of a parcel of land located in the Philippines. A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign state is in order. Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the Holy See, was considered a subject of International Law. With the loss of the Papal States and the limitation of the territory under the Holy See to an area of 108.7 acres, the position of the Holy See in International Law became controversial (Salonga and Yap, Public International Law 36-37 [1992]). In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats to foreign countries, and to enter into treaties according to International Law (Garcia, Questions and Problems In International Law, Public and Private 81 [1948]). The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to the Holy See absolute and visible independence and of guaranteeing to it indisputable sovereignty also in the field of international relations" (O'Connell, I International Law 311 [1965]). In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is vested in the Holy See or in the Vatican City. Some writers even suggested that the treaty created two international persons the Holy See and Vatican City (Salonga and Yap, supra, 37). The Vatican City fits into none of the established categories of states, and the attribution to it of "sovereignty" must be made in a sense different from that in which it is applied to other states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a community of national states, the Vatican City represents an entity organized not for political but for ecclesiastical

purposes and international objects. Despite its size and object, the Vatican City has an independent government of its own, with the Pope, who is also head of the Roman Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and the demands of its mission in the world. Indeed, the world-wide interests and activities of the Vatican City are such as to make it in a sense an "international state" (Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]). One authority wrote that the recognition of the Vatican City as a state has significant implication that it is possible for any entity pursuing objects essentially different from those pursued by states to be invested with international personality (Kunz, The Status of the Holy See in International Law, 46 The American Journal of International Law 308 [1952]). Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy See and not in the name of the Vatican City, one can conclude that in the Pope's own view, it is the Holy See that is the international person. The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal practice in international relations. B. Sovereign Immunity As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally accepted principles of International Law. Even without this affirmation, such principles of International Law are deemed incorporated as part of the law of the land as a condition and consequence of our admission in the society of nations (United States of America v. Guinto, 182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According to the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the courts of another sovereign. According to the newer or restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis (United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International Law 194 [1984]). Some states passed legislation to serve as guidelines for the executive or judicial determination when an act may be considered as jure gestionis. The United States passed the Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as "either a regular course of commercial conduct or a particular commercial transaction or act." Furthermore, the law declared that the "commercial character of the activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." The Canadian Parliament enacted in 1982 an Act to Provide For State Immunity in Canadian Courts. The Act defines a "commercial activity" as any particular transaction, act or conduct or any regular course of conduct that by reason of its nature, is of a "commercial character." The restrictive theory, which is intended to be a solution to the host of problems involving the issue of sovereign immunity, has created problems of its own. Legal treatises and the decisions in countries which follow the restrictive theory have difficulty in characterizing whether a contract of a sovereign state with a private party is an act jure gestionis or an act jure imperii. The restrictive theory came about because of the entry of sovereign states into purely commercial activities remotely connected with the discharge of governmental functions. This is particularly true with respect to the Communist states which took control of nationalized business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the repair of a wharf at a United States Naval Station (United States of America v. Ruiz, supra.); and (3) the change of employment status of base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]). On the other hand, this Court has considered the following transactions by a foreign state with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay Air Station in Baguio City, to cater to American servicemen and the general public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the operation of barber shops in Clark Air Base in Angeles City (United States of America v. Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to the general public is undoubtedly for profit as a commercial and not a governmental activity. By entering into the employment contract with the cook in the discharge of its proprietary function, the United States government impliedly divested itself of its sovereign immunity from suit. In the absence of legislation defining what activities and transactions shall be considered "commercial" and as constituting acts jure gestionis, we have to come out with our own guidelines, tentative they may be. Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it

is an act jure imperii, especially when it is not undertaken for gain or profit. As held in United States of America v. Guinto, (supra): There is no question that the United States of America, like any other state, will be deemed to have impliedly waived its non-suability if it has entered into a contract in its proprietary or private capacity. It is only when the contract involves its sovereign or governmental capacity that no such waiver may be implied. In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business, surely the said transaction can be categorized as an act jure gestionis. However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were made for profit but claimed that it acquired said property for the site of its mission or the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim. Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not for commercial purpose, but for the use of petitioner to construct thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign to acquire property, real or personal, in a receiving state, necessary for the creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and entered into force in the Philippines on November 15, 1965. In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and administrative jurisdiction of the receiving state over any real action relating to private immovable property situated in the territory of the receiving state which the envoy holds on behalf of the sending state for the purposes of the

mission. If this immunity is provided for a diplomatic envoy, with all the more reason should immunity be recognized as regards the sovereign itself, which in this case is the Holy See. The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a governmental character. Petitioner did not sell Lot 5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon made it almost impossible for petitioner to use it for the purpose of the donation. The fact that squatters have occupied and are still occupying the lot, and that they stubbornly refuse to leave the premises, has been admitted by private respondent in its complaint (Rollo, pp. 26, 27). The issue of petitioner's non-suability can be determined by the trial court without going to trial in the light of the pleadings, particularly the admission of private respondent. Besides, the privilege of sovereign immunity in this case was sufficiently established by the Memorandum and Certification of the Department of Foreign Affairs. As the department tasked with the conduct of the Philippines' foreign relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this case and officially certified that the Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of the Philippines exempt from local jurisdiction and entitled to all the rights, privileges and immunities of a diplomatic mission or embassy in this country (Rollo, pp. 156-157). The determination of the executive arm of government that a state or instrumentality is entitled to sovereign or diplomatic immunity is a political question that is conclusive upon the courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea of immunity is recognized and affirmed by the executive branch, it is the duty of the courts to accept this claim so as not to embarrass the executive arm of the government in conducting the country's foreign relations (World Health Organization v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration Commission and in World Health Organization, we abide by the certification of the Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a hearing to establish the facts alleged by petitioner in its motion. In view of said certification, such procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994). IV Private respondent is not left without any legal remedy for the redress of its grievances. Under both Public International Law and Transnational Law, a person who feels aggrieved by the acts of a foreign sovereign can ask his own government to espouse his cause through diplomatic channels. Private respondent can ask the Philippine government, through the Foreign Office, to espouse its claims against the Holy See. Its first task is to persuade the Philippine government to take up with the Holy See the validity of its claims. Of course, the Foreign Office shall first make a determination of the impact of its espousal on the relations between the Philippine government and the Holy See (Young, Remedies of Private Claimants Against Foreign States , Selected Readings on Protection by Law of Private Foreign Investments 905, 919 [1964]). Once the Philippine government decides to espouse the claim, the latter ceases to be a private cause. According to the Permanent Court of International Justice, the forerunner of the International Court of Justice: By taking up the case of one of its subjects and by reporting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own rights its right to ensure, in the person of its subjects, respect for the rules of international law (The Mavrommatis Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).

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

REPUBLIC OF THE PHILIPPINES vs.HONORABLE AMANTE P. PURISIMA, the Presiding Judge of the court of first Instance of Manila (Branch VII), and YELLOW BALL FREIGHT LINES, INC. FERNANDO, Acting C.J.: 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. 1 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, 2 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. 3 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. 4 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." 5

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: 6 "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@it 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 very well be imagined." 7 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; 8 Republic v. Villasor; 9 Sayson v. Singson; 10 and Director of the Bureau of Printing v. Francisco. 11 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 principles must prevail if government is to satisfy the public weal, the verdict must be, as it has been these so many years, for its continuing recognition as a fundamental postulate of constitutional law." 12 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. 13 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, 14 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." 15 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.

-VICTORIA AMIGABLE vs.NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE PHILIPPINES, MAKALINTAL, J.:p This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977, dismissing the plaintiff's complaint. Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate in Cebu City as shown by Transfer Certificate of Title No. T-18060, which superseded Transfer Certificate of Title No. RT-3272 (T-3435) issued to her by the Register of Deeds of Cebu on February 1, 1924. No annotation in favor of the government of any right or interest in the property appears at the back of the certificate. Without prior expropriation or negotiated sale, the government used a portion of said lot, with an area of 6,167 square meters, for the construction of the Mango and Gorordo Avenues. It appears that said avenues were already existing in 1921 although "they were in bad condition and very narrow, unlike the wide and beautiful avenues that they are now," and "that the tracing of said roads was begun in 1924, and the formal construction in 1925." * On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the portion of her lot which had been appropriated by the government. The claim was indorsed to the Auditor General, who disallowed it in his 9th Indorsement dated December 9, 1958. A copy of said indorsement was transmitted to Amigable's counsel by the Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April 17, 1959 upon motion of the defendants, against the Republic of the Philippines and Nicolas Cuenca, in his capacity as Commissioner of Public Highways for the recovery of ownership and possession of the 6,167 square meters of land traversed by the Mango and Gorordo Avenues. She also sought the payment of compensatory damages in the sum of P50,000.00 for the illegal occupation of her land, moral damages in the sum of P25,000.00, attorney's fees in the sum of P5,000.00 and the costs of the suit. Within the reglementary period the defendants filed a joint answer denying the material allegations of the complaint and interposing the following affirmative defenses, to wit: (1) that the action was premature, the claim not having been filed first with the Office of the Auditor General; (2) that the right of action for the recovery of any amount which might be due the plaintiff, if any, had already prescribed; (3) that the action being a suit against the Government, the claim for moral damages, attorney's fees and costs had no valid basis since as to these items the Government had not given its consent to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and used the area involved in the construction of Mango Avenue, plaintiff had no cause of action against the defendants. During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so the trial court proceeded to receive the plaintiff's evidence ex parte. On July 29, 1959 said court rendered its decision holding that it had no jurisdiction over the plaintiff's cause of action for the recovery of possession and ownership of the portion of her lot in question on the ground that the government cannot be sued without its consent; that it had neither original nor appellate jurisdiction to hear, try and decide plaintiff's claim for compensatory damages in the sum of P50,000.00, the same being a money claim against the government; and that the claim for moral damages had long prescribed, nor did it have jurisdiction over said claim because the government had not given its consent to be sued. Accordingly, the complaint was

dismissed. Unable to secure a reconsideration, the plaintiff appealed to the Court of Appeals, which subsequently certified the case to Us, there being no question of fact involved. The issue here is whether or not the appellant may properly sue the government under the facts of the case. In the case of Ministerio vs. Court of First Instance of Cebu , 1 involving a claim for payment of the value of a portion of land used for the widening of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice Enrique M. Fernando, held that where the government takes away property from a private landowner for public use without going through the legal process of expropriation or negotiated sale, the aggrieved party may properly maintain a suit against the government without thereby violating the doctrine of governmental immunity from suit without its consent. We there said: . ... . If the constitutional mandate that the owner be compensated for property taken for public use were to be respected, as it should, then a suit of this character should not be summarily dismissed. The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. Had the government followed the procedure indicated by the governing law at the time, a complaint would have been filed by it, and only upon payment of the compensation fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed, may it "have the right to enter in and upon the land so condemned, to appropriate the same to the public use defined in the judgment." If there were an observance of procedural regularity, petitioners would not be in the sad plaint they are now. It is unthinkable then that precisely because there was a failure

to abide by what the law requires, the government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from suit could still be appropriately invoked. Considering that no annotation in favor of the government appears at the back of her certificate of title and that she has not executed any deed of conveyance of any portion of her lot to the government, the appellant remains the owner of the whole lot. As registered owner, she could bring an action to recover possession of the portion of land in question at anytime because possession is one of the attributes of ownership. However, since restoration of possession of said portion by the government is neither convenient nor feasible at this time because it is now and has been used for road purposes, the only relief available is for the government to make due compensation which it could and should have done years ago. To determine the due compensation for the land, the basis should be the price or value thereof at the time of the taking. 2 As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of the land from the time it was taken up to the time that payment is made by the government. 3 In addition, the government should pay for attorney's fees, the amount of which should be fixed by the trial court after hearing. WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the court a quo for the determination of compensation, including attorney's fees, to which the appellant is entitled as above indicated. No pronouncement as to costs.

-ANGEL MINISTERIO and ASUNCION SADAYA vs. THE COURT OF FIRST INSTANCE OF CEBU, Fourth Branch, Presided by the Honorable, Judge JOSE C. BORROMEO, THE PUBLIC HIGHWAY COMMISSIONER, and THE AUDITOR GENERAL FERNANDO, J.: 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 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 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." 1 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." 2 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. 3 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.
4

validly entertained by the courts except with the consent of said Government." 6 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: 7 "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." 8 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. 9 However, as noted in Alfonso v. Pasay City, 10 this Court speaking through Justice Montemayor, restoration would be "neither convenient nor feasible because it is now and has been used for road purposes." 11 The only relief, in the opinion of this Court, would be for the government "to make due compensation, ..." 12 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 13 were to be respected, as it should, then a suit of this character should not be

So it has been categorically set forth in Syquia v. Almeda Lopez: 5 "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

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." 14 If there were an observance of procedural regularity, petitioners would not be in the sad plaint they are now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from suit could still be appropriately invoked. 15 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."
16

ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T. SANTIAGO vs. THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the Director, Bureau of Plant Industry, and the Regional Director, Region IX, Zamboanga City FERNANDO, J.: The first impression yielded by a perusal of this petition for certiorari is its inherent weakness considering the explicit provision in the present Constitution prohibiting a suit against the Republic without its consent. 1 Here petitioner Ildefonso Santiago 2 filed on August 9, 1976 an action in the Court of First Instance of Zamboanga City naming as defendant the government of the Republic of the Philippines represented by the Director of the Bureau of Plant Industry. 3 His plea was for the revocation of a deed of donation executed by him and his spouse in January of 1971, 4 with the Bureau of Plant Industry as the donee. As alleged in such complaint, such Bureau, contrary to the terms of the donation, failed to "install lighting facilities and water system on the property donated and to build an office building and parking [lot] thereon which should have been constructed and ready for occupancy on or before December 7, 1974. 5 That led him to conclude that under the circumstances, he was exempt from compliance with such an explicit constitutional command. The lower court, in the order challenged in this petition, was of a different view. It sustained a motion to dismiss on the part of the defendant Republic of the Philippines, now named as one of the respondents, the other respondent being the Court of First Instance of Zamboanga City, Branch II. It premised such an order on the settled "rule that the state cannot be sued without its consent. This is so, because the New Constitution of the Philippines expressly provides that the state may not be sued without its consent. 6 Solicitor General Estelito P. Mendoza, 7 in the com ment on the petition filed with this Court, is for the affirmance of the order of dismissal of respondent Court precisely to accord deference to the above categorical constitutional mandate.

WHEREFORE, the lower court decision of January 30, 1969 dismissing the complaint is reversed and the case remanded to the lower court for proceedings in accordance with law. --

On its face, such a submission carries persuasion. Upon further reflection, this Tribunal is impressed with the unique aspect of this petition for certiorari, dealing as it does with a suit for the revocation of a donation to the Republic, which allegedly fatted to conform with what was agreed to by the donee. If an order of dismissal would suffice, then the element of unfairness enters, the facts alleged being hypothetically admitted. It is the considered opinion of this Court then that to conform to the high dictates of equity and justice, the presumption of consent could be indulged in safely. That would serve to accord to petitioner as plaintiff, at the very least, the right to be heard. certiorari lies. 1. This is not to deny the obstacle posed by the constitutional provision. It is expressed in language plain and unmistakable: "The State may not be sued without its consent. 8 The Republic cannot be proceeded against unless it allows itself to be sued. Neither can a department, bureau, agency, office, or instrumentality of the government where the suit, according to the then Justice, now Chief Justice, Castro in Del Mar v. Philippine Veterans Administration, 9 may result "in adverse consequences to the public treasury, whether in the disbursements of funds or loss of property. 10 Such a doctrine was reiterated in the following cases: Republic v. Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v. Francisco, 13 and Republic v. Purisima. 14 2. It is contended by counsel for petitioner that the above constitutional provision would be given a retroactive application in this case if the suit for the revocation of donation were dismissed. That is not the case at all. In Republic v. Purisima, this Court made clear that such a basic postulate is part and parcel of the system of government implanted in the Philippines from the time of the acquisition of sovereignty by the United States, and therefore, was implicit in the 1935 Constitution even in the absence of any explicit language to that effect. This it did in a citation from Switzerland General Insurance Co., Ltd. v. Republic of the Philippines: 15 "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 paraphrase 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. 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. 16 That is the teaching of the leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, 17 promulgated in December of 1966. As a matter of fact, the Switzerland General Insurance Co. decision was the thirty-seventh of its kind after Mobil. Clearly, then, the contention that to dismiss the suit would be to give the applicable constitutional provision a retroactive effect is, to put it at its mildest, untenable. 3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough analysis ought to have cautioned him against reliance on such a case. It was therein clearly pointed out that the government entity involved was originally the National Airports Corporation. Thereafter, it "was abolished by Executive Order No. 365, series of 1950, and in its place and stead the Civil Aeronautics Administration was created and took over all the assets and assumed all the liabilities of the abolished corporation. The Civil Aeronautics Administration, even if it is not a juridical entity, cannot legally prevent a party or parties from enforcing their proprietary rights under the cloak or shield of lack of juridical personality, because to took over all the powers and assumed all the obligations of the defunct corporation which had entered into the contract in question." 19 Then came National Shipyard and Steel Corporation v. Court of Industrial Relations, 20 a 1963 decision, where the then Justice, later Chief Justice, Concepcion, as ponente, stated that a government-owned and controlled corporation "has a personality of its own distinct and separate from that of the government. ... Accordingly, it may sue and be sued and may be subjected to court processes just like any other corporation. (Section 13, Act 1459, as amended). 21 In three recent decisions, Philippine National Bank v. Court of Industrial Relations, 22 Philippine National Bank v. Honorable Judge Pabalan, 23 and Philippine National Railways v. Union de Maquinistas, 24 this constitutional provision on non-

suability was unavailing in view of the suit being against a government-owned or controlled corporation. That point apparently escaped the attention of counsel for petitioner. Hence Santos v. Santos is hardly controlling. 4. It is to be noted further that the trend against the interpretation sought to be fastened in the broad language of Santos v. Santos is quite discernible. Not long after, in Araneta v. Hon. M. Gatmaitan, 25 decided in 1957, it was held that an action [against] Government officials, is essentially one against the Government, ... . 26 In the same year, this Court, in Angat River Irrigation System v. Angat River Workers 27 Union, after referring to the "basic and fundamental principle of the law that the Government cannot be sued before courts of justice without its consent," pointed out that "this privilege of non-suability of the Government" covers with the mantle of its protection "an entity," in this case, the Angat River Irrigation System. 28 Then, in 1960, came Lim v. Brownell, Jr., 29 where there was a reaffirmation of the doctrine that a "claim [constituting] a charge against, or financial liability to, the Government cannot be entertained by the courts except with the consent of said government. 30 Bureau of Printing v. Bureau of Printing Employees Association 31 came a year later; it reiterated such a doctrine. It was not surprising therefore that in 1966, Mobil Philippines Exploration, Inc. was decided the way it was. The remedy, where the liability is based on contract, according to this Court, speaking through Justice J. P. Bengzon, is for plaintiff to file a claim with the general office in accordance with the controlling statute, Commonwealth Act No. 327. 32 To repeat, that doctrine has been adhered to ever since. The latest case in point is Travelers Indemnity Company v. Barber Steamship Lines, Inc. 33 Justice Aquino's opinion concluded with this paragraph: "It is settled that the Bureau of Customs, acting as part of the machinery of the national government in the operation of the arrastre service, is immune from suit under the doctrine of non-suability of the State. The claimant's remedy to recover the loss or damage to the goods under the custody of the customs arrastre service is to file a claim with the Commission in Audit as contemplated in Act No. 3083 and Commonwealth Act No. 327. 34 With the explicit provision found in

the present Constitution, the fundamental principle of non-suability becomes even more exigent in its command. 5. The reliance on Santos v. Santos as a prop for this petition having failed, it would ordinarily follow that this suit cannot prosper. Nonetheless, as set forth at the outset, there is a novel aspect that suffices to call for a contrary conclusion. It would be manifestly unfair for the Republic, as donee, alleged to have violated the conditions under which it received gratuitously certain property, thereafter to put as a barrier the concept of non-suitability. That would be a purely one-sided arrangement offensive to one's sense of justice. Such conduct, whether proceeding from an individual or governmental agency, is to be condemned. As a matter of fact, in case it is the latter that is culpable, the affront to decency is even more manifest. The government, to paraphrase Justice Brandeis, should set the example. If it is susceptible to the charge of having acted dishonorably, then it forfeits public trust-and rightly so. 6. Fortunately, the constitutional provision itself snows a waiver. Where there is consent, a suit may be filed. Consent need not be express. It can be implied. So it was more than implied in Ministerio v. Court of First Instance of Cebu: 35 "The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. 36 The fact that this decision arose from a suit against the Public Highways Commissioner and the Auditor General for failure of the government to pay for land necessary to widen a national highway, the defense of immunity without the consent proving unavailing, is not material. The analogy is quite obvious. Where the government ordinarily benefited by the taking of the land, the failure to institute the necessary condemnation proceedings should not be a bar to an ordinary action for the collection of the just compensation due. Here, the alleged failure to abide by the conditions under which a donation was given should not prove an insuperable obstacle to a civil action, the consent likewise being presumed. This conclusion is strengthened by the fact that while a donation partakes of a contract, there is no money claim, and therefore reliance on Commonwealth Act No. 327 would be futile.

7. Our decision, it must be emphasized, goes no further than to rule that a donor, with the Republic or any of its agency being the donee, is entitled to go to court in case of an alleged breach of the conditions of such donation. He has the right to be heard. Under the circumstances, the fundamental postulate of non-suability cannot stand in the way. It is made to accommodate itself to the demands of procedural due process, which is the negation of arbitrariness and inequity. The government, in the final analysis, is the beneficiary. It thereby manifests its adherence to the highest ethical standards, which can only be ignored at the risk of losing the confidence of the people, the repository of the sovereign power. The judiciary under this circumstance has the grave responsibility of living up to the ideal of objectivity and impartiality, the very essence of the rule of law. Only by displaying the neutrality expected of an arbiter, even if it happens to be one of the departments of a litigant, can the decision arrived at, whatever it may be, command respect and be entitled to acceptance. WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of October 20, 1977 is nullified, set aside and declared to be without force and effect. The Court of First Instance of Zamboanga City, Branch II, is hereby directed to proceed with this case, observing the procedure set forth in the Rules of Court. No costs. --

FERNANDO A. FROILAN vs. PAN ORIENTAL SHIPPING CO. REPUBLIC OF THE PHILIPPINES, intervenor-appellee. PARAS, C.J.: The factual antecedents of this case are sufficiently recited in the brief filed by the intervenor-appellee as follows:

1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint against the defendantappellant, Pan Oriental Shipping Co., alleging that he purchased from the Shipping Commission the vessel FS-197 for P200,000, paying P50,000 down and agreeing to pay the balance in installments; that to secure the payment of the balance of the purchase price, he executed a chattel mortgage of said vessel in favor of the Shipping Commission; that for various reason, among them the non-payment of the installments, the Shipping Commission took possession of said vessel and considered the contract of sale cancelled; that the Shipping Commission chartered and delivered said vessel to the defendantappellant Pan Oriental Shipping Co. subject to the approval of the President of the Philippines; that he appealed the action of the Shipping Commission to the President of the Philippines and, in its meeting on August 25, 1950, the Cabinet restored him to all his rights under his original contract with the Shipping Commission; that he had repeatedly demanded from the Pan Oriental Shipping Co. the possession of the vessel in question but the latter refused to do so. He, therefore, prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin be issued for the seizure of said vessel with all its equipment and appurtenances, and that after hearing, he be adjudged to have the rightful possession thereof (Rec. on App. pp. 2-8). 2. On February 3, 1951, 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 (Rec. on App. p. 47). 3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right of Froilan to the possession of the said vessel; it alleged that the action

of the Cabinet on August 25, 1950, restoring Froilan to his rights under his original contract with the Shipping Commission was null and void; that, in any event, Froilan had not complied with the conditions precedent imposed by the Cabinet for the restoration of his rights to the vessel under the original contract; that it suffered damages in the amount of P22,764.59 for wrongful replevin in the month of February, 1951, and the sum of P17,651.84 a month as damages suffered for wrongful replevin from March 1, 1951; it alleged that it had incurred necessary and useful expenses on the vessel amounting to P127,057.31 and claimed the right to retain said vessel until its useful and necessary expenses had been reimbursed (Rec. on App. pp. 8-53). 4. On November 10, 1951, after the leave of the lower court had been obtained, the intervenor-appellee, Government of the Republic of the Philippines, filed a complaint in intervention alleging that Froilan had failed to pay to the Shipping Commission (which name was later changed to Shipping Administration) the balance due on the purchase price of the vessel in question, the interest thereon, and its advances on insurance premium totalling P162,142.95, excluding the dry-docking expenses incurred on said vessel by the Pan Oriental Shipping Co.; that intervenor was entitled to the possession of the said vessel either under the terms of the original contract as supplemented by Froilan's letter dated January 28, 1949, or in order that it may cause the extrajudicial sale thereof under the Chattel Mortgage Law. It, therefore, prayed that Froilan be ordered to deliver the vessel in question to its authorized representative, the Board of Liquidators; that Froilan be declared to be without any rights on said vessel and the amounts he paid thereon forfeited or alternately, that the said vessel be delivered to the Board of Liquidators in

order that the intervenor may have its chattel mortgage extrajudicially foreclosed in accordance with the provisions of the Chattel Mortgage Law; and that pending the hearing on the merits, the said vessel be delivered to it (Rec. on App. pp. 54-66). 5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the complaint in intervention alleging that the Government of the Republic of the Philippines was obligated to deliver the vessel in question to it by virtue of a contract of bare-boat charter with option to purchase executed on June 16, 1949, by the latter in favor of the former; it also alleged that it had made necessary and useful expenses on the vessel and claimed the right of retention of the vessel. It, therefore, prayed that, if the Republic of the Philippines succeeded in obtaining possession of the said vessel, to comply with its obligations of delivering to it (Pan Oriental Shipping co.) or causing its delivery by recovering it from Froilan (Rec. on App. pp. 69-81). 6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which was liquidating the affairs of the Shipping Administration, a check in the amount of P162,576.96 in payment of his obligation to the Shipping Administration for the said vessel as claimed in the complaint in intervention of the Government of the Republic of the Philippines. The Board of Liquidators issued an official report therefor stating that it was a 'deposit pending the issuance of an order of the Court of First Instance of Manila' (Rec. on App. pp. 92-93). 7. On December 7, 1951, the Government of the Republic of the Philippines brought the matter of said payment and the circumstance surrounding it to the attention of the lower court "in order that they may be

taken into account by this Honorable Court in connection with the questions that are not pending before it for determination" (Rec. on App. pp. 82-86). 8. On February 3, 1952, the lower court held that the payment by Froilan of the amount of P162,576.96 on November 29, 1951, to the Board of Liquidators constituted a payment and a discharge of Froilan's obligation to the Government of the Republic of the Philippines and ordered the dismissal of the latter's complaint in intervention. In the same order, the lower court made it very clear that said order did not pre-judge the question involved between Froilan and the Oriental Shipping Co. which was also pending determination in said court (Rec. on App. pp. 92-93). This order dismissing the complaint in intervention, but reserving for future adjudication the controversy between Froilan and the Pan Oriental Shipping Co. has already become final since neither the Government of the Republic of the Philippines nor the Pan Oriental Shipping Co. had appealed therefrom. 9. On May 10, 1952, the Government of the Republic of the Philippines filed a motion to dismiss the counterclaim of the Pan Oriental Shipping Co. against it on the ground that the purpose of said counterclaim was to compel the Government of the Republic of the Philippines to deliver the vessel to it (Pan Oriental Shipping Co.) in the event that the Government of the Republic of the Philippines recovers the vessel in question from Froilan. In view, however, of the order of the lower court dated February 3, holding that the payment made by Froilan to the Board of Liquidators constituted full payment of Froilan's obligation to the Shipping Administration, which order had already become final, the claim of the Pan Oriental Shipping Co. against the Republic of the Philippines was no longer feasible, said counterclaim was barred by prior

judgment and stated no cause of action. It was also alleged that movant was not subject to the jurisdiction of the court in connection with the counterclaim. (Rec. on App. pp. 94-97). This motion was opposed by the Pan Oriental Shipping Co. in its written opposition dated June 4, 1952 (Rec. on app. pp. 19-104). 10. In an order dated July 1, 1952, the lower court dismissed the counterclaim of the Pan Oriental Shipping Co. as prayed for by the Republic of the Philippines (Rec. on App. pp. 104-106). 11. It if from this order of the lower court dismissing its counterclaim against the Government of the Republic of the Philippines that Pan Oriental Shipping Co. has perfected the present appeal (Rec. on App. p. 107). The order of the Court of First Instance of Manila, dismissing the counterclaim of the defendant Pan Oriental Shipping Co., from which the latter has appealed, reads as follows: This is a motion to dismiss the counterclaim interposed by the defendant in its answer to the complaint in intervention. "The counterclaim states as follows: "COUNTERCLAIM "As counterclaim against the intervenor Republic of the Philippines, the defendant alleges: "1. That the defendant reproduces herein all the pertinent allegations of the foregoing answer to the complaint in intervention

"2. That, as shown by the allegations of the foregoing answer to the complaint in intervention, the defendant Pan Oriental Shipping Company is entitled to the possession of the vessel and the intervenor Republic of the Philippines is bound under the contract of charter with option to purchase it entered into with the defendant to deliver that possession to the defendant whether it actually has the said possession or it does not have that possession from the plaintiff Fernando A. Froilan and deliver the same to the defendant; "3. That, notwithstanding demand, the intervenor Republic of the Philippines has not to date complied with its obligation of delivering or causing the delivery of the vessel to the defendant Pan Oriental Shipping Company.1wphl.nt "RELIEF "WHEREFORE, the defendant respectfully prays that judgment be rendered ordering the intervenor Republic of the Philippines alternatively to deliver to the defendants the possession of the said vessel, or to comply with its obligation to the defendant or causing the delivery to the latter of the said vessel by recovering the same from plaintiff, with costs. "The defendant prays for such other remedy as the Court may deem just and equitable in the premises." The ground of the motion to dismiss are (a) That the cause of action is barred by prior judgment; ( b) That the counterclaim states no cause of action; and ( c) That this Honorable Court has no jurisdiction over the intervenor government of the Republic of the

Philippines in connection with the counterclaim of the defendant Pan Oriental Shipping Co. The intervenor contends that the complaint in intervention having been dismissed and no appeal having been taken, the dismissal of said complaint is tantamount to a judgment. The complaint in intervention did not contain any claim whatsoever against the defendant Pan Oriental Shipping Co.; hence, the counterclaim has no foundation. The question as to whether the Court has jurisdiction over the intervenor with regard to the counterclaim, the Court is of the opinion that it has no jurisdiction over said intervenor. It appearing, therefore, that the grounds of the motion to dismiss are well taken, the counterclaim of the defendant is dismissed, without pronouncement as to costs. The defendant's appeal is predicated upon the following assignments of error: I. The lower court erred in dismissing the counterclaim on the ground of prior judgment. II. The lower court erred in dismissing the counterclaim on the ground that the counterclaim had no foundation because made to a complaint in intervention that contained no claim against the defendant. III. The lower counterclaim on court erred in dismissing the the ground of alleged lack of

jurisdiction over Philippines.

the

intervenor

Republic

of

the

We agree with appellant's contention that its counterclaim is not barred by prior judgment (order of February 8, 1952, dismissing the complaint in intervention), first, because said counterclaim was filed on November 29, 1951, before the issuance of the order invoked; and, secondly, because in said order of February 8, the court dismissed the complaint in intervention, "without, of course, precluding the determination of the right of the defendant in the instant case," and subject to the condition that the "release and cancellation of the chattel mortgage does not, however, prejudge the question involved between the plaintiff and the defendant which is still the subject of determination in this case." It is to be noted that the first condition referred to the right of the defendant, as distinguished from the second condition that expressly specified the controversy between the plaintiff and the defendant. That the first condition reserved the right of the defendant as against the intervenor, is clearly to be deduced from the fact that the order of February 8 mentioned the circumstance that "the question of the expenses of drydocking incurred by the defendant has been included in its counterclaim against the plaintiff," apparently as one of the grounds for granting the motion to dismiss the complaint in intervention. The defendant's failure to appeal from the order of February 8 cannot, therefore, be held as barring the defendant from proceeding with its counterclaim, since, as already stated, said order preserved its right as against the intervenor. Indeed, the maintenance of said right is in consonance with Rule 30, section 2, of the Rules of Court providing that "if a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court." The lower court also erred in holding that, as the intervenor had not made any claim against the defendant, the latter's counterclaim had

no foundation. The complaint in intervention sought to recover possession of the vessel in question from the plaintiff, and this claim is logically adverse to the position assumed by the defendant that it has a better right to said possession than the plaintiff who alleges in his complaint that he is entitled to recover the vessel from the defendant. At any rate a counterclaim should be judged by its own allegations, and not by the averments of the adverse party. It should be recalled that the defendant's theory is that the plaintiff had already lost his rights under the contract with the Shipping Administration and that, on the other hand, the defendant is relying on the charter contract executed in its favor by the intervenor which is bound to protect the defendant in its possession of the vessel. In other words, the counterclaim calls for specific performance on the part of the intervenor. As to whether this counterclaim is meritorious is another question which is not now before us. The other ground for dismissing the defendant's counterclaim is that the State is immune from suit. This is untenable, because by filing its complaint in intervention the Government in effect waived its right of nonsuability. 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. The United States Supreme Court thus explains: "No direct suit can be maintained against the United States. But when an action is brought by the United States to recover money in the hands of a party who has a legal claim against them, it would be a very rigid principle to deny

to him the right of setting up such claim in a court of justice, and turn him around to an application to Congress." (Sinco, Philippine Political Law, Tenth Ed., pp. 36-37, citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899.) It is however, contended for the intervenor that, if there was at all any waiver, it was in favor of the plaintiff against whom the complaint in intervention was directed. This contention is untenable. As already stated, the complaint in intervention was in a sense in derogation of the defendant's claim over the possession of the vessel in question. Wherefore, the appealed order is hereby reversed and set aside and the case remanded to the lower court for further proceedings. So ordered, without costs. -US vs. RUIZ

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines. 2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment, NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines. Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the company received from the United States two telegrams requesting it to confirm its price proposals and for the name of its bonding company. The company complied with the requests. [In its complaint, the company alleges that the United States had accepted its bids because "A request to confirm a price proposal confirms the acceptance of a bid pursuant to defendant United States' bidding practices." (Rollo, p. 30.) The truth of this allegation has not been tested because the case has not reached the trial stage.] In June, 1972, the company received a letter which was signed by Wilham I. Collins, Director, Contracts Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the Navy of the United States, who is one of the petitioners herein. The letter said that the company did not qualify to receive an award for the projects because of its previous unsatisfactory performance rating on a repair contract for the sea wall at the boat landings of the U.S. Naval Station in Subic Bay. The letter further said that the projects had been awarded to third parties. In the abovementioned Civil Case No. 779-M, the company sued the United States of America and Messrs. James E. Galloway, William I. Collins and Robert Gohier all members of the Engineering Command of the U.S. Navy. The complaint is to order the defendants to allow the plaintiff to perform the work on the projects and, in the event that specific performance was no longer possible, to order the defendants to pay damages. The company also asked for the issuance of a writ of preliminary injunction to restrain the defendants from entering into contracts with third parties for work on the projects.

ABAD SANTOS, J.: This is a petition to review, set aside certain orders and restrain the respondent judge from trying Civil Case No. 779M of the defunct Court of First Instance of Rizal. The factual background is as follows: At times material to this case, the United States of America had a naval base in Subic, Zambales. The base was one of those provided in the Military Bases Agreement between the Philippines and the United States. Sometime in May, 1972, the United States invited the submission of bids for the following projects

The defendants entered their special appearance for the purpose only of questioning the jurisdiction of this court over the subject matter of the complaint and the persons of defendants, the subject matter of the complaint being acts and omissions of the individual defendants as agents of defendant United States of America, a foreign sovereign which has not given her consent to this suit or any other suit for the causes of action asserted in the complaint." (Rollo, p. 50.) Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to the issuance of the writ of preliminary injunction. The company opposed the motion. The trial court denied the motion and issued the writ. The defendants moved twice to reconsider but to no avail. Hence the instant petition which seeks to restrain perpetually the proceedings in Civil Case No. 779-M for lack of jurisdiction on the part of the trial court. The petition is highly impressed with merit. The traditional rule of State immunity exempts a State from being sued in the courts of another State without its consent or waiver. This rule is a necessary consequence of the principles of independence and equality of States. However, the rules of International Law are not petrified; they are constantly developing and evolving. And because the activities of states have multiplied, it has been necessary to distinguish them-between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result is that State immunity now extends only to acts jure imperil The restrictive application of State immunity is now the rule in the United States, the United Kingdom and other states in western Europe. (See Coquia and Defensor Santiago, Public International Law, pp. 207-209 [1984].) The respondent judge recognized the restrictive doctrine of State immunity when he said in his Order denying the defendants' (now petitioners) motion: " A distinction should be made between a strictly governmental function of the sovereign state from its

private, proprietary or non- governmental acts (Rollo, p. 20.) However, the respondent judge also said: "It is the Court's considered opinion that entering into a contract for the repair of wharves or shoreline is certainly not a governmental function altho it may partake of a public nature or character. As aptly pointed out by plaintiff's counsel in his reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes with approval, viz.: It is however contended that when a sovereign state enters into a contract with a private person, the state can be sued upon the theory that it has descended to the level of an individual from which it can be implied that it has given its consent to be sued under the contract. ... xxx xxx xxx We agree to the above contention, and considering that the United States government, through its agency at Subic Bay, entered into a contract with appellant for stevedoring and miscellaneous labor services within the Subic Bay Area, a U.S. Naval Reservation, it is evident that it can bring an action before our courts for any contractual liability that that political entity may assume under the contract. The trial court, therefore, has jurisdiction to entertain this case ... (Rollo, pp. 20-21.) The reliance placed on Lyons by the respondent judge is misplaced for the following reasons: In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of First Instance of Manila to collect several sums of money on account of a contract between

plaintiff and defendant. The defendant filed a motion to dismiss on the ground that the court had no jurisdiction over defendant and over the subject matter of the action. The court granted the motion on the grounds that: (a) it had no jurisdiction over the defendant who did not give its consent to the suit; and (b) plaintiff failed to exhaust the administrative remedies provided in the contract. The order of dismissal was elevated to this Court for review. In sustaining the action of the lower court, this Court said: It appearing in the complaint that appellant has not complied with the procedure laid down in Article XXI of the contract regarding the prosecution of its claim against the United States Government, or, stated differently, it has failed to first exhaust its administrative remedies against said Government, the lower court acted properly in dismissing this case.(At p. 598.) It can thus be seen that the statement in respect of the waiver of State immunity from suit was purely gratuitous and, therefore, obiter so that it has no value as an imperative authority. The restrictive application of State immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State may be said to have descended to the level of an individual and can thus be deemed to have tacitly given its consent to be sued only when it enters into business contracts. It does not apply where the contract relates to the exercise of its sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the defense of both the United States and the Philippines, indisputably a function of the government of the highest order; they are not utilized for nor dedicated to commercial or business purposes.

That the correct test for the application of State immunity is not the conclusion of a contract by a State but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case the plaintiffs leased three apartment buildings to the United States of America for the use of its military officials. The plaintiffs sued to recover possession of the premises on the ground that the term of the leases had expired. They also asked for increased rentals until the apartments shall have been vacated. The defendants who were armed forces officers of the United States moved to dismiss the suit for lack of jurisdiction in the part of the court. The Municipal Court of Manila granted the motion to dismiss; sustained by the Court of First Instance, the plaintiffs went to this Court for review on certiorari. In denying the petition, this Court said: On the basis of the foregoing considerations we are of the belief and we hold that the real party defendant in interest is the Government of the United States of America; that any judgment for back or Increased rentals or damages will have to be paid not by defendants Moore and Tillman and their 64 co-defendants but by the said U.S. Government. On the basis of the ruling in the case of Land vs. Dollar already cited, and on what we have already stated, the present action must be considered as one against the U.S. Government. It is clear hat the courts of the Philippines including the Municipal Court of Manila have no jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was raised and interposed at the very beginning of the action. The U.S. Government has not , given its consent to the filing of this suit which is essentially against her, though not in name. Moreover, this is not only a case of a citizen filing a suit against his own Government

without the latter's consent but it is of a citizen filing an action against a foreign government without said government's consent, which renders more obvious the lack of jurisdiction of the courts of his country. The principles of law behind this rule are so elementary and of such general acceptance that we deem it unnecessary to cite authorities in support thereof. (At p. 323.) In Syquia,the United States concluded contracts with private individuals but the contracts notwithstanding the States was not deemed to have given or waived its consent to be sued for the reason that the contracts were for jure imperii and not for jure gestionis. WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside and Civil Case No. is dismissed. Costs against the private respondent. -REPUBLIC OF THE PHILIPPINES vs. HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY OF MANILA, THE CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO UNCHUAN, AND INTERNATIONAL CONSTRUCTION CORPORATION FERNANDO, J.: The Republic of the Philippines in this certiorari and prohibition proceeding challenges the validity of an order issued by respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch I, 1 declaring a decision final and executory and of an alias writ of execution directed against the funds of the Armed

Forces of the Philippines subsequently issued in pursuance thereof, the alleged ground being excess of jurisdiction, or at the very least, grave abuse of discretion. As thus simply and tersely put, with the facts being undisputed and the principle of law that calls for application indisputable, the outcome is predictable. The Republic of the Philippines is entitled to the writs prayed for. Respondent Judge ought not to have acted thus. The order thus impugned and the alias writ of execution must be nullified. In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth thus: "7. On July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R 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. 8. On June 24, 1969, respondent Honorable Guillermo P. Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila to execute the said decision. 9. Pursuant to the said Order dated June 24, 1969, the corresponding Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On the strength of the afore-mentioned Alias Writ of Execution dated June 26, 1969, the Provincial Sheriff of Rizal (respondent herein) served notices of garnishment dated June 28, 1969 with several Banks, specially on the "monies due the Armed Forces of the Philippines in the form of deposits sufficient to cover the amount mentioned in the said Writ of Execution"; the Philippine Veterans Bank received the same notice of garnishment on June 30, 1969 .... 11. The funds of the Armed Forces of the Philippines on deposit with the Banks, particularly, with the Philippine Veterans Bank and the Philippine National Bank [or] their branches 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 Armed Forces of the Philippines, as per Certification dated July 3, 1969 by the AFP Controller,..." 2. The paragraph immediately succeeding in such petition then alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of jurisdiction [or]

with grave abuse of discretion amounting to lack of jurisdiction in granting the issuance of an alias writ of execution against the properties of the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of garnishment issued pursuant thereto are null and void." 3 In the answer filed by respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set forth were admitted with the only qualification being that the total award was in the amount of P2,372,331.40. 4 The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. . 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. It is readily understandable why it must be so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends." 5 Sociological jurisprudence supplies an answer not dissimilar. So it was indicated in a recent decision, Providence Washington Insurance Co. v. Republic of the Philippines, 6 with its affirmation that "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." 7 This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein expressly provided:

"The State may not be sued without its consent." 8 A corollary, both dictated by logic and sound sense from a basic concept 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. Thus in the recent case of Commissioner of Public Highways v. San Diego, 9 such a well-settled doctrine was restated in the opinion of Justice Teehankee: "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." 10 Such a principle applies even to an attempted garnishment of a salary that had accrued in favor of an employee. Director of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice Malcolm as ponente left no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money in the hands of public officers, although it may be due government employees, is not liable to the creditors of these employees in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may not be sued in its own courts except by express authorization by the Legislature, and to subject its officers to garnishment would be to permit indirectly what is prohibited directly. Another reason is that moneys sought to be garnished, as long as they remain in the hands of the disbursing officer of the Government, belong to the latter, although the defendant in garnishment may be entitled to a specific portion thereof. And still another reason which covers both of the foregoing is that every consideration of public policy forbids it." 12

In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully allege a legitimate grievance. WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order of June 24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued thereunder. The preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent. -EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING, SEPTA CONSTRUCTION CO., PHIL. PLUMBING CO., HOME CONSTRUCTION INC., WORLD BUILDERS CO., GLASS WORLD INC., PERFORMANCE BUILDERS DEVT. CO., DE LEON-ARANETA CONST. CO., J.D. MACAPAGAL CONST. CO., All represented by their Atty. IN FACT, MARCELO D, FORONDA, petitioners, vs. HON. GREGORIO R. VIGILAR, In His Capacity as Secretary of Public Works and Highways, respondent. DECISION BUENA, J.: Sought to be reversed in the instant Petition for Certiorari is the Decision, dated 07 November 1997, of the Regional Trial Court of Quezon City, Branch 226, in Civil Case No. Q-96-29243,[1] dismissing the Petition for Mandamus filed by herein petitioners against herein respondent Hon. Gregorio Vigilar, in his capacity as Secretary of the Department of Public Works and Highways (DPWH). The tapestry of facts unfurls.

In 1983, the Ministry of Human Settlement, through the BLISS Development Corporation, initiated a housing project on a government property along the east bank of the Manggahan Floodway in Pasig City. For this purpose, the Ministry of Human Settlement entered into a Memorandum of Agreement (MOA) with the Ministry of Public Works and Highways,[2] where the latter undertook to develop the housing site and construct thereon 145 housing units. By virtue of the MOA, the Ministry of Public Works and Highways forged individual contracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering, Septa Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc., Glass World Inc., Performance Builders Development Co. and De Leon Araneta Construction Co., for the construction of the housing units. Under the contracts, the scope of construction and funding therefor covered only around 2/3 of each housing unit.[3] After complying with the terms of said contracts, and by reason of the verbal request and assurance of then DPWH Undersecretary Aber Canlas that additional funds would be available and forthcoming, petitioners agreed to undertake and perform additional constructions[4] for the completion of the housing units, despite the absence of appropriations and written contracts to cover subsequent expenses for the additional constructions. Petitioners then received payment for the construction work duly covered by the individual written contracts, thereby leaving an unpaid balance of P5,918,315.63,[5] which amount represents the expenses for the additional constructions for the completion of the existing housing units. On 14 November 1988, petitioners sent a demand letter to the DPWH Secretary and submitted that their claim for payment was favorably recommended by DPWH Assistant Secretary for Legal Services Dominador Madamba, who recognized

the existence of implied contracts covering the additional constructions. Notwithstanding, DPWH Assistant Secretary Madamba opined that payment of petitioners money claims should be based on quantum meruit and should be forwarded to the Commission on Audit (COA) for its due consideration and approval. The money claims were then referred to COA which returned the same to the DPWH Auditor for auditorial action. On the basis of the Inspection Report of the Auditors Technical Staff, the DPWH Auditor interposed no objection to the payment of the money claims subject to whatever action the COA may adopt. In a Second Indorsement dated 27 July 1992, the COA returned the documents to the DPWH, stating that funds should first be made available before COA could pass upon and act on the money claims. In a Memorandum dated 30 July 1992, then DPWH Secretary Jose De Jesus requested the Secretary of Budget and Management to release public funds for the payment of petitioners m oney claims, stating that the amount is urgently needed in order to settle once and for all this (sic) outstanding obligations of the government. In a Letter of the Undersecretary of Budget and Management dated 20 December 1994, the amount of P5,819,316.00 was then released for the payment of petitioners money claims, under Advise of Allotment No. A4-1303-04-41-303. In an Indorsement dated 27 December 1995, the COA referred anew the money claims to the DPWH pursuant to COA Circular 95-006, thus: Respectfully returned thru the Auditor to the Honorable Secretary, Department of Public Works and Highways, Port Area, Manila, the above-captioned subject (Re: Claim of Ten (10) contractors for payment of Work accomplishments on the construction of the COGEO II Housing Project, Pasig, Metro Manila) and reiterating the

policy of this office as embodied in COA Circular No. 95-006 dated May 18, 1995 totally lifting its pre-audit activities on all financial transactions of the agencies of the government involving implementation/prosecution of projects and/or payment of claims without exception so as to vest on agency heads the prerogative to exercise fiscal responsibility thereon. The audit of the transaction shall be done after payment. In a letter dated 26 August 1996, respondent DPWH Secretary Gregorio Vigilar denied the subject money claims prompting herein petitioners to file before the Regional Trial Court of Quezon City, Branch 226, a Petition for Mandamus praying that herein respondent be ordered: 1) To pay petitioners the total of P5,819,316.00; 2) To pay petitioners moral and exemplary damages in the amount to be fixed by the Court and sum of P500,000.00 as attorneys fees. On 18 February 1997, the lower court conducted a pre-trial conference where the parties appeared and filed their respective pre-trial briefs. Further, respondent submitted a Memorandum to which petitioners filed a Rejoinder. On 07 November 1997, the lower court denied the Petition for Mandamus, in a Decision which disposed as follows: WHEREFORE, in view of all the foregoing, the instant Petition for Mandamus is dismissed. The order of September 24, 1997, submitting the Manifestation and Motion for Resolution, is hereby withdrawn.

SO ORDERED. Hence, this petition where the core issue for resolution focuses on the right of petitioners-contractors to compensation for a public works housing project. In the case before us, respondent, citing among others Sections 46[6] and 47,[7] Chapter 7, Sub-Title B, Title I, Book V of the Administrative Code of 1987 (E.O 292), posits that the existence of appropriations and availability of funds as certified to and verified by the proper accounting officials are conditions sine qua non for the execution of government contracts.[8] Respondent harps on the fact that the additional work was pursued through the verbal request of then DPWH Undersecretary Aber P. Canlas, despite the absence of the corresponding supplemental contracts and appropriate funding.[9] According to respondent, sa ns showing of certificate of availability of funds, the implied contracts are considered fatally defective and considered inexistent and void ab initio. Respondent concludes that inasmuch as the additional work done was pursued in violation of the mandatory provisions of the laws concerning contracts involving expenditure of public funds and in excess of the public officials contracting authority, the same is not binding on the government and impose no liability therefor.[10] Although this Court agrees with respondents postulation that the implied contracts, which covered the additional constructions, are void, in view of violation of applicable laws, auditing rules and lack of legal requirements,[11] we nonetheless find the instant petition laden with merit and uphold, in the interest of substantial justice, petitioners-contractors right to be compensated for the "additional constructions" on the public works housing project, applying the principle of quantum meruit.

Interestingly, this case is not of first impression. In Eslao vs. Commission on Audit,[12] this Court likewise allowed recovery by the contractor on the basis of quantum meruit, following our pronouncement in Royal Trust Construction vs. Commission on Audit,[13] thus: In Royal Trust Construction vs. COA, a case involving the widening and deepening of the Betis River in Pampanga at the urgent request of the local officials and with the knowledge and consent of the Ministry of Public Works, even without a written contract and the covering appropriation, the project was undertaken to prevent the overflowing of the neighboring areas and to irrigate the adjacent farmlands. The contractor sought compensation for the completed portion in the sum of over P1 million. While the payment was favorably recommended by the Ministry of Public Works, it was denied by the respondent COA on the ground of violation of mandatory legal provisions as the existence of corresponding appropriations covering the contract cost. Under COA Res. No. 3658 dated November 15, 1986, its existing policy is to allow recovery from covering contracts on the basis of quantum meruit if there is delay in the accomplishment of the required certificate of availability of funds to support a contract. (Emphasis ours) In the Royal Construction case, this Court, applying the principle of quantum meruit in allowing recovery by the contractor, elucidated: The work done by it (the contractor) was impliedly authorized and later expressly acknowledged by the Ministry of Public Works, which has twice recommended favorable action on the petitioners request for payment. Despite the admitted absence of a specific covering appropriation as required under COA Resolution No. 36-58, the petitioner may nevertheless be compensated for the services rendered by it, concededly for the public benefit, from the general

fund allotted by law to the Betis River project. Substantial compliance with the said resolution, in view of the circumstances of this case, should suffice. The Court also feels that the remedy suggested by the respondent, to wit, the filing of a complaint in court for recovery of the compensation claimed, would entail additional expense, inconvenience and delay which in fairness should be imposed on the petitioner. Accordingly, in the interest of substantial justice and equity, the respondent Commission on Audit is DIRECTED to determine on a quantum meruit basis the total compensation due to the petitioner for the services rendered by it in the channel improvement of the Betis River in Pampanga and to allow the payment thereof immediately upon completion of the said determination. (Emphasis ours) Similarly, this Court applied the doctrine of quantum meruit in Melchor vs. Commission on Audit[14] and explained that where payment is based on quantum meruit, the amount of recovery would only be the reasonable value of the thing or services rendered regardless of any agreement as to value.[15] Notably, the peculiar circumstances present in the instant case buttress petitioners claim for compensation for the additional constructions, despite the illegality and void nature of the implied contracts forged between the DPWH and petitioners -contractors. On this matter, it bears stressing that the illegality of the subject contracts proceeds from an express declaration or prohibition by law,[16] and not from any intrinsic illegality. Stated differently, the subject contracts are not illegal per se.

Of equal significance are circumstances attendant and peculiar in this case which necessitate allowance of petitioners money claims on the basis of quantum meruit for work accomplished on the government housing project. To begin with, petitioners-contractors assented and agreed to undertake additional constructions for the completion of the housing units, believing in good faith and in the interest of the government and, in effect, the public in general, that appropriations to cover the additional constructions and completion of the public works housing project would be available and forthcoming. On this particular score, the records reveal that the verbal request and assurance of then DPWH Undersecretary Canlas led petitioners-contractors to undertake the completion of the government housing project, despite the absence of covering appropriations, written contracts, and certification of availability of funds, as mandated by law and pertinent auditing rules and issuances. To put it differently, the implied contracts, declared void in this case, covered only the completion and final phase of construction of the housing units, which structures, concededly, were already existing, albeit not yet finished in their entirety at the time the implied contracts were entered into between the government and the contractors. Further, petitioners-contractors sent to the DPWH Secretary a demand letter pressing for their money claims, on the strength of a favorable recommendation from the DPWH Assistant Secretary for Legal Affairs to the effect that implied contracts existed and that the money claims had ample basis applying the principle of quantum meruit. Moreover, as can be gleaned from the records, even the DPWH Auditor interposed no objection to the payment of the money claims, subject to whatever action the COA may adopt.

Beyond this, the sum of P5,819,316.00 representing the amount of petitioners money claims, had already been released by the Department of Budget and Management (DBM), under Advise of Allotment No. A4-1303-04-41-303. Equally important is the glaring fact that the construction of the housing units had already been completed by petitioners-contractors and the subject housing units had been, since their completion, under the control and disposition of the government pursuant to its public works housing project. To our mind, it would be the apex of injustice and highly inequitable for us to defeat petitioners-contractors right to be duly compensated for actual work performed and services rendered, where both the government and the public have, for years, received and accepted benefits from said housing project and reaped the fruits of petitioners-contractors honest toil and labor. Incidentally, respondent likewise argues that the State may not be sued in the instant case, invoking the constitutional doctrine of Nonsuability of the State,[17] otherwise known as the Royal Prerogative of Dishonesty. Respondents argument is misplaced inasmuch as the Principle of State Immunity finds no application in the case before us. Under these circumstances, respondent may not validly invoke the Royal Prerogative of Dishonesty and conveniently hide under the States cloak of invincibility against suit, considering that this principle yields to certain settled exceptions. True enough, the rule, in any case, is not absolute for it does not say that the state may not be sued under any circumstance.[18] Thus, in Amigable vs. Cuenca,[19] this Court, in effect, shred the protective shroud which shields the State from suit, reiterating our

decree in the landmark case of Ministerio vs. CFI of Cebu[20] that 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.[21] Although the Amigable and Ministerio cases generously tackled the issue of the States immunity from suit vis a vis the payment of just compensation for expropriated property, this Court nonetheless finds the doctrine enunciated in the aforementioned cases applicable to the instant controversy, considering that the ends of justice would be subverted if we were to uphold, in this particular instance, the States immunity from suit. To be sure, this Court as the staunch guardian of the citizens rights and welfare cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the perpetration thereof. Justice and equity sternly demand that the States cloak of invincibility against suit be shred in this particular instance, and that petitionerscontractors be duly compensated on the basis of quantum meruit for construction done on the public works housing project. IN VIEW WHEREOF, the instant petition is GRANTED. The assailed decision of the Regional Trial Court dated 07 November 1997 is REVERSED AND SET ASIDE. ACCORDINGLY, the Commission on Audit is hereby directed to determine and ascertain with dispatch, on a quantum meruit basis, the total compensation due to petitioners-contractors for the additional constructions on the housing project and to allow payment thereof upon the completion of said determination. No costs.

-THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER COUNSELLOR AZHARI KASIM, petitioners, vs. JAMES VINZON, doing business under the name and style of VINZON TRADE AND SERVICES, respondent. DECISION AZCUNA, J: This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled The Republic of Indonesia, His Excellency Ambassador Soeratmin and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC Branch 145, Makati City, and James Vinzon, doing business under the name and style of Vinzon Trade and Services. Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a Maintenance Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon Trade and Services. The Maintenance Agreement stated that respondent shall, for a consideration, maintain specified equipment at the Embassy Main Building, Embassy Annex Building and the Wisma Duta, the official residence of petitioner Ambassador Soeratmin. The equipment covered by the Maintenance Agreement are air conditioning units, generator sets, electrical facilities, water heaters, and water motor pumps. It is likewise stated therein that the agreement shall be effective for a period of four years and will renew itself automatically unless cancelled by either party by giving thirty days prior written notice from the date of expiry.[1] Petitioners claim that sometime prior to the date of expiration of the said agreement, or before August 1999, they informed respondent that the renewal of the agreement shall be at the discretion of the incoming Chief of Administration, Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000. When Minister Counsellor Kasim assumed the position of Chief of Administration in March 2000, he allegedly found respondents work and services unsatisfactory and not in compliance with the standards set in the Maintenance Agreement. Hence, the Indonesian Embassy terminated the agreement in a letter dated August 31, 2000.[2] Petitioners claim, moreover, that they had earlier verbally informed respondent of their decision to terminate the agreement. On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful. Respondent cites various circumstances which purportedly negated petitioners alleged dissatisfaction over respondents services: (a) in July 2000, Minister Counsellor Kasim still requested respondent to assign to the embassy an additional full-time worker to assist one of his other workers; (b) in August 2000, Minister Counsellor Kasim asked respondent to donate a prize, which the latter did, on the occasion of the Indonesian Independence Day golf tournament; and (c) in a letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked respondent for sponsoring a prize and expressed his hope that the cordial relations happily existing between them will continue to prosper and be strengthened in the coming years. Hence, on December 15, 2000, respondent filed a complaint[3] against petitioners docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign sovereign State, has sovereign immunity

from suit and cannot be sued as a party-defendant in the Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and therefore enjoy diplomatic immunity.[4] In turn, respondent filed on March 20, 2001, an Opposition to the said motion alleging that the Republic of Indonesia has expressly waived its immunity from suit. He based this claim upon the following provision in the Maintenance Agreement: Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the Philippines and by the proper court of Makati City, Philippines. Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim can be sued and held liable in their private capacities for tortious acts done with malice and bad faith.[5] On May 17, 2001, the trial court denied herein petitioners Motion to Dismiss. It likewise denied the Motion for Reconsideration subsequently filed. The trial courts denial of the Motion to Dismiss was brought up to the Court of Appeals by herein petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be sued and voluntarily submitted itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived their immunity from suit.

On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack of merit.[6] On August 16, 2002, it denied herein petitioners motion for reconsideration.[7] Hence, this petition. In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in sustaining the trial courts decision that petitioners have waived their immunity from suit by using as its basis the abovementioned provision in the Maintenance Agreement. The petition is impressed with merit. International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution.[8] The rule that a State may not be sued without its consent is a necessary consequence of the principles of independence and equality of States.[9] As enunciated in Sanders v. Veridiano II,[10] the practical justification for the doctrine of sovereign immunity is that there can be no legal right against the authority that makes the law on which the right depends. In the case of foreign States, the rule is derived from the principle of the sovereign equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another.[11] A contrary attitude would unduly vex the peace of nations.[12] The rules of International Law, however, are neither unyielding nor impervious to change. The increasing need of sovereign States to enter into purely commercial activities remotely connected with the discharge of their governmental functions brought about a new concept of sovereign immunity. This concept, the restrictive theory,

holds that the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii, but not with regard to private acts or acts jure gestionis.[13] In United States v. Ruiz,[14] for instance, we held that the conduct of public bidding for the repair of a wharf at a United States Naval Station is an act jure imperii. On the other hand, we considered as an act jure gestionis the hiring of a cook in the recreation center catering to American servicemen and the general public at the John Hay Air Station in Baguio City,[15] as well as the bidding for the operation of barber shops in Clark Air Base in Angeles City.[16] Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the start of the inquiry. Is the foreign State engaged in the regular conduct of a business? If the foreign State is not engaged regularly in a business or commercial activity, and in this case it has not been shown to be so engaged, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii.[17] Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of the agreement shall be settled according to the laws of the Philippines and by a specified court of the Philippines is not necessarily a waiver of sovereign immunity from suit. The aforesaid provision contains language not necessarily inconsistent with sovereign immunity. On the other hand, such provision may also be meant to apply where the sovereign party elects to sue in the local courts, or otherwise waives its immunity by any subsequent act. The applicability of Philippine laws must be deemed to include Philippine laws in its totality, including the

principle recognizing sovereign immunity. Hence, the proper court may have no proper action, by way of settling the case, except to dismiss it. Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given explicitly or by necessary implication. We find no such waiver in this case. Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On the other hand, he argues that the actual physical maintenance of the premises of the diplomatic mission, such as the upkeep of its furnishings and equipment, is no longer a sovereign function of the State.[18] We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure imperii. A sovereign State does not merely establish a diplomatic mission and leave it at that; the establishment of a diplomatic mission encompasses its maintenance and upkeep. Hence, the State may enter into contracts with private entities to maintain the premises, furnishings and equipment of the embassy and the living quarters of its agents and officials. It is therefore clear that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract with respondent for the upkeep or maintenance of the air conditioning units, generator sets, electrical facilities, water heaters, and water motor pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador. The Solicitor General, in his Comment, submits the view that, the Maintenance Agreement was entered into by the Republic of Indonesia in the discharge of its governmental functions. In such a case, it cannot be deemed to have waived its immunity from suit. As to the paragraph in the agreement relied upon by respondent,

the Solicitor General states that it was not a waiver of their immunity from suit but a mere stipulation that in the event they do waive their immunity, Philippine laws shall govern the resolution of any legal action arising out of the agreement and the proper court in Makati City shall be the agreed venue thereof.[19] On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim may be sued herein in their private capacities, Article 31 of the Vienna Convention on Diplomatic Relations provides: xxx 1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State. He shall also enjoy immunity from its civil and administrative jurisdiction, except in the case of: (a) a real action relating to private immovable property situated in the territory of the receiving State, unless he holds it on behalf of the sending State for the purposes of the mission; (b) an action relating to succession in which the diplomatic agent is involved as executor, administrator, heir or legatee as a private person and not on behalf of the sending State; (c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions. xxx The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the Maintenance Agreement is not

covered by provision.

the

exceptions

provided

in

the

abovementioned

The Solicitor General believes that said act may fall under subparagraph (c) thereof,[20] but said provision clearly applies only to a situation where the diplomatic agent engages in any professional or commercial activity outside official functions, which is not the case herein. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 against petitioners is DISMISSED. No costs. -NATIONAL HOUSING AUTHORITY, petitioner, vs. HEIRS OF ISIDRO GUIVELONDO, court of appeals, HON. ISAIAS DICDICAN, Presiding Judge, Regional Trial Court, Branch 11, Cebu City, and PASCUAL Y. ABORDO, Sheriff, Regional Trial Court, Branch 11, Cebu City, respondents. DECISION YNARES-SANTIAGO, J.: On February 23, 1999, petitioner National Housing Authority filed with the Regional Trial Court of Cebu City, Branch 11, an Amended Complaint for eminent domain against Associacion Benevola de Cebu, Engracia Urot and the Heirs of Isidro Guivelondo, docketed as Civil Case No. CEB-23386. Petitioner alleged that defendant Associacion Benevola de Cebu was the claimant/owner of Lot 108-C

located in the Banilad Estate, Cebu City; that defendant Engracia Urot was the claimant/owner of Lots Nos. 108-F, 108-I, 108-G, 6019-A and 6013-A, all of the Banilad Estate; that defendant Heirs of Isidro Guivelondo were the claimants/owners of Cadastral Lot No. 1613-D located at Carreta, Mabolo, Cebu City; and that the lands are within a blighted urban center which petitioner intends to develop as a socialized housing project.[1] On November 12, 1999, the Heirs of Isidro Guivelondo, respondents herein, filed a Manifestation stating that they were waiving their objections to petitioners power to expropriate their properties. Hence, the trial court issued an Order as follows: WHEREFORE, the Court hereby declares that the plaintiff has a lawful right to expropriate the properties of the defendants who are heirs of Isidro Guivelondo. The appointment of commissioners who would ascertain and report to the Court the just compensation for said properties will be done as soon as the parties shall have submitted to the Court the names of persons desired by them to be appointed as such commissioners. SO ORDERED.[2] Thereafter, the trial court appointed three Commissioners to ascertain the correct and just compensation of the properties of respondents. On April 17, 2000, the Commissioners submitted their report wherein they recommended that the just compensation of the subject properties be fixed at P11,200.00 per square meter.[3] On August 7, 2000, the trial court rendered Partial Judgment adopting the recommendation of the Commissioners and fixing the just compensation of the lands of respondent Heirs of Isidro Guivelondo at P11,200.00 per square meter, to wit:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by the Court in this case fixing the just compensation for the lands of the defendants who are the heirs of Isidro Guivelondo, more particularly Lots Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 19, 20, 6016-F, 6016-H, 6016-E and 6016-D of Csd-10219, which were sought to be expropriated by the plaintiff at P11,200.00 per square meter and ordering the plaintiff to pay to the said defendants the just compensation for the said lands computed at P11,200.00 per square meter. IT IS SO ORDERED.[4] Petitioner NHA filed two motions for reconsideration dated August 30, 2000 and August 31, 2000, assailing the inclusion of Lots 12, 13 and 19 as well as the amount of just compensation, respectively. Respondent Heirs also filed a motion for reconsideration of the Partial Judgment. On October 11, 2000, the trial court issued an Omnibus Order denying the motion for reconsideration of respondent Heirs and the August 31, 2000 motion of petitioner, on the ground that the fixing of the just compensation had adequate basis and support. On the other hand, the trial court granted petitioners August 30, 2000 motion for reconsideration on the ground that the Commissioners Report did not include Lots 12, 13 and 19 within its coverage. Thus: WHEREFORE, in view of the foregoing premises, the Court hereby denies the motion of the heirs of Isidro Guivelondo (with the exception of Carlota Mercado and Juanita Suemith) for reconsideration of the partial judgment rendered in this case on August 7, 2000 and plaintiffs motion for reconsideration of said judgment, dated August 31, 2000.

However, the Court hereby grants the plaintiffs motion for reconsideration of said judgment, dated August 30, 2000. Accordingly, the judgment rendered in this case on August 7, 2000 is hereby set aside insofar as it has fixed just compensations for Lots Nos. 12, 13 and 19 of Csd-10219 because the fixing of said just compensations appears to lack adequate basis. SO ORDERED.[5] Petitioner filed with the Court of Appeals a petition for certiorari, which was docketed as CA-G.R. SP No. 61746.[6] Meanwhile, on October 31, 2000, the trial court issued an Entry of Judgment over the Partial Judgment dated August 7, 2000 as modified by the Omnibus Order dated October 11, 2000.[7] Subsequently, respondent Heirs filed a Motion for Execution, which was granted on November 22, 2000. On January 31, 2001, the Court of Appeals dismissed the petition for certiorari on the ground that the Partial Judgment and Omnibus Order became final and executory when petitioner failed to appeal the same.[8] Petitioners Motion for Reconsideration and Urgent Ex-Parte Motion for a Clarificatory Ruling were denied in a Resolution dated March 18, 2001.[9] A petition for review was filed by petitioner with this Court, which was docketed as G.R. No. 147527. However, the same was denied in a Minute Resolution dated May 9, 2001 for failure to show that the Court of Appeals committed a reversible error.[10] Petitioner filed a Motion for Reconsideration which was however denied with finality on August 20, 2001.[11]

Prior to the aforesaid denial of the Motion for Reconsideration, petitioner, on July 16, 2001, filed with the trial court a Motion to Dismiss Civil Case No. CEB-23386, complaint for eminent domain, alleging that the implementation of its socialized housing project was rendered impossible by the unconscionable value of the land sought to be expropriated, which the intended beneficiaries can not afford.[12] The Motion was denied on September 17, 2001, on the ground that the Partial Judgment had already become final and executory and there was no just and equitable reason to warrant the dismissal of the case.[13] Petitioner filed a Motion for Reconsideration, which was denied in an Order dated November 20, 2001.[14] Petitioner thus filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 68670, praying for the annulment of the Order of the trial court denying its Motion to Dismiss and its Motion for Reconsideration.[15] On February 5, 2002, the Court of Appeals summarily dismissed the petition. Immediately thereafter, respondent Sheriff Pascual Y. Abordo of the Regional Trial Court of Cebu City, Branch 11, served on petitioner a Notice of Levy pursuant to the Writ of Execution issued by the trial court to enforce the Partial Judgment of August 7, 2000 and the Omnibus Order of October 11, 2000.[16] On February 18, 2002, the Court of Appeals set aside the dismissal of the petition and reinstated the same.[17] Thereafter, a temporary restraining order was issued enjoining respondent sheriff to preserve the status quo.[18] On May 27, 2002, respondent sheriff served on the Landbank of the Philippines a Notice of Third Garnishment against the deposits, moneys and interests of petitioner therein.[19] Subsequently,

respondent sheriff levied on funds and personal properties of petitioner.[20] On July 16, 2002, the Court of Appeals rendered the assailed decision dismissing the petition for certiorari.[21] Hence, petitioner filed this petition for review, raising the following issues: 1) WHETHER OR NOT THE STATE CAN BE COMPELLED AND COERCED BY THE COURTS TO EXERCISE OR CONTINUE WITH THE EXERCISE OF ITS INHERENT POWER OF EMINENT DOMAIN; 2) WHETHER OR NOT JUDGMENT HAS BECOME FINAL AND EXECUTORY AND IF ESTOPPEL OR LACHES APPLIES TO GOVERNMENT; 3) WHETHER OR NOT WRITS OF EXECUTION AND GARNISHMENT MAY BE ISSUED AGAINST THE STATE IN AN EXPROPRIATION WHEREIN THE EXERCISE OF THE POWER OF EMINENT DOMAIN WILL NOT SERVE PUBLIC USE OR PURPOSE {APPLICATION OF SUPREME COURT ADMINISTRATIVE CIRCULAR NO. 10-2000}.[22] Respondent Heirs of Isidro Guivelondo filed their Comment, arguing as follows: I AS EARLIER UPHELD BY THE HONORABLE COURT, THE JUDGMENT OF THE TRIAL COURT IS ALREADY FINAL AND EXECUTORY, HENCE, COULD NO LONGER BE DISTURBED NOR SET ASIDE

II THE FUNDS AND ASSETS OF THE PETITIONER ARE NOT EXEMPT FROM LEVY AND GARNISHMENT III THE ISSUES RAISED IN THIS SECOND PETITION FOR REVIEW WERE ALREADY RESOLVED BY THE HONORABLE COURT[23] In the early case of City of Manila v. Ruymann,[24] the Court was confronted with the question: May the petitioner, in an action for expropriation, after he has been placed in possession of the property and before the termination of the action, dismiss the petition? It resolved the issue in the affirmative and held: The right of the plaintiff to dismiss an action with the consent of the court is universally recognized with certain well-defined exceptions. If the plaintiff discovers that the action which he commenced was brought for the purpose of enforcing a right or a benefit, the advisability or necessity of which he later discovers no longer exists, or that the result of the action would be different from what he had intended, then he should be permitted to withdraw his action, subject to the approval of the court. The plaintiff should not be required to continue the action, subject to some well-defined exceptions, when it is not to his advantage to do so. Litigation should be discouraged and not encouraged. Courts should not require parties to litigate when they no longer desire to do so. Courts, in granting permission to dismiss an action, of course, should always take into consideration the effect which said dismissal would have upon the rights of the defendant.[25]

Subsequently, in Metropolitan Water District v. De Los Angeles,[26] the Court had occasion to apply the above-quoted ruling when the petitioner, during the pendency of the expropriation case, resolved that the land sought to be condemned was no longer necessary in the maintenance and operation of its system of waterworks. It was held: It is not denied that the purpose of the plaintiff was to acquire the land in question for a public use. The fundamental basis then of all actions brought for the expropriation of lands, under the power of eminent domain, is public use. That being true, the very moment that it appears at any stage of the proceedings that the expropriation is not for a public use, the action must necessarily fail and should be dismissed, for the reason that the action cannot be maintained at all except when the expropriation is for some public use. That must be true even during the pendency of the appeal of at any other stage of the proceedings. If, for example, during the trial in the lower court, it should be made to appear to the satisfaction of the court that the expropriation is not for some public use, it would be the duty and the obligation of the trial court to dismiss the action. And even during the pendency of the appeal, if it should be made to appear to the satisfaction of the appellate court that the expropriation is not for public use, then it would become the duty and the obligation of the appellate court to dismiss it.[27] Notably, the foregoing cases refer to the dismissal of an action for eminent domain at the instance of the plaintiff during the pendency of the case. The rule is different where the case had been decided and the judgment had already become final and executory. Expropriation proceedings consists of two stages: first, condemnation of the property after it is determined that its acquisition will be for a public purpose or public use and, second, the

determination of just compensation to be paid for the taking of private property to be made by the court with the assistance of not more than three commissioners.[28] Thus: There are two (2) stages in every action for expropriation. The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint. An order of dismissal, if this be ordained, would be a final one, of course, since it finally disposes of the action and leaves nothing more to be done by the Court on the merits. So, too, would an order of condemnation be a final one, for thereafter, as the Rules expressly state, in the proceedings before the Trial Court, no objection to the exercise of the right of condemnation (or the propriety thereof) shall be filed or heard. The second phase of the eminent domain action is concerned with the determination by the Court of the just compensation for the property sought to be taken. This is done by the Court with the assistance of not more than three (3) commissioners. The order fixing the just compensation on the basis of the evidence before, and findings of, the commissioners would be final, too. It would finally dispose of the second stage of the suit, and leave nothing more to be done by the Court regarding the issue. Obviously, one or another of the parties may believe the order to be erroneous in its appreciation of the evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party may seek a reversal of the order by taking an appeal therefrom.[29]

The outcome of the first phase of expropriation proceedings, which is either an order of expropriation or an order of dismissal, is final since it finally disposes of the case. On the other hand, the second phase ends with an order fixing the amount of just compensation. Both orders, being final, are appealable.[30] An order of condemnation or dismissal is final, resolving the question of whether or not the plaintiff has properly and legally exercised its power of eminent domain.[31] Once the first order becomes final and no appeal thereto is taken, the authority to expropriate and its public use can no longer be questioned.[32] The above rule is based on Rule 67, Section 4 of the 1997 Rules of Civil Procedure, which provides: Order of expropriation. If the objections to and the defenses against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. A final order sustaining the right to expropriate the property may be appealed by any party aggrieved thereby. Such appeal, however, shall not prevent the court from determining the just compensation to be paid. After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the proceeding except on such terms as the court deems just and equitable. (underscoring ours)

In the case at bar, petitioner did not appeal the Order of the trial court dated December 10, 1999, which declared that it has a lawful right to expropriate the properties of respondent Heirs of Isidro Guivelondo. Hence, the Order became final and may no longer be subject to review or reversal in any court.[33] A final and executory decision or order can no longer be disturbed or reopened no matter how erroneous it may be. Although judicial determinations are not infallible, judicial error should be corrected through appeals, not through repeated suits on the same claim.[34] Petitioner anchors its arguments on the last paragraph of the abovequoted Rule 67, Section 4. In essence, it contends that there are just and equitable grounds to allow dismissal or discontinuance of the expropriation proceedings. More specifically, petitioner alleges that the intended public use was rendered nugatory by the unreasonable just compensation fixed by the court, which is beyond the means of the intended beneficiaries of the socialized housing project. The argument is tenuous. Socialized housing has been recognized as public use for purposes of exercising the power of eminent domain. Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and significantly affects public health, safety, the environment and in sum, the general welfare. The public character of housing measures does not change because units in housing projects cannot be occupied by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not possible to provide housing for all who need it, all at once. xxx xxx. xxx

In the light of the foregoing, this Court is satisfied that socialized housing falls with the confines of public use. xxx xxx xxx. Provisions on economic opportunities inextricably linked with lowcost housing, or slum clearance, relocation and resettlement, or slum improvement emphasize the public purpose of the project.[35] The public purpose of the socialized housing project is not in any way diminished by the amount of just compensation that the court has fixed. The need to provide decent housing to the urban poor dwellers in the locality was not lost by the mere fact that the land cost more than petitioner had expected. It is worthy to note that petitioner pursued its petition for certiorari with the Court of Appeals assailing the amount of just compensation and its petition for review with this Court which eloquently indicates that there still exists a public use for the housing project. It was only after its appeal and petitions for review were dismissed that petitioner made a complete turn-around and decided it did not want the property anymore. Respondent landowners had already been prejudiced by the expropriation case. Petitioner cannot be permitted to institute condemnation proceedings against respondents only to abandon it later when it finds the amount of just compensation unacceptable. Indeed, our reprobation in the case of Cosculluela v. Court of Appeals[36] is apropos: It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a persons property, allow the judgment of the court to become final and executory and then refuse to pay on the ground that there are no appropriations for the property earlier taken and profitably used. We condemn in the strongest possible terms the cavalier attitude of government officials who adopt such a despotic and irresponsible stance.

In order to resolve the issue of the propriety of the garnishment against petitioners funds and personal properties, there is a need to first determine its true character as a government entity. Generally, funds and properties of the government cannot be the object of garnishment proceedings even if the consent to be sued had been previously granted and the state liability adjudged.[37] The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit claimants action only up to the completion of proceedings anterior to the stage of execution and that the power of the Courts ends when the judgment is rendered, since government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public funds must be covered by the corresponding appropriation as required by law. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law.[38] However, if the funds belong to a public corporation or a government-owned or controlled corporation which is clothed with a personality of its own, separate and distinct from that of the government, then its funds are not exempt from garnishment.[39] This is so because when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation.[40] In the case of petitioner NHA, the matter of whether its funds and properties are exempt from garnishment has already been resolved

squarely against its predecessor, the Peoples Homesite and Housing Corporation (PHHC), to wit: The plea for setting aside the notice of garnishment was premised on the funds of the Peoples Homesite and Housing Corporation deposited with petitioner being public in character. There was not even a categorical assertion to that effect. It is only the possibility of its being public in character. The tone was thus irresolute, the approach diffident. The premise that the funds cold be spoken of as public in character may be accepted in the sense that the Peopl es Homesite and Housing Corporation was a government-owned entity. It does not follow though that they were exempt from garnishment.[41] This was reiterated in the subsequent case of Philippine Rock Industries, Inc. v. Board of Liquidators:[42] Having a juridical personality separate and distinct from the government, the funds of such government-owned and controlled corporations and non-corporate agency, although considered public in character, are not exempt from garnishment. This doctrine was applied to suits filed against the Philippine Virginia Tobacco Administration (PNB vs. Pabalan, et al., 83 SCRA 695); the National Shipyard & Steel Corporation (NASSCO vs. CIR, 118 Phil. 782); the Manila Hotel Company (Manila Hotel Employees Asso. vs. Manila Hotel Co., 73 Phil. 374); and the People's Homesite and Housing Corporation (PNB vs. CIR, 81 SCRA 314). [emphasis ours] Hence, it is clear that the funds of petitioner NHA are not exempt from garnishment or execution. Petitioners prayer for injunctive relief to restrain respondent Sheriff Pascual Abordo from enforcing the Notice of Levy and Garnishment against its funds and properties must, therefore, be denied.

WHEREFORE, in view of the foregoing, the instant petition for review is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 68670, affirming the trial courts Order denying petitioners Motion to Dismiss the expropriation proceedings in Civil Case No. CEB23386, is AFFIRMED. Petitioners prayer for injunctive relief against the levy and garnishment of its funds and personal properties is DENIED. The Temporary Restraining Order dated January 22, 2003 is LIFTED. --

NATIONAL AIRPORTS CORPORATION vs.JOSE TEODORO, SR., as Judge of the Court of First Instance of Negros Occidental and PHILIPPINE AIRLINES, INC. TUASON, J.: The National Airports Corporation was organized under Republic Act No. 224, which expressly made the provisions of the Corporation Law applicable to the said corporation. On November 10, 1950, the National Airports Corporation was abolished by Executive Order No. 365 and to take its place the Civil Aeronautics Administration was created. Before the abolition, the Philippine Airlines, Inc. paid to the National Airports Corporation P65,245 as fees for landing and parking on Bacolod Airport No. 2 for the period up to and including July 31, 1948. These fees are said to have been due and payable to the Capitol Subdivision, Inc. which owned the land used by the National Airports Corporation as airport, and the owner commenced an action in the Court of First Instance of Negros Occidental against the Philippine Airlines, Inc., in 1951 to recover the above amount. The Philippine Airlines, Inc. countered with a third-party complaint against the National Airports Corporation, which by that time had been dissolved, and served summons on the Civil Aeronautics Administration. The third party plaintiff alleged that it had paid to the National Airports Corporation the fees claimed by the Capitol

Subdivision, Inc. "on the belief and assumption that the third party defendant was the lessee of the lands subject of the complaint and that the third party defendant and its predecessors in interest were the operators and maintainers of said Bacolod Airport No. 2 and, further, that the third party defendant would pay to the landowners, particularly the Capitol Subdivision, Inc., the reasonable rentals for the use of their lands." The Solicitor General, after answering the third party complaint, filed a motion to dismiss on the ground that the court lacks jurisdiction to entertain the third- party complaint, first, because the National Airports Corporation "has lost its juridical personality," and, second, because agency of the Republic of the Philippines, unincorporated and not possessing juridical personality under the law, is incapable of suing and being sued." Section 7 of Executive Order No. 365 reads: All records, properties, equipment, assets, rights, choses in action, obligations, liabilities and contracts of the National Airport Corporation abolished under this Order, are hereby transferred to, vested in, and assumed by, the Civil Aeronautics Administration. All works, construction, and improvements made by the National Airports Corporation or any agency of the National Government in or upon government airfields, including all appropriations or the unreleased and unexpended balances thereof, shall likewise be transferred to the Civil Aeronautics Administration. Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concession rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. And if it has the power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have the power to prosecute and defend suits for and against the National Airports Corporation, having acquired all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny the National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics Administration is to say that the government could impair the obligation of its corporations by the simple expedient of converting them into unincorporated agencies. But repudiation of the National Airports Corporation's obligation was far from the intention in its dissolution and the setting up of the Civil Aeronautics Administration. Nor would such scheme work even if the executive order had so expressly provided. Not all government entities, whether corporate or non corporate, are immune from suits. Immunity from suits is determined by the character of the obligations 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 nongovernment 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.)

This rule has been applied to such government agencies as State Dock Commissions carrying on business relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 26 Fed. (2d) 480), and State Highway Commissions created to build public roads, and given appropriations in advance to discharge obligations incurred in that behalf (Arkansas State Highway Commission of Missouri vs. Bates, 269, S W 418.) 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. In the light of a well-established precedents, and as a matter of simple justice to the parties who dealt with the National Airports Corporation on the faith of equality in the enforcement of their mutual commitments, the Civil Aeronautics Administration may not, and should not, claim for itself the privileges and immunities of the sovereign state. The case of National Airports Corporation vs. Hon. V. Jimenez Yanzon et al., (89 Phil. 745), relied upon by counsel, is not controlling. That was a labor dispute and can be distinguished from the case at bar in at least one fundamental respect. Involving labor demands and labor- management relations, any decision in that case would, if given force and effect, operate prospectively and for an indefinite period against the Civil Aeronautics Administration whose rights and obligations with respect to its officers and employees were regulated by the regular law on civil service. Moreover, some of the petitioners might already have ceased. By Sections 5 and 8 of Executive Order No. 365 all

employees of the National Airports Corporation were, upon the latter's dissolution, automatically separated from the service, and the part of the personnel whose employment was "necessary and convenient" to the Civil Aeronautics Administration would have to be reappointed and, what was more important, "in accordance with the Civil Service rules and regulations." If the petitioners in that case had been absorbed into the Civil Aeronautics Administration, the Matters raised in their petition were outside the jurisdiction of the Court of Industrial Relations, and of this Court on Appeal, to entertain. Their rights, privileges, hours of work, and rates of compensation were already governed by the Civil Service Law. The Philippine Airlines' third party-complaint is premised on the assumption that the National Airports Corporation is still in existence, at least for the limited object of winding up its affairs under Section 77 of the Corporation Law. Our opinion is that by its abolition that corporation stands abolished for all purposes. No trustees, assignees or receivers have been designated to make a liquidation and, what is more, there is nothing to liquidate. Everything the National Airports Corporation had, has been taken over by the Civil Aeronautics Administration. To all legal intents and practical purposes, the National Airports Corporation is dead and the Civil Aeronautics Administration is its heir or legal representative, acting by the law of its creation upon its own rights and in its own name. The better practice then should have been to make the Civil Aeronautics Administration the third party defendant instead of the National Airports Corporation. The error, however, is purely procedural, not put in issue, and may be corrected by amendment of the pleadings if deemed necessary. Wherefore, the petition is denied with costs against the Civil Aeronautics Administration. -BUREAU OF PRINTING, SERAFIN SALVADOR and MARIANO LEDESMA vs.THE BUREAU OF PRINTING EMPLOYEES

ASSOCIATION (NLU), PACIFICO ADVINCULA, ROBERTO MENDOZA, PONCIANO ARGANDA and TEODULO TOLERAN GUTIERREZ DAVID, J.: This is a petition for certiorari and prohibition with preliminary injunction to annul Certain orders of the respondent Court of Industrial Relations and to restrain it from further proceeding in the action for unfair labor practice pending before it on the ground of lack of jurisdiction. Giving due course to the petition, this Court ordered the issuance of the writ of preliminary injunction prayed for without bond. The action in question was upon complaint of the respondents Bureau of Printing Employees Association (NLU) Pacifico Advincula, Roberto Mendoza, Ponciano Arganda and Teodulo Toleran filed by an acting prosecutor of the Industrial Court against herein petitioner Bureau of Printing, Serafin Salvador, the Acting Secretary of the Department of General Services, and Mariano Ledesma the Director of the Bureau of Printing. The complaint alleged that Serafin Salvador and Mariano Ledesma have been engaging in unfair labor practices by interfering with, or coercing the employees of the Bureau of Printing particularly the members of the complaining association petition, in the exercise of their right to self-organization an discriminating in regard to hire and tenure of their employment in order to discourage them from pursuing the union activities. Answering the complaint, the petitioners Bureau of Printing, Serafin Salvador and Mariano Ledesma denied the charges of unfair labor practices attributed to the and, by way of affirmative defenses, alleged, among other things, that respondents Pacifico Advincula, Roberto Mendoza Ponciano Arganda and Teodulo Toleran were suspended pending result of an administrative investigation against

them for breach of Civil Service rules and regulations petitions; that the Bureau of Printing has no juridical personality to sue and be sued; that said Bureau of Printing is not an industrial concern engaged for the purpose of gain but is an agency of the Republic performing government functions. For relief, they prayed that the case be dismissed for lack of jurisdiction. Thereafter, before the case could be heard, petitioners filed an "Omnibus Motion" asking for a preliminary hearing on the question of jurisdiction raised by them in their answer and for suspension of the trial of the case on the merits pending the determination of such jurisdictional question. The motion was granted, but after hearing, the trial judge of the Industrial Court in an order dated January 27, 1959 sustained the jurisdiction of the court on the theory that the functions of the Bureau of Printing are "exclusively proprietary in nature," and, consequently, denied the prayer for dismissal. Reconsideration of this order having been also denied by the court in banc, the petitioners brought the case to this Court through the present petition for certiorari and prohibition. We find the petition to be meritorious. The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657). As such instrumentality of the Government, it operates under the direct supervision of the Executive Secretary, Office of the President, and is "charged with the execution of all printing and binding, including work incidental to those processes, required by the National Government and such other work of the same character as said Bureau may, by law or by order of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . .." (See. 1644, Rev. Adm. Code). It has no corporate existence, and its appropriations are provided for in the General Appropriations Act. Designed to meet the printing needs of

the Government, it is primarily a service bureau and obviously, not engaged in business or occupation for pecuniary profit. It is true, as stated in the order complained of, that the Bureau of Printing receives outside jobs and that many of its employees are paid for overtime work on regular working days and on holidays, but these facts do not justify the conclusion that its functions are "exclusively proprietary in nature." Overtime work in the Bureau of Printing is done only when the interest of the service so requires (sec. 566, Rev. Adm. Code). As a matter of administrative policy, the overtime compensation may be paid, but such payment is discretionary with the head of the Bureau depending upon its current appropriations, so that it cannot be the basis for holding that the functions of said Bureau are wholly proprietary in character. Anent the additional work it executes for private persons, we find that such work is done upon request, as distinguished from those solicited, and only "as the requirements of Government work will permit" (sec. 1654, Rev. Adm. Code), and "upon terms fixed by the Director of Printing, with the approval of the Department Head" (sec. 1655, id.). As shown by the uncontradicted evidence of the petitioners, most of these works consist of orders for greeting cards during Christmas from government officials, and for printing of checks of private banking institutions. On those greeting cards, the Government seal, of which only the Bureau of Printing is authorized to use, is embossed, and on the bank cheeks, only the Bureau of Printing can print the reproduction of the official documentary stamps appearing thereon. The volume of private jobs done, in comparison with government jobs, is only one-half of 1 per cent, and in computing the costs for work done for private parties, the Bureau does not include profit because it is not allowed to make any. Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it cannot be pretended that it is thereby an industrial or business concern. The additional work it executes for

private parties is merely incidental to its function, and although such work may be deemed proprietary in character, there is no showing that the employees performing said proprietary function are separate and distinct from those employed in its general governmental functions. From what has been stated, it is obvious that the Court of Industrial Relations did not acquire jurisdiction over the respondent Bureau of Printing, and is thus devoid of any authority to take cognizance of the case. This Court has already held in a long line of decisions that the Industrial Court has no jurisdiction to hear and determine the complaint for unfair labor practice filed against institutions or corporations not organized for profit and, consequently, not an industrial or business organization. This is so because the Industrial Peace Act was intended to apply only to industrial employment, and to govern the relations between employers engaged in industry and occupations for purposes of gain, and their industrial employees. (University of the Philippines, et al. vs. CIR, et al., G.R. No. L15416, April 28, 1960; University of Sto. Tomas vs. Villanueva, et al., G.R. No. L-13748, October 30, 1959; La Consolacion College vs. CIR, G.R. No. L-13282, April 22, 1960; See also the cases cited therein.) . Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot be sued. (Sec. 1, Rule 3, Rules of Court). Any suit, action or proceeding against it, if it were to produce any effect, would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the Government cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River Workers' Union, et. al., G.R. Nos. L-10943-44, December 28, 1957).

The record also discloses that the instant case arose from the filing of administrative charges against some officers of the respondent Bureau of Printing Employees' Association by the Acting Secretary of General Services. Said administrative charges are for insubordination, grave misconduct and acts prejudicial to public service committed by inciting the employees, of the Bureau of Printing to walk out of their jobs against the order of the duly constituted officials. Under the law, the Heads of Departments and Bureaus are authorized to institute and investigate administrative charges against erring subordinates. For the Industrial Court now to take cognizance of the case filed before it, which is in effect a review of the acts of executive officials having to do with the discipline of government employees under them, would be to interfere with the discharge of such functions by said officials. WHEREFORE, the petition for a writ of prohibition is granted. The orders complained of are set aside and the complaint for unfair labor practice against the petitioners is dismissed, with costs against respondents other than the respondent court. --

Service and the Bureau of Customs to recover the value of the undelivered case in the amount of P18,493.37 plus other damages. On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not being persons under the law, defendants cannot be sued. After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the ground that neither the Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff appealed to Us from the order of dismissal. Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the facts stated. Appellant contends that not all government entities are immune from suit; that defendant Bureau of Customs as operator of the arrastre service at the Port of Manila, is discharging proprietary functions and as such, can be sued by private individuals. The Rules of Court, in Section 1, Rule 3, provide: SECTION 1. Who may be parties.Only natural or juridical persons or entities authorized by law may be parties in a civil action. Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an entity authorized by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit, the Customs Arrastre Service, is a person. They are merely parts of the machinery of Government. The Bureau of Customs is a bureau under the Department of Finance (Sec. 81, Revised Administrative Code); and as stated, the Customs Arrastre Service is a unit of the Bureau of Custom, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that the defendants herein cannot he

MOBIL PHILIPPINES EXPLORATION, INC. ARRASTRE SERVICE and BUREAU of CUSTOMS

vs.CUSTOMS

Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November of 1962, consigned to Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port of Manila on April 10, 1963, and was discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of Customs then handling arrastre operations therein. The Customs Arrastre Service later delivered to the broker of the consignee three cases only of the shipment. On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila against the Customs Arrastre

sued under the first two abovementioned categories of natural or juridical persons. Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the law thereby impliedly authorizes it to be sued as arrastre operator, for the reason that the nature of this function (arrastre service) is proprietary, not governmental. Thus, insofar as arrastre operation is concerned, appellant would put defendants under the third category of "entities authorized by law" to be sued. Stated differently, it is argued that while there is no law expressly authorizing the Bureau of Customs to sue or be sued, still its capacity to be sued is implied from its very power to render arrastre service at the Port of Manila, which it is alleged, amounts to the transaction of a private business. The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and Customs Code, effective June 1, 1957), and it states: SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.The Bureau of Customs shall have exclusive supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at all ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and superintend such plants and facilities as may be necessary for the receiving, handling, custody and delivery of articles, and the convenience and comfort of passengers and the handling of baggage; as well as to acquire fire protection equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and delivery of articles can be carried on by private parties with greater efficiency, the Commissioner may, after public bidding and subject to the approval of the department head, contract with any private party for the service of receiving, handling, custody and delivery of articles,

and in such event, the contract may include the sale or lease of government-owned equipment and facilities used in such service. In Associated Workers Union, et al. vs. Bureau of Customs, et al., L21397, resolution of August 6, 1963, this Court indeed held "that the foregoing statutory provisions authorizing the grant by contract to any private party of the right to render said arrastre services necessarily imply that the same is deemed by Congress to be proprietary or non-governmental function." The issue in said case, however, was whether laborers engaged in arrastre service fall under the concept of employees in the Government employed in governmental functions for purposes of the prohibition in Section 11, Republic Act 875 to the effect that "employees in the Government . . . shall not strike," but "may belong to any labor organization which does not impose the obligation to strike or to join in strike," which prohibition "shall apply only to employees employed in governmental functions of the Government . . . . Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject matter of the case, but not that the Bureau of Customs can be sued. Said issue of suability was not resolved, the resolution stating only that "the issue on the personality or lack of personality of the Bureau of Customs to be sued does not affect the jurisdiction of the lower court over the subject matter of the case, aside from the fact that amendment may be made in the pleadings by the inclusion as respondents of the public officers deemed responsible, for the unfair labor practice acts charged by petitioning Unions". Now, the fact that a non-corporate government entity performs a function proprietary in nature does not necessarily result in its being suable. If said non-governmental function is undertaken as an incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit extended to such government entity. This is the doctrine recognized in Bureau of Printing, et al. vs. Bureau of Printing Employees Association, et al., L-15751, January 28, 1961:

The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657). As such instrumentality of the Government, it operates under the direct supervision of the Executive Secretary, Office of the President, and is "charged with the execution of all printing and binding, including work incidental to those processes, required by the National Government and such other work of the same character as said Bureau may, by law or by order of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . . ." (Sec. 1644, Rev. Adm. Code.) It has no corporate existence, and its appropriations are provided for in the General Appropriations Act. Designed to meet the printing needs of the Government, it is primarily a service bureau and, obviously, not engaged in business or occupation for pecuniary profit. xxx xxx xxx

were to produce any effect, would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the Government cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44, December 28, 1957.) The situation here is not materially different. The Bureau of Customs, to repeat, is part of the Department of Finance (Sec. 81, Rev. Adm. Code), with no personality of its own apart from that of the national government. Its primary function is governmental, that of assessing and collecting lawful revenues from imported articles and all other tariff and customs duties, fees, charges, fines and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a necessary incident. For practical reasons said revenues and customs duties can not be assessed and collected by simply receiving the importer's or ship agent's or consignee's declaration of merchandise being imported and imposing the duty provided in the Tariff law. Customs authorities and officers must see to it that the declaration tallies with the merchandise actually landed. And this checking up requires that the landed merchandise be hauled from the ship's side to a suitable place in the customs premises to enable said customs officers to make it, that is, it requires arrastre operations.1 Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary incident of the primary and governmental function of the Bureau of Customs, so that engaging in the same does not necessarily render said Bureau liable to suit. For otherwise, it could not perform its governmental function without necessarily exposing itself to suit. Sovereign immunity, granted as to the end, should not be denied as to the necessary means to that end. And herein lies the distinction between the present case and that of National Airports Corporation vs. Teodoro , 91 Phil. 203, on which

. . . Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it cannot be pretended that it is thereby an industrial or business concern. The additional work it executes for private parties is merely incidental to its function, and although such work may be deemed proprietary in character, there is no showing that the employees performing said proprietary function are separate and distinct from those emoloyed in its general governmental functions. xxx xxx xxx

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot be sued (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against it, if it

appellant would rely. For there, the Civil Aeronautics Administration was found have for its prime reason for existence not a governmental but a proprietary function, so that to it the latter was not a mere incidental function: Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concessions rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management. These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. . . . xxx xxx xxx

It must be remembered that statutory provisions waiving State immunity from suit are strictly construed and that waiver of immunity, being in derogation of sovereignty, will not be lightly inferred. (49 Am. Jur., States, Territories and Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S. 275, 3 L. Ed. 804, 79 S. Ct. 785). From the provision authorizing the Bureau of Customs to lease arrastre operations to private parties, We see no authority to sue the said Bureau in the instances where it undertakes to conduct said operation itself. The Bureau of Customs, acting as part of the machinery of the national government in the operation of the arrastre service, pursuant to express legislative mandate and as a necessary incident of its prime governmental function, is immune from suit, there being no statute to the contrary. WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against appellant. So ordered. -E. MERRITT vs.GOVERNMENT OF THE PHILIPPINE ISLANDS

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. . . . Regardless of the merits of the claim against it, the State, for obvious reasons of public policy, cannot be sued without its consent. Plaintiff should have filed its present claim to the General Auditing Office, it being for money under the provisions of Commonwealth Act 327, which state the conditions under which money claims against the Government may be filed.

TRENT, J.: This is an appeal by both parties from a judgment of the Court of First Instance of the city of Manila in favor of the plaintiff for the sum of P14,741, together with the costs of the cause. Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages which the plaintiff suffered to P5,000, instead of P25,000 as claimed in the complaint," and (2) "in limiting the time when plaintiff was entirely disabled to two months and twenty-one days and fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in his complaint." The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that the collision between the plaintiff's

motorcycle and the ambulance of the General Hospital was due to the negligence of the chauffeur; (b) in holding that the Government of the Philippine Islands is liable for the damages sustained by the plaintiff as a result of the collision, even if it be true that the collision was due to the negligence of the chauffeur; and (c) in rendering judgment against the defendant for the sum of P14,741. The trial court's findings of fact, which are fully supported by the record, are as follows: It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a motorcycle, was going toward the western part of Calle Padre Faura, passing along the west side thereof at a speed of ten to twelve miles an hour, upon crossing Taft Avenue and when he was ten feet from the southwestern intersection of said streets, the General Hospital ambulance, upon reaching said avenue, instead of turning toward the south, after passing the center thereof, so that it would be on the left side of said avenue, as is prescribed by the ordinance and the Motor Vehicle Act, turned suddenly and unexpectedly and long before reaching the center of the street, into the right side of Taft Avenue, without having sounded any whistle or horn, by which movement it struck the plaintiff, who was already six feet from the southwestern point or from the post place there. By reason of the resulting collision, the plaintiff was so severely injured that, according to Dr. Saleeby, who examined him on the very same day that he was taken to the General Hospital, he was suffering from a depression in the left parietal region, a would in the same place and in the back part of his head, while blood issued from his nose and he was entirely unconscious.

The marks revealed that he had one or more fractures of the skull and that the grey matter and brain was had suffered material injury. At ten o'clock of the night in question, which was the time set for performing the operation, his pulse was so weak and so irregular that, in his opinion, there was little hope that he would live. His right leg was broken in such a way that the fracture extended to the outer skin in such manner that it might be regarded as double and the would be exposed to infection, for which reason it was of the most serious nature. At another examination six days before the day of the trial, Dr. Saleeby noticed that the plaintiff's leg showed a contraction of an inch and a half and a curvature that made his leg very weak and painful at the point of the fracture. Examination of his head revealed a notable readjustment of the functions of the brain and nerves. The patient apparently was slightly deaf, had a light weakness in his eyes and in his mental condition. This latter weakness was always noticed when the plaintiff had to do any difficult mental labor, especially when he attempted to use his money for mathematical calculations. According to the various merchants who testified as witnesses, the plaintiff's mental and physical condition prior to the accident was excellent, and that after having received the injuries that have been discussed, his physical condition had undergone a noticeable depreciation, for he had lost the agility, energy, and ability that he had constantly displayed before the accident as one of the best constructors of wooden buildings and he could not now earn even a half of the income that he had secured for his work because he had lost 50 per cent of his efficiency. As a contractor, he could no longer, as he had before done, climb up

ladders and scaffoldings to reach the highest parts of the building. As a consequence of the loss the plaintiff suffered in the efficiency of his work as a contractor, he had to dissolved the partnership he had formed with the engineer. Wilson, because he was incapacitated from making mathematical calculations on account of the condition of his leg and of his mental faculties, and he had to give up a contract he had for the construction of the Uy Chaco building." We may say at the outset that we are in full accord with the trial court to the effect that the collision between the plaintiff's motorcycle and the ambulance of the General Hospital was due solely to the negligence of the chauffeur. The two items which constitute a part of the P14,741 and which are drawn in question by the plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the P2,666, the amount allowed for the loss of wages during the time the plaintiff was incapacitated from pursuing his occupation. We find nothing in the record which would justify us in increasing the amount of the first. As to the second, the record shows, and the trial court so found, that the plaintiff's services as a contractor were worth P1,000 per month. The court, however, limited the time to two months and twenty-one days, which the plaintiff was actually confined in the hospital. In this we think there was error, because it was clearly established that the plaintiff was wholly incapacitated for a period of six months. The mere fact that he remained in the hospital only two months and twenty-one days while the remainder of the six months was spent in his home, would not prevent recovery for the whole time. We, therefore, find that the amount of damages sustained by the plaintiff, without any fault on his part, is P18,075. As the negligence which caused the collision is a tort committed by an agent or employee of the Government, the inquiry at once arises

whether the Government is legally-liable for the damages resulting therefrom. Act No. 2457, effective February 3, 1915, reads: An Act authorizing E. Merritt to bring suit against the Government of the Philippine Islands and authorizing the Attorney-General of said Islands to appear in said suit. Whereas a claim has been filed against the Government of the Philippine Islands by Mr. E. Merritt, of Manila, for damages resulting from a collision between his motorcycle and the ambulance of the General Hospital on March twenty-fifth, nineteen hundred and thirteen; Whereas it is not known who is responsible for the accident nor is it possible to determine the amount of damages, if any, to which the claimant is entitled; and Whereas the Director of Public Works and the Attorney-General recommended that an Act be passed by the Legislature authorizing Mr. E. Merritt to bring suit in the courts against the Government, in order that said questions may be decided: Now, therefore, By authority of the United States, be it enacted by the Philippine Legislature, that: SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of the city of Manila against the Government of the Philippine Islands in order to fix the responsibility for the collision between his motorcycle and the ambulance of the General Hospital, and to determine the amount of the damages, if any, to which Mr. E. Merritt is entitled on

account of said collision, and the Attorney-General of the Philippine Islands is hereby authorized and directed to appear at the trial on the behalf of the Government of said Islands, to defendant said Government at the same. SEC. 2. This Act shall take effect on its passage. Enacted, February 3, 1915. Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it also concede its liability to the plaintiff? If only the former, then it cannot be held that the Act created any new cause of action in favor of the plaintiff or extended the defendant's liability to any case not previously recognized. All admit that the Insular Government (the defendant) cannot be sued by an individual without its consent. It is also admitted that the instant case is one against the Government. As the consent of the Government to be sued by the plaintiff was entirely voluntary on its part, it is our duty to look carefully into the terms of the consent, and render judgment accordingly. The plaintiff was authorized to bring this action against the Government "in order to fix the responsibility for the collision between his motorcycle and the ambulance of the General Hospital and to determine the amount of the damages, if any, to which Mr. E. Merritt is entitled on account of said collision, . . . ." These were the two questions submitted to the court for determination. The Act was passed "in order that said questions may be decided." We have "decided" that the accident was due solely to the negligence of the chauffeur, who was at the time an employee of the defendant, and we have also fixed the amount of damages sustained by the plaintiff as a result of the collision. Does the Act authorize us to hold that the Government is legally liable for that amount? If not, we must look elsewhere for such authority, if it exists.

The Government of the Philippine Islands having been "modeled after the Federal and State Governments in the United States," we may look to the decisions of the high courts of that country for aid in determining the purpose and scope of Act No. 2457. In the United States the rule that the state is not liable for the torts committed by its officers or agents whom it employs, except when expressly made so by legislative enactment, is well settled. "The Government," says Justice Story, "does not undertake to guarantee to any person the fidelity of the officers or agents whom it employs, since that would involve it in all its operations in endless embarrassments, difficulties and losses, which would be subversive of the public interest." (Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15 L. Ed., 991.) In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the state for personal injuries received on account of the negligence of the state officers at the state fair, a state institution created by the legislature for the purpose of improving agricultural and kindred industries; to disseminate information calculated to educate and benefit the industrial classes; and to advance by such means the material interests of the state, being objects similar to those sought by the public school system. In passing upon the question of the state's liability for the negligent acts of its officers or agents, the court said: No claim arises against any government is favor of an individual, by reason of the misfeasance, laches, or unauthorized exercise of powers by its officers or agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)

As to the scope of legislative enactments permitting individuals to sue the state where the cause of action arises out of either fort or contract, the rule is stated in 36 Cyc., 915, thus: By consenting to be sued a state simply waives its immunity from suit. It does not thereby concede its liability to plaintiff, or create any cause of action in his favor, or extend its liability to any cause not previously recognized. It merely gives a remedy to enforce a preexisting liability and submits itself to the jurisdiction of the court, subject to its right to interpose any lawful defense. In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of 1913, which authorized the bringing of this suit, read: SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit, Waukesha County, Wisconsin, to bring suit in such court or courts and in such form or forms as he may be advised for the purpose of settling and determining all controversies which he may now have with the State of Wisconsin, or its duly authorized officers and agents, relative to the mill property of said George Apfelbacher, the fish hatchery of the State of Wisconsin on the Bark River, and the mill property of Evan Humphrey at the lower end of Nagawicka Lake, and relative to the use of the waters of said Bark River and Nagawicka Lake, all in the county of Waukesha, Wisconsin. In determining the scope of this act, the court said: Plaintiff claims that by the enactment of this law the legislature admitted liability on the part of the state for the acts of its officers, and that the suit now

stands just as it would stand between private parties. It is difficult to see how the act does, or was intended to do, more than remove the state's immunity from suit. It simply gives authority to commence suit for the purpose of settling plaintiff's controversies with the estate. Nowhere in the act is there a whisper or suggestion that the court or courts in the disposition of the suit shall depart from well established principles of law, or that the amount of damages is the only question to be settled. The act opened the door of the court to the plaintiff. It did not pass upon the question of liability, but left the suit just where it would be in the absence of the state's immunity from suit. If the Legislature had intended to change the rule that obtained in this state so long and to declare liability on the part of the state, it would not have left so important a matter to mere inference, but would have done so in express terms. (Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L. R. A., 399.) In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and considered, are as follows: All persons who have, or shall hereafter have, claims on contract or for negligence against the state not allowed by the state board of examiners, are hereby authorized, on the terms and conditions herein contained, to bring suit thereon against the state in any of the courts of this state of competent jurisdiction, and prosecute the same to final judgment. The rules of practice in civil cases shall apply to such suits, except as herein otherwise provided. And the court said:

This statute has been considered by this court in at least two cases, arising under different facts, and in both it was held that said statute did not create any liability or cause of action against the state where none existed before, but merely gave an additional remedy to enforce such liability as would have existed if the statute had not been enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.) A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims against the commonwealth, whether at law or in equity," with an exception not necessary to be here mentioned. In construing this statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass., 28), said: The statute we are discussing disclose no intention to create against the state a new and heretofore unrecognized class of liabilities, but only an intention to provide a judicial tribunal where well recognized existing liabilities can be adjudicated. In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the statute of New York, jurisdiction of claims for damages for injuries in the management of the canals such as the plaintiff had sustained, Chief Justice Ruger remarks: "It must be conceded that the state can be made liable for injuries arising from the negligence of its agents or servants, only by force of some positive statute assuming such liability." It being quite clear that Act No. 2457 does not operate to extend the Government's liability to any cause not previously recognized, we will now examine the substantive law touching the defendant's liability for the negligent acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the Civil Code reads:

The state is liable in this sense when it acts through a special agent, but not when the damage should have been caused by the official to whom properly it pertained to do the act performed, in which case the provisions of the preceding article shall be applicable. The supreme court of Spain in defining the scope of this paragraph said: That the obligation to indemnify for damages which a third person causes to another by his fault or negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7, on that the person obligated, by his own fault or negligence, takes part in the act or omission of the third party who caused the damage. It follows therefrom that the state, by virtue of such provisions of law, is not responsible for the damages suffered by private individuals in consequence of acts performed by its employees in the discharge of the functions pertaining to their office, because neither fault nor even negligence can be presumed on the part of the state in the organization of branches of public service and in the appointment of its agents; on the contrary, we must presuppose all foresight humanly possible on its part in order that each branch of service serves the general weal an that of private persons interested in its operation. Between these latter and the state, therefore, no relations of a private nature governed by the civil law can arise except in a case where the state acts as a judicial person capable of acquiring rights and contracting obligations. (Supreme Court of Spain, January 7, 1898; 83 Jur. Civ., 24.) That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise out of fault or negligence; and whereas in the first article thereof. No. 1902, where the general principle is laid down

that where a person who by an act or omission causes damage to another through fault or negligence, shall be obliged to repair the damage so done, reference is made to acts or omissions of the persons who directly or indirectly cause the damage, the following articles refers to this persons and imposes an identical obligation upon those who maintain fixed relations of authority and superiority over the authors of the damage, because the law presumes that in consequence of such relations the evil caused by their own fault or negligence is imputable to them. This legal presumption gives way to proof, however, because, as held in the last paragraph of article 1903, responsibility for acts of third persons ceases when the persons mentioned in said article prove that they employed all the diligence of a good father of a family to avoid the damage, and among these persons, called upon to answer in a direct and not a subsidiary manner, are found, in addition to the mother or the father in a proper case, guardians and owners or directors of an establishment or enterprise, the state, but not always, except when it acts through the agency of a special agent, doubtless because and only in this case, the fault or negligence, which is the original basis of this kind of objections, must be presumed to lie with the state. That although in some cases the state might by virtue of the general principle set forth in article 1902 respond for all the damage that is occasioned to private parties by orders or resolutions which by fault or negligence are made by branches of the central administration acting in the name and representation of the state itself and as an external expression of its sovereignty in the exercise of its executive powers, yet said article is not applicable in the case of damages said to have been occasioned to the petitioners by an executive official , acting in the

exercise of his powers, in proceedings to enforce the collections of certain property taxes owing by the owner of the property which they hold in sublease. That the responsibility of the state is limited by article 1903 to the case wherein it acts through a special agent (and a special agent, in the sense in which these words are employed, is one who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office if he is a special official) so that in representation of the state and being bound to act as an agent thereof, he executes the trust confided to him. This concept does not apply to any executive agent who is an employee of the acting administration and who on his own responsibility performs the functions which are inherent in and naturally pertain to his office and which are regulated by law and the regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.) That according to paragraph 5 of article 1903 of the Civil Code and the principle laid down in a decision, among others, of the 18th of May, 1904, in a damage case, the responsibility of the state is limited to that which it contracts through a special agent, duly empowered by a definite order or commission to perform some act or charged with some definite purpose which gives rise to the claim, and not where the claim is based on acts or omissions imputable to a public official charged with some administrative or technical office who can be held to the proper responsibility in the manner laid down by the law of civil responsibility. Consequently, the trial court in not so deciding and in sentencing the said entity to the payment of damages, caused by an official of the second class referred to, has by erroneous interpretation infringed the provisions of articles 1902

and 1903 of the Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.) It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable, according to the above quoted decisions of the Supreme Court of Spain, for the acts of its agents, officers and employees when they act as special agents within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the ambulance of the General Hospital was not such an agent. For the foregoing reasons, the judgment appealed from must be reversed, without costs in this instance. Whether the Government intends to make itself legally liable for the amount of damages above set forth, which the plaintiff has sustained by reason of the negligent acts of one of its employees, by legislative enactment and by appropriating sufficient funds therefor, we are not called upon to determine. This matter rests solely with the Legislature and not with the courts. -PALAFOX V. PROVINCE OF ILOCOS NORTE Facts: Sabas Torralba was employed as the driver of Ilocos Norte and detailed to the Office of the District Engineer. While driving his truck, Sabas ran over Proceto Palafox resulting to the latters death. Sabas was prosecuted for homicide through reckless imprudence to which he pleaded guilty. The heirs of Palafox instituted a civil case against him, the Province, the District Engineer and the Provincial Treasurer. Issue: Whether or not the Province of Ilocos Norte can be held liable.

Held: NO. The general rule is that local government units are not liable for negligent acts of its employees while they are performing governmental functions or duties. In this case, the driver was involved in the construction or maintenance of roads which was a governmental duty. Therefore, the province cannot be held liable for his negligent act. However tragic and deplorable it may be, the death of Palafox imposed on the province no duty to pay monetary consideration. (Palafox v. Province of Ilocos Norte, 102 Phil 1186) -TORIO V. FONTANILLA

MUOZ PALMA, J.: These Petitions for review present the issue of whether or not the celebration of a town fiesta authorized by a municipal council under Sec. 2282 of the Municipal Law as embodied in the Revised Administrative Code is a governmental or a corporate or proprietary function of the municipality. A resolution of that issue will lead to another, viz the civil liability for damages of the Municipality of Malasiqui, and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a death which occurred during the celebration of the town fiesta on January 22, 1959, and which was attributed to the negligence of the municipality and its council members. The following facts are not in dispute: On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159 whereby "it resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and 23, 1959." Resolution No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn

organized a sub-committee on entertainment and stage, with Jose Macaraeg as Chairman. the council appropriated the amount of P100.00 for the construction of 2 stages, one for the "zarzuela" and another for the cancionan Jose Macaraeg supervised the construction of the stage and as constructed the stage for the "zarzuela" was "5- meters by 8 meters in size, had a wooden floor high at the rear and was supported by 24 bamboo posts 4 in a row in front, 4 in the rear and 5 on each side with bamboo braces." 1 The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui employees of the Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of January 22 for the performance and one of the members of the group was Vicente Fontanilla. The program started at about 10:15 o'clock that evening with some speeches, and many persons went up the stage. The "zarzuela" then began but before the dramatic part of the play was reached, the stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned underneath. Fontanilia was taken to tile San Carlos General Hospital where he died in the afternoon of the following day. The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of Manila on September 11, 1959 to recover damages. Named party-defendants were the Municipality of Malasiqui, the Municipal Council of Malasiqui and all the individual members of the Municipal Council in 1959. Answering the complaint defendant municipality invoked inter alia the principal defense that as a legally and duly organized public corporation it performs sovereign functions and the holding of a town fiesta was an exercise of its governmental functions from which no liability can arise to answer for the negligence of any of its agents. The defendant councilors inturn maintained that they merely acted as agents of the municipality in carrying out the municipal ordinance

providing for the management of the town fiesta celebration and as such they are likewise not liable for damages as the undertaking was not one for profit; furthermore, they had exercised due care and diligence in implementing the municipal ordinance. 2 After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or not the defendants exercised due diligence 'm the construction of the stage. From his findings he arrived at the conclusion that the Executive Committee appointed by the municipal council had exercised due diligence and care like a good father of the family in selecting a competent man to construct a stage strong enough for the occasion and that if it collapsed that was due to forces beyond the control of the committee on entertainment, consequently, the defendants were not liable for damages for the death of Vicente Fontanilla. The complaint was accordingly dismissed in a decision dated July 10, 1962. 3 The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October 31, 1968, the Court of Appeals through its Fourth Division composed at the time of Justices Salvador V. Esguerra, Nicasio A. Yatco and Eulogio S. Serrano reversed the trial court's decision and ordered all the defendants-appellees to pay jointly and severally the heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and actual damages: P1200.00 its attorney's fees; and the costs. 4 The case is now before Us on various assignments of errors all of which center on the proposition stated at the sentence of this Opinion and which We repeat: Is the celebration of a town fiesta an undertaking in the excercise of a municipality's governmental or public function or is it or a private or proprietary character? 1. Under Philippine laws municipalities are political bodies corporate and as such ag endowed with the faculties of municipal corporations to be exercised by and through their respective municipal

governments in conformity with law, and in their proper corporate name, they may inter alia sue and be sued, and contract and be contracted with. 5 The powers of a municipality are twofold in character public, governmental or political on the one hand, and corporate, private, or proprietary on the other. Governmental powers are those exercised by the corporation in administering the powers of the state and promoting the public welfare and they include the legislative, judicial public, and political Municipal powers on the other hand are exercised for the special benefit and advantage of the community and include those which are ministerial private and corporate. 6 As to when a certain activity is governmental and when proprietary or private, that is generally a difficult matter to determine. The evolution of the municipal law in American Jurisprudence, for instance, has shown that; none of the tests which have evolved and are stated in textbooks have set down a conclusive principle or rule, so that each case will have to be determined on the basis of attending circumstances. In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper has ... a public character as regards the state at large insofar as it is its agent in government, and private (so-called) insofar as it is to promote local necessities and conveniences for its own community. 7 Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of Indiana in 1916, thus: Municipal corporations exist in a dual capacity, and their functions are two fold. In one they exercise the right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political and governmental Their officers and agents in such capacity, though elected or appointed by the

are nevertheless public functionaries performing a public service, and as such they are officers, agents, and servants of the state. In the other capacity the municipalities exercise a private. proprietary or corporate right, arising from their existence as legal persons and not as public agencies. Their officers and agents in the performance of such functions act in behalf of the municipalities in their corporate or in. individual capacity, and not for the state or sovereign power. (112 N. E 994-995) In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through Justice Grant T. Trent, relying mainly on American Jurisprudence classified certain activities of the municipality as governmental, e.g.: regulations against fire, disease, preservation of public peace, maintenance of municipal prisons, establishment of schools, post-offices, etc. while the following are corporate or proprietary in character, viz: municipal waterwork, slaughter houses, markets, stables, bathing establishments, wharves, ferries, and fisheries. 8 Maintenance of parks, golf courses, cemeteries and airports among others, are also recognized as municipal or city activities of a proprietary character. 9 2. This distinction of powers becomes important for purposes of determining the liability of the municipality for the acts of its agents which result in an injury to third persons. If the injury is caused in the course of the performance of a governmental function or duty no recovery, as a rule, can be. had from the municipality unless there is an existing statute on the matter, 10 nor from its officers, so long as they performed their duties honestly and in good faith or that they did not act wantonly and maliciously. 11 In Palafox, et al., v. Province of Ilocos Norte, et al., 1958, a truck driver employed by the provincial government of Ilocos Norte ran over Proceto Palafox in the course of his work at the construction of a road. The Supreme Court in affirming the trial

court's dismissal of the complaint for damages held that the province could not be made liable because its employee was in the performance of a governmental function the construction and maintenance of roads and however tragic and deplorable it may be, the death of Palafox imposed on the province no duty to pay monetary consideration. 12 With respect to proprietary functions, the settled rule is that a municipal corporation can be held liable to third persons ex contract 13 or ex delicto. 14 Municipal corporations are subject to be sued upon contracts and in tort. ... xxx xxx xxx The rule of law is a general one, that the superior or employer must answer civilly for the negligence or want of skill of its agent or servant in the course or fine of his employment, by which another, who is free from contributory fault, is injured. Municipal corporations under the conditions herein stated, fall within the operation of this rule of law, and are liable, accordingly, to civil actions for damages when the requisite elements of liability co-exist. ... (Dillon on Municipal Corporations, 5th ed. Sec. 1610,1647, cited in Mendoza v. de Leon, supra. 514) 3. Coming to the cam before Us, and applying the general tests given above, We hold that the ho of the town fiesta in 1959 by the municipality of Malsiqui Pangasinan was an exercise of a private or proprietary function of the municipality. Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code provides:

Section 2282. Celebration of fiesta. fiesta may be held in each municipality not oftener than once a year upon a date fixed by the municipal council A fiesta s not be held upon any other date than that lawfully fixed therefor, except when, for weighty reasons, such as typhoons, foundations, earthquakes, epidemics, or other public ties, the fiesta cannot be hold in the date fixed in which case it may be held at a later date in the same year, by resolution of the council. This provision simply gives authority to the municipality to accelebrate a yearly fiesta but it does not impose upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a religious or historical event of the town is in essence an act for the special benefit of the community and not for the general welfare of the public performed in pursuance of a policy of the state. The mere fact that the celebration, as claimed was not to secure profit or gain but merely to provide entertainment to the town inhabitants is not a conclusive test. For instance, the maintenance of parks is not a source of income for the nonetheless it is private undertaking as distinguished from the maintenance of public schools, jails, and the like which are for public service. As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of an undertaking or function of a municipality; the surrounding circumstances of a particular case are to be considered and will be decisive. The basic element, however beneficial to the public the undertaking may be, is that it is governmental in essence, otherwise. the function becomes private or proprietary in character. Easily, no overnmental or public policy of the state is involved in the celebration of a town fiesta. 15 4. It follows that under the doctrine of respondent superior, petitioner-municipality is to be held liable for damages for the death of Vicente Fontanilia if that was at- tributable to the negligence of the municipality's officers, employees, or agents.

Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. . . Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for one's own acts or omission, but also for those of persons for whom one is responsible. . . On this point, the Court of Appeals found and held that there was negligence. The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now petitioners), that a member of the "extravaganza troupe removed two principal braces located on the front portion of the stage and u them to hang the screen or "telon", and that when many people went up the stage the latter collapsed. This testimony was not believed however by respondent appellate court, and rightly so. According to said defendants, those two braces were "mother" or "principal" braces located semi-diagonally from the front ends of the stage to the front posts of the ticket booth located at the rear of the stage and were fastened with a bamboo twine. 16 That being the case, it becomes incredible that any person in his right mind would remove those principal braces and leave the front portion of the stage practically unsuported Moreover, if that did happen, there was indeed negligence as there was lack of suspension over the use of the stage to prevent such an occurrence. At any rate, the guitarist who was pointed to by Novado as the person who removed the two bamboo braces denied having done go. The Court of Appeals said "Amor by himself alone could not have removed the two braces which must be about ten meters long and fastened them on top of the stags for the curtain. The stage was only five and a half meters wide. Surely, it, would be impractical and unwieldy to use a ten meter bamboo pole, much more two poles for the stage curtain. 17

The appellate court also found that the stage was not strong enough considering that only P100.00 was appropriate for the construction of two stages and while the floor of the "zarzuela" stage was of wooden planks, the Post and braces used were of bamboo material We likewise observe that although the stage was described by the Petitioners as being supported by "24" posts, nevertheless there were only 4 in front, 4 at the rear, and 5 on each side. Where were the rest? The Court of Appeals thus concluded The court a quo itself attributed the collapse of the stage to the great number of onlookers who mounted the stage. The municipality and/or its agents had the necessary means within its command to prevent such an occurrence. Having filed to take the necessary steps to maintain the safety of the stage for the use of the participants in the stage presentation prepared in connection with the celebration of the town fiesta, particularly, in preventing non participants or spectators from mounting and accumulating on the stage which was not constructed to meet the additional weightthe defendant-appellees were negligent and are liable for the death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993) The findings of the respondent appellate court that the facts as presented to it establish negligence as a matter of law and that the Municipality failed to exercise the due diligence of a good father of the family, will not disturbed by Us in the absence of a clear showing of an abuse of discretion or a gross misapprehension of facts." 18 Liability rests on negligence which is "the want of such care as a person of ordinary prudence would exercise under the circumstances of the case." 19

Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during the town fiesta was a "donation" offered by an association of Malasiqui employees of the Manila Railroad Co. in Caloocan, and that when the Municipality of Malasiqui accepted the donation of services and constructed precisely a "zarzuela stage" for the purpose, the participants in the stage show had the right to expect that the Municipality through its "Committee on entertainment and stage" would build or put up a stage or platform strong enough to sustain the weight or burden of the performance and take the necessary measures to insure the personal safety of the participants. 20 We agree. Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942, which was an action against the city for injuries sustained from a fall when plaintiff was descending the steps of the city auditorium. The city was conducting a "Know your City Week" and one of the features was the showing of a motion picture in the city auditorium to which the general public was invited and plaintiff Sanders was one of those who attended. In sustaining the award for Damages in favor of plaintiff, the District Court of Appeal, Second district, California, held inter alia that the "Know your City Week" was a "proprietary activity" and not a "governmental one" of the city, that defendant owed to plaintiff, an invitee the duty of exercising ordinary care for her safety, and plaintiff was entitled to assume that she would not be exposed to a danger (which in this case consisted of lack of sufficient illumination of the premises) that would come to her through a violation of defendant duty. 21 We can say that the deceased Vicente Fontanilla was similarly situated as Sander The Municipality of Malasiqui resolved to celebrate the town fiesta in January of 1959; it created a committee in charge of the entertainment and stage; an association of Malasiqui residents responded to the call for the festivities and volunteered to present a stage show; Vicente Fontanilla was one of the participants who like Sanders had the right to expect that he would be exposed to danger on that occasion.

Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the c that it was Jose Macaraeg who constructed the stage. The municipality acting through its municipal council appointed Macaraeg as chairman of the sub-committee on entertainment and in charge of the construction of the "zarzuela" stage. Macaraeg acted merely as an agent of the Municipality. Under the doctrine of respondent superior mentioned earlier, petitioner is responsible or liable for the negligence of its agent acting within his assigned tasks. 22 ... when it is sought to render a municipal corporation liable for the act of servants or agents, a cardinal inquiry is, whether they are the servants or agents of the corporation. If the corporation appoints or elects them, can control them in the discharge of their duties, can continue or remove the can hold them responsible for the manner in which they discharge their trust, and if those duties relate to the exercise of corporate powers, and are for the benefit of the corporation in its local or special interest, they may justly be regarded as its agents or servants, and the maxim of respondent superior applies." ... (Dillon on Municipal Corporations, 5th Ed., Vol IV, p. 2879) 5. The remaining question to be resolved centers on the liability of the municipal councilors who enacted the ordinance and created the fiesta committee. The Court of Appeals held the councilors jointly and solidarity liable with the municipality for damages under Article 27 of the Civil Code which provides that d any person suffering ing material or moral loss because a public servant or employee refuses or neglects, without just cause to perform his official duty may file an action for damages and other relief at the latter. 23 In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling that the holding of a town fiesta is not a governmental function and that there was negligence on their part for not maintaining and supervising the safe use of the stage, in

applying Article 27 of the Civil Code against them and in not holding Jose Macaraeg liable for the collapse of the stage and the consequent death of Vicente Fontanilla. 24 We agree with petitioners that the Court of Appeals erred in applying Article 27 of the Civil Code against the for this particular article covers a case of nonfeasance or non-performance by a public officer of his official duty; it does not apply to a case of negligence or misfeasance in carrying out an official duty. If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are concerned, it is because of a plain error committed by respondent court which however is not invoked in petitioners' brief. In Miguel v. The Court of appeal. et al ., the Court, through Justice, now Chief Justice, Fred Ruiz Castro, held that the Supreme Court is vested with ample authority to review matters not assigned as errors in an appeal if it finds that their consideration and resolution are indispensable or necessary in arriving at a just decision in a given case, and that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We believe that this pronouncement can well be applied in the instant case. The Court of Appeals in its decision now under review held that the celebration of a town fiesta by the Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal consequence thereof is that the Municipality stands on the same footing as an ordinary private corporation with the municipal council acting as its board of directors. It is an elementary principle that a corporation has a personality, separate and distinct from its officers, directors, or persons composing it 26 and the latter are not as a rule co-responsible in an action for damages for tort or negligence culpa aquilla committed by the corporation's employees or agents unless there is a showing of bad faith or gross or wanton negligence on their part. 27

xxx xxx xxx The ordinary doctrine is that a director, merely by reason of his office, is not personally Stable for the torts of his corporation; he Must be shown to have personally voted for or otherwise participated in them ... Fletcher Encyclopedia Corporations, Vol 3A Chapt 11, p. 207) Officers of a corporation 'are not held liable for the negligence of the corporation merely because of their official relation to it, but because of some wrongful or negligent act by such officer amounting to a breach of duty which resulted in an injury ... To make an officer of a corporation liable for the negligence of the corporation there must have been upon his part such a breach of duty as contributed to, or helped to bring about, the injury; that is to say, he must be a participant in the wrongful act. ... (pp. 207-208, Ibid.) xxx xxx xxx Directors who merely employ one to give a fireworks Ambition on the corporate are not personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.) On these people We absolve Use municipal councilors from any liability for the death of Vicente Fontanilla. The records do not show that said petitioners directly participated in the defective construction of the "zarzuela" stage or that they personally permitted spectators to go up the platform.

6. One last point We have to resolve is on the award of attorney's fees by respondent court. Petitioner-municipality assails the award. Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be granted when the court deems it just and equitable. In this case of Vicente Fontanilla, although respondent appellate court failed to state the grounds for awarding attorney's fees, the records show however that attempts were made by plaintiffs, now private respondents, to secure an extrajudicial compensation from the municipality: that the latter gave prorases and assurances of assistance but failed to comply; and it was only eight month after the incident that the bereaved family of Vicente Fontanilla was compelled to seek relief from the courts to ventilate what was believed to be a just cause. 28 We hold, therefore, that there is no error committed in the grant of attorney's fees which after all is a matter of judicial discretion. The amount of P1,200.00 is fair and reasonable. PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the Municipality of Malasiqui is concerned (L-30183), and We absolve the municipal councilors from liability and SET ASIDE the judgment against them (L-9993). Without pronouncement as to costs.