Thursday, January 8, 2009

full text case for next meeting 1


[G.R. No. 70853. March 12, 1987.]



YAP, J p:

Petitioner seeks the review of the decision of the Intermediate Appellate Court dated April 30, 1985 reversing the order of the Court of First Instance of Camarines Sur, Branch VI, dated August 21, 1980, which dismissed the complaint of respondent Pablo Feliciano for recovery of ownership and possession of a parcel of land on the ground of non-suability of the State.

The background of the present controversy may be briefly summarized as follows:

On January 22, 1970, respondent Feliciano filed a complaint with the then Court of First Instance of Camarines Sur against the Republic of the Philippines, represented by the Land Authority, for the recovery of ownership and possession of a parcel of land, consisting of four (4) lots with an aggregate area of 1,364.4177 hectares, situated in the Barrio of Salvacion, Municipality of Tinambac, Camarines Sur. Plaintiff alleged that he bought the property in question from Victor Gardiola by virtue of a Contract of Sale dated May 31, 1952, followed by a Deed of Absolute Sale on October 30, 1954; that Gardiola had acquired the property by purchase from the heirs of Francisco Abrazado whose title to the said property was evidenced by an informacion posesoria; that upon plaintiff's purchase of the property, he took actual possession of the same, introduced various improvements therein and caused it to be surveyed in July 1952, which survey was approved by the Director of Lands on October 24, 1954; that on November 1, 1954, President Ramon Magsaysay issued Proclamation No. 90 reserving for settlement purposes, under the administration of the National Resettlement and Rehabilitation Administration (NARRA), a tract of land situated in the Municipalities of Tinambac and Siruma, Camarines Sur, after which the NARRA and its successor agency, the Land Authority, started subdividing and distributing the land to the settlers; that the property in question, while located within the reservation established under Proclamation No. 90, was the private property of plaintiff and should therefore be excluded therefrom. Plaintiff prayed that he be declared the rightful and true owner of the property in question consisting of 1,364.4177 hectares; that his title of ownership based on informacion posesoria of his predecessor-in-interest be declared legal, valid and subsisting and that defendant be ordered to cancel and nullify all awards to the settlers.

The defendant, represented by the Land Authority, filed an answer, raising by way of affirmative defenses lack of sufficient cause of action and prescription.

On August 29, 1970. the trial court, through Judge Rafael S. Sison, rendered a decision declaring Lot No. 1, with an area of 701.9064 hectares, to be the private property of the plaintiff, "being covered by a possessory information title in the name of his predecessor-in-interest" and declaring said lot excluded from the NARRA settlement reservation. The court declared the rest of the property claimed by plaintiff, i.e. Lots 2, 3 and 4, reverted to the public domain.

A motion to intervene and to set aside the decision of August 29, 1970 was filed by eighty-six (86) settlers, together with the barrio council of Pag-asay, alleging among other things that intervenors had been in possession of the land in question for more than twenty (20) years under claim of ownership.

On January 25, 1971, the court a quo reconsidered its decision, reopened the case and directed the intervenors to file their corresponding pleadings and present their evidence; all evidence already presented were to remain but plaintiff, as well as the Republic of the Philippines, could present additional evidence if they so desire. The plaintiff presented additional evidence on July 30, 1971, and the case was set for hearing for the reception of intervenors' evidence on August 30 and August 31, 1971.

On August 30, 1971, the date set for the presentation of the evidence for intervenors, the latter did not appear but submitted a motion for postponement and resetting of the hearing on the next day, August 31, 1971. The trial court denied the motion for postponement and allowed plaintiff to offer his evidence "en ausencia," after which the case would be deemed submitted for decision. On the following day, August 31, 1971, Judge Sison rendered a decision reiterating his decision of August 29, 1970.

A motion for reconsideration was immediately filed by the intervenors. But before this motion was acted upon, plaintiff filed a motion for execution, dated November 18, 1971. On December 10, 1971, the lower court, this time through Judge Miguel Navarro, issued an order denying the motion for execution and setting aside the order denying intervenors' motion for postponement. The case was reopened to allow intervenors to present their evidence. Unable to secure a reconsideration of Judge Navarro's order, the plaintiff went to the Intermediate Appellate Court on a petition for certiorari. Said petition was, however, denied by the Intermediate Appellate Court, and petitioners brought the matter to this Court in G.R. No. 36163, which was denied on May 3, 1973 Consequently, the case was remanded to the court a quo for further proceedings.

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

On August 21, 1980, the trial court, through Judge Esteban Lising, issued the questioned order dismissing the case for lack of jurisdiction. Respondent moved for reconsideration, while the Solicitor General, on behalf of the Republic of the Philippines filed its opposition thereto, maintaining that the dismissal was proper on the ground of non-suability of the State and also on the ground that the existence and or authenticity of the purported possessory information title of the respondents' predecessor-in-interest had not been demonstrated and that at any rate, the same is not evidence of title, or if it is, its efficacy has been lost by prescription and laches.

Upon denial of the motion for reconsideration, plaintiff again went to the Intermediate Appellate Court on petition for certiorari. On April 30, 1985, the respondent appellate court rendered its decision reversing the order of Judge Lising and remanding the case to the court a quo for further proceedings. Hence this petition.

We find the petition meritorious. The doctrine of non-suability of the State has proper application in this case. The plaintiff has impleaded the Republic of the Philippines as defendant in an action for recovery of ownership and possession of a parcel of land, bringing the State to court just like any private person who is claimed to be usurping a piece of property. A suit for the recovery of property is not an action in rem, but an action in personam. 1 It is an action directed against a specific party or parties, and any judgment therein binds only such party or parties. The complaint filed by plaintiff, the private respondent herein, is directed against the Republic of the Philippines, represented by the Land Authority, a governmental agency created by Republic Act No. 3844.

By its caption and its allegation and prayer, the complaint is clearly a suit against the State, which under settled jurisprudence is not permitted, except upon a showing that the State has consented to be sued, either expressly or by implication through the use of statutory language too plain to be misinterpreted. 2 There is no such showing in the instant case. Worse, the complaint itself fails to allege the existence of such consent. This is a fatal defect, 3 and on this basis alone, the complaint should have been dismissed.

The failure of the petitioner to assert the defense of immunity from suit when the case was tried before the court a quo, as alleged by private respondent, is not fatal. It is now settled that such defense "may be invoked by the courts sua sponte at any stage of the proceedings." 4

Private respondent contends that the consent of petitioner may be read from the Proclamation itself, when it established the reservation "subject to private rights, if any there be." We do not agree. No such consent can be drawn from the language of the Proclamation. The exclusion of existing private rights from the reservation established by Proclamation No. 90 can not be construed as a waiver of the immunity of the State from suit. Waiver of immunity, being a derogation of sovereignty, will not be inferred lightly, but must be construed in strictissimi juris. 5 Moreover, the Proclamation is not a legislative act. The consent of the State to be sued must emanate from statutory authority. Waiver of State immunity can only be made by an act of the legislative body.

Neither is there merit in respondent's submission. which the respondent appellate court sustained, on the basis of our decision in the Begosa case, 6 that the present action is not a suit against the State within the rule of State immunity from suit, because plaintiff does not seek to divest the Government of any of its lands or its funds. It is contended that the complaint involves land not owned by the State, but private land belonging to the plaintiff, hence the Government is not being divested of any of its properties. There is some sophistry involved in this argument, since the character of the land sought to be recovered still remains to be established, and the plaintiff's action is directed against the State precisely to compel the latter to litigate the ownership and possession of the property. In other words, the plaintiff is out to establish that he is the owner of the land in question based, incidentally, on an informacion posesoria of dubious value, and he seeks to establish his claim of ownership by suing the Republic of the Philippines in an action in personam.

The inscription in the property registry of an informacion posesoria under the Spanish Mortgage Law was a means provided by the law then in force in the Philippines prior to the transfer of sovereignty from Spain to the United States of America, to record a claimant's actual possession of a piece of land, established through an ex parte proceeding conducted in accordance with prescribed rules. 7 Such inscription merely furnishes, at best, prima facie evidence of the fact that at the time the proceeding was held, the claimant was in possession of the land under a claim of right as set forth in his application. 8 The possessory information could ripen into a record of ownership after the lapse of 20 years (later reduced to 10 years), upon the fulfillment of the requisites prescribed in Article 393 of the Spanish Mortgage Law. 9

There is no showing in the case at bar that the informacion posesoria held by the respondent had been converted into a record of ownership. Such possessory information, therefore, remained at best mere prima facie evidence of possession. Using this possessory information, the respondent could have applied for judicial confirmation of imperfect title under the Public Land Act, which is an action in rem. However, having failed to do so, it is rather late for him to pursue this avenue at this time. Respondent must also contend, as the records disclose, with the fact admitted by him and stated in the decision of the Court a quo that settlers have been occupying and cultivating the land in question since even before the outbreak of the war, which puts in grave doubt his own claim of possession.

Worthy of note is the fact, as pointed out by the Solicitor General, that the informacion posesoria registered in the Office of the Register of Deed of Camarines Sur on September 23, 1952 was a "reconstituted" possessory information; it was "reconstituted from the duplicate presented to this office (Register of Deeds) by Dr. Pablo Feliciano," without the submission of proof that the alleged duplicate was authentic or that the original thereof was lost. Reconstitution can be validly made only in case of loss of the original. 10 These circumstances raise grave doubts as to the authenticity and validity of the "informacion posesoria" relied upon by respondent Feliciano. Adding to the dubiousness of said document is the fact that "possessory information calls for an area of only 100 hectares," 11 whereas the land claimed by respondent Feliciano comprises 1,364.4177 hectares, later reduced to 701.9064 hectares. Courts should be wary in accepting "possessory information" documents, as well as other purportedly old Spanish titles, as proof of alleged ownership of lands.

WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed decision of the Intermediate Appellate Court, dated April 30, 1985, and affirming the order of the court a quo, dated August 21, 1980, dismissing the complaint filed by respondent Pablo Feliciano against the Republic of the Philippines. No costs.


Narvasa, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Melencio-Herrera, J., on leave.


1. Ang Lam v. Rosellosa, 86 Phil. 447.

2. Providence Washington Insurance Co. v. Republic of the Philippines, 29 SCRA 598, 601.

3. Insurance Company of North America v. Republic of the Philippines, 20 SCRA 627.

4. Insurance Company of North America v. Osaka Shosen Kaisha, 27 SCRA 780.

5. Mobil Philippines Exploration, nn. v. Customs Arrastre Service, 18 SCRA 1120; Insurance Company of North America v. Warner, 21 SCRA 765.

6. Begosa v. Philippine Veterans Administration, 32 SCRA 466.

7. Alfonso v. Commanding General 7 Phil. 600, 615.

8. Bishop of Segovia v. Mun. of Bantay, 28 Phil. 347, 351.

9. Querol and Flores v. Querol, 48 Phil. 90, 98-99.

10. Republic of the Philippines vs. Court of Appeals, 94 SCRA 865.

11. Government of the Philippines v. Heirs of Abella, 49 Phil. 374, 379.


[G.R. No. L-30044. December 19, 1973.]

LORENZO SAYSON, as Highway Auditor, Bureau of Public Highways, Cebu First Engineering District; CORNELIO FORNIER, as Regional Supervising Auditor, Eastern Visayas Region; ASTERIO, BUQUERON, ADVENTOR FERNANDEZ, MANUEL S. LEPATAN, RAMON QUIRANTE, and TEODULFO REGIS, petitioners, vs. FELIPE SINGSON, as sole owner and proprietor of Singkier Motor Service, respondent.

Solicitor General Felix V . Makasiar and Solicitor Bernardo P. Pardo for petitioners.

Teodoro Almase & Casiano U . Laput for respondent.



The real party in interest before this Court in this certiorari proceeding to review a decision of the Court of First Instance of Cebu is the Republic of the Philippines, although the petitioners are the public officials who were named as respondents 1 in a mandamus suit below. Such is the contention of the then Solicitor General, now Associate Justice, Felix V. Makasiar, 2 for as he did point out, what is involved is a money claim against the government, predicated on a contract. The basic doctrine of non-suability of the government without its consent is thus decisive of the controversy. There is a governing statute that is controlling. 3 Respondent Felipe Singson, the claimant, for reasons known to him, did not choose to abide by its terms. That was a fatal misstep. The lower court, however, did not see it that way. We cannot affirm its decision.

As found by the lower court, the facts are the following: "In January, 1967, the Office of the District Engineer requisitioned various items of spare parts for the repair of a D-8 bulldozer, . . . The requisition (RIV No. 67/0331) was signed by the District Engineer, Adventor Fernandez, and the Requisitioning Officer (civil engineer), Manuel S. Lepatan. . . . It was approved by the Secretary of Public Works and Communications, Antonio V. Raquiza. it is noted in the approval of the said requisition that `This is an exception to the telegram dated Feb. 21, 1967 of the Secretary of Public Works and Communications.' . . . So, a canvass or public bidding was conducted on May 5, 1967 . . . The committee on award accepted the bid of the Singkier Motor Service [owned by respondent Felipe Singson] for the sum of P43,530.00. . . . Subsequently, it was approved by the Secretary of Public Works and Communications; and on May 16, 1967 the Secretary sent a letter-order to the Singkier Motor Service, Mandaue, Cebu requesting it to immediately deliver the items listed therein for the lot price of P43,530.00. . . . It would appear that a purchase order signed by the District Engineer, the Requisitioning Officer and the Procurement Officer, was addressed to the Singkier Motor Service. . . . In due course the Voucher No. 07806 reached the hands of Highway Auditor Sayson for pre-audit. He then made inquiries about the reasonableness of the price. . . . Thus, after finding from the indorsements of the Division Engineer and the Commissioner of Public Highways that the prices of the various spare parts are just and reasonable and that the requisition was also approved by no less than the Secretary of Public Works and Communications with the verification of V.M. Secarro, a representative of the Bureau of Supply Coordination, Manila, he approved it for payment in the sum of P34,824.00, with the retention of 20% equivalent to P8,706.00. . . . His reason for withholding the 20% equivalent to P8,706.00 was to submit the voucher with the supporting papers to the Supervising Auditor, which he did. . . . The voucher . . . was paid on June 9, 1967 in the amount of P34,824.00 to the petitioner [respondent Singson]. On June 10, 1967, Highway Auditor Sayson received a telegram from Supervising Auditor Fornier quoting a telegraphic message of the General Auditing Office which states: 'In view of excessive prices charge for purchase of spare parts and equipment shown by vouchers already submitted this Office direct all highway auditors refer General Office payment similar nature for appropriate action.' . . . In the interim it would appear that when the voucher and the supporting papers reached the GAO, a canvass was made of the spare parts among the suppliers in Manila, particularly, the USI (Phil.), which is the exclusive dealer of the spare parts of the caterpillar tractors in the Philippines. Said firm thus submitted its quotations at P2,529.64 only which is P40,000.00 less than the price of the Singkier. . . . In view of the over-pricing the GAO took up the matter with the Secretary of Public Works in a third indorsement of July 18, 1987. . . .The Secretary then circularized a telegram holding the district engineer responsible for overpricing." 4 What is more, charges for malversation were filed against the district engineer and the civil engineer involved. It was the failure of the Highways Auditor, one of the petitioners before us, that led to the filing of the mandamus suit below, with now respondent Singson as sole proprietor of Singkier Motor Service, being adjudged as entitled to collect the balance of P8,706.00, the contract in question having been upheld. Hence this appeal by certiorari.

1. To state the facts is to make clear the solidity of the stand taken by the Republic. The lower court was unmindful of the fundamental doctrine of non-suability. So it was stressed in the petition of the then Solicitor General Makasiar. Thus: "It is apparent that respondent Singson's cause of action is a money claim against the government, for the payment of the alleged balance of the cost of spare parts supplied by him to the Bureau of Public Highways. Assuming momentarily the validity of such claim, although as will be shown hereunder, the claim is void for the cause or consideration is contrary to law, morals or public policy, mandamus is not the remedy to enforce the collection of such claim against the State . . ., but an ordinary action for specific performance . . . Actually, the suit disguised as one for mandamus to compel the Auditors to approve the vouchers for payment, is a suit against the State, which cannot prosper or be entertained by the Court except with the consent of the State . . . In other words, the respondent should have filed his claim with the General Auditing Office, under the provisions of Com. Act 327 . . . which prescribe the conditions under which money claim against the government may be filed . . .," 5 Commonwealth Act No. 327 is quite explicit. It is therein provided: "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. If said accounts or claims need reference to other persons, office or offices, or to a party interested, the period aforesaid shall be counted from the time the last comment necessary to a proper decision is received by him." 6 Thereafter, the procedure for appeal is indicated: "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 (a) To the President of the United States, pending the final and complete withdrawal of her sovereignty over the Philippines, or (b) To the President of the Philippines, or (c) To the Supreme Court of the Philippines if the appellant is a private person or entity." 7

2. With the facts undisputed and the statute far from indefinite or ambiguous, the appealed decision defies explanation. It would be to disregard a basic corollary of the cardinal postulate of non-suability. It is true that once consent is secured, an action may be filed. There is nothing to prevent the State, however, in such statutory grant, to require that certain administrative proceedings be had and the exhausted. Also, the proper forum in the judicial hierarchy can be specified if thereafter an appeal would be taken by the party aggrieved. Here, there was no ruling of the Auditor General. Even had there been such, the court to which the matter should have been elevated is this Tribunal; the lower court could not legally act on the matter. What transpired was anything but that. It is quite obvious then that it does not have the imprint of validity.

WHEREFORE, the decision of the Court of First Instance of Cebu of September 4, 1968 is reversed and set aside, and the suit for mandamus filed against petitioners, respondents below, is dismissed. With costs against respondent Felipe Singson.

Zaldivar, Barredo, Antonio, Fernandez and Aquino, JJ ., concur.


1. This petition was filed by Lorenzo Sayson, Highways Auditor; Cornelio Sornier, Regional Supervising Auditor; Adventor Fernandez, District Engineer; Manuel S. Lepatan, Mechanical Engineer; Ramon Quirante, Property Custodian; Teodulfo Regis, Chief Accountant; and Asterio Buqueron, Cashier, of the Cebu First Engineering District of Cebu City.

2. He was assisted by Solicitor Bernardo P. Pardo.

3. Com. Act No. 327 (1938).

4. Petition for Review, 2-4.

5. Ibid, 4-5. The Solicitor General cited the following cases: City of Manila v. Posadas, 48 Phil. 309 (1925); Jacinto v. Director of Lands, 49 Phil. 853 (1926); Syquia v. Almeda Lopez, 84 Phil. 312 (1949); Aprueba v. Ganzon, L-20867, Sept. 3, 1966, 18 SCRA 8; Namarco v. Cloribel, L-27260, April 29, 1968, 23 SCRA 398.

6. Commonwealth Act No. 327, Section 1 (1938).

7. Ibid, Section 2.


[G.R. No. 11154. March 21, 1916.]

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

Crossfield & O'Brien for plaintiff.

Attorney-General AvanceƱa for defendant.



This is an appeal by both partied 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 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 and 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 placed 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 wound in the same place and in beck 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 mass 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 wound would be expose 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 notice 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 re-adjustment of the functions of the brain and nerves. The patient apparently was slightly deaf, had a slight 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 memory 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 dissolve 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 amount 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 fund 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 sex 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 recommend 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 defend 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. State, 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 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 in favor of an individual, by reason of the misfeasance, laces, 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 tort 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 authorizes officers and agents, relative to the mill property of said George Apfelbacher, the fish hatchery of the State 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 commence suit for the purpose of settling plaintiff's controversies with the state. 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. (Murdoc 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 discloses 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 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 provision 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 the 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 and 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 articles 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 article refers to third 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 up[on 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 director 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 executed the trust confided to him. this concept does not apply to any executive agent who is an employee of the active administration and who in 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 charge 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, evident that the State (the Government of the Philippine Islands) is only liable, according to the above quoted decisions of the Supreme Court of Spain, for the acts of its agents, officers and employees when they act as special agents within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the ambulance of the General Hospital was not such an agent.

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

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


[G.R. No. L-36084. August 31, 1977.]

REPUBLIC OF THE PHILIPPINES, petitioner, vs. HONORABLE AMANTE P. PURISIMA, the Presiding Judge of the Court of First Instance of Manila (Branch VII), and YELLOW BALL FREIGHT LINES, INC., respondents.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M. Kapunan, Solicitor Oscar C. Fernandez and Special Attorney Renato P. Mabugat for petitioner.

Jose Q. Calingo for private respondent.



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 jurisdictional 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. 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 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 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 caused 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 Providence 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 petition 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 petition 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 except for the above-mentioned purpose of definitely terminating this case. Costs against Yellow Ball Freight Lines, Inc.

Antonio, Aquino, Concepcion Jr. and Santos, JJ., concur.

Barredo, J., took no part.


1. Petition, Annex H.

2. L-23139, December 17 1966, 18 SCRA 1120.

3. Insurance Company of North America v. Republic, L-24520, July 11, 1967, 20 SCRA 648, was the first case citing Mobil with approval. The last opinion came from the pen of Chief Justice Concepcion deciding therein the appeals in Union Insurance Society of Canton, Ltd. v. Republic, L-26409, 46 SCRA 120; Domestic Insurance Company of the Philippines v. Republic, L-26550, 46 SCRA 121; Insurance Company of North America v. Republic, L-26587, 46 SCRA 121; British Traders Insurance Co., Ltd. v. Barber Line, Macondray and Co., Inc., L-31157, 46 SCRA 121, the decisions being promulgated on July 31, 1972.

4. Ibid, Annex J.

5. Article XV, Section 16.

6. L-27389, March 30, 1970, 32 SCRA 227.

7. Ibid, 228-229. The classic formulation of Holmes is found in Kawananakoa v. Polybank, 205 US 349 (1907). It is worded thus: "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." The providence Washington Insurance Company decision, L-26386, Sept. 30, 1969 is reported in 29 SCRA 598.

8. L-27299, June 27, 1973, 51 SCRA 340.

9. L-30671, November 28, 1973, 54 SCRA 83.

10. L-30044, December 19, 1973, 54 SCRA 282.

11. L-31337, December 20, 1973, 54 SCRA 324.

12. 32 SCRA 227, 229-230.

13. Petition, Annex J, 2.

14. L-22753, December 18, 1967, 21 SCRA 1283.

15. Ibid, 1287.


[G.R. No. L-32667. January 31, 1978.]

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF INDUSTRIAL RELATIONS, GABRIEL V. MANANSALA and GILBERT P. LORENZO, in his official capacity as authorized Deputy Sheriff, respondents.

Conrado E. Medina for petitioner.

Gabriel V. Manansala in his own behalf.

Jose K. Manguiat, Jr. for respondent Court.


Pursuant to a writ of execution issued by the now defunct Court of Industrial Relations in favor of private respondent and against the People's Homesite and Housing Corporation, respondent clerk of court, in his capacity as special deputy sheriff, served a notice to garnish the funds of the People's Homesite and Housing Corporation which were deposited with petitioner bank. Petitioner moved to quash the notice of garnishment but respondent Court denied the motion. Claiming that respondent Court's denial amounted to grave abuse of discretion because the appointment of the clerk of court as authorized deputy sheriff was contrary to law and the funds subject of the garnishment "could be public in character", petitioner instituted instant certiorari proceeding.

The Supreme Court held that respondent clerk of court is the legally authorized deputy sheriff to serve the Court of Industrial Relations' writ of execution as provided for in Republic Act No. 4201 which amended the Court of Industrial Relations Act; and that funds of the People's Homesite and Housing Corporation may be the object of garnishment because although the said corporation is a government-owned and controlled corporation, it has a personality separate and distinct from the government which subjects it to the rules of law governing private corporations.



The issue raised in this certiorari proceeding is whether or not an order of the now defunct respondent Court of Industrial Relations denying for lack of merit petitioner's motion to quash a notice of garnishment can be stigmatized as a grave abuse of discretion. What was sought to be garnished was the money of the People's Homesite and Housing Corporation deposited at petitioner's branch in Quezon City, to satisfy a decision of respondent Court which had become final and executory. 1 A writ of execution in favor of private respondent Gabriel V. Manansala had previously been issued. 2 He was the counsel of the prevailing party, the United Homesite Employees and Laborers Association, in the aforementioned case. The validity of the order assailed is challenged on two, grounds: (1) that the appointment of respondent Gilbert P. Lorenzo as authorized deputy sheriff to serve the writ of execution was contrary to law and (2) that the funds subject of the garnishment "may be public in character." 3 In thus denying the motion to quash, petitioner contended that there was on the part of respondent Court a failure to abide by authoritative doctrines amounting to a grave abuse of discretion. After a careful consideration of the matter, it is the conclusion of this Tribunal that while the authorization of respondent Lorenzo to act as special deputy sheriff to serve the notice of garnishment may be open to objection, the more basic ground that could have been relied upon — not even categorically raised, petitioner limiting itself to the assertion that the funds "could be public" in character, thus giving rise to the applicability of fundamental concept of non-suability — is hardly persuasive. The People's Homesite and Housing Corporation had a juridical existence enabling it sue and be sued. 4 Whatever defect could be attributed therefore to the order denying the motion to quash could not be characterized as a grave abuse of discretion. Moreover, with the lapse of time during which private respondent had been unable to execute a judgment in his favor, the equities are on his side. Accordingly, this petition must be dismissed.

The order of August 26, 1970 of respondent Court denying the motion to quash, subject of this certiorari proceeding, reads as follows: "The Philippine National Bank moves to quash the notice of garnishment served upon its branch in Quezon City by the authorized deputy sheriff of this Court. It contends that the service of the notice by the authorized deputy sheriff of the court contravenes Section 11 Commonwealth Act No. 105, as amended which reads: 'All writs and processes issued by the Court shall be served and executed free of charge by provincial or city sheriffs, or by any person authorized by this Court, in the same manner as writs and processes of Courts of First Instance.' Following the law, the Bank argues that it is the Sheriff of Quezon City, and not the Clerk of this Court who is its Ex-Officio Sheriff, that has the authority to serve the notice of garnishment, and that the actual service by the latter officer of said notice is therefore not in order. The Court finds no merit in this argument. Republic Act No. 4201 has, since June 19, 1965, already repealed Commonwealth Act No. 103, and under this law, it is now the Clerk of this Court that is at the same time the Ex-Officio Sheriff. As such Ex-Officio Sheriff, the Clerk of this Court has therefore the authority to issue writs of execution and notices of garnishment in an area encompassing the whole of the country, including Quezon City, since his area of authority is coterminous with that of the Court itself, which is national in nature. . .. At this stage, the Court notes from the record that the appeal to the Supreme Court by individual employees of PHHC which questions the award of attorney's fees to Atty. Gabriel V. Manansala, has already been dismissed and that the same became final and executory on August 9, 1970. There is no longer any reason, therefore, for withholding action in this case. [Wherefore], the motion to quash filed by the Philippine National Bank is denied for lack of merit. The said Bank is therefore ordered to comply within five days from receipt with the 'notice of Garnishment' dated May 6, 1970." 5 There was a motion for reconsideration filed by petitioner, but in a resolution dated September 22, 1970, it was denied. Hence, this certiorari petition.

As noted at the outset, the petition lacks merit.

1. The plea for setting aside the notice of garnishment was premised on the funds of the People's 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 could be spoken of as public in character may be accepted in the sense that the People's Homesite and Housing Corporation was a government-owned entity. It does not follow though that they were exempt from garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations 6 is squarely in point. As was explicitly stated in the opinion of the then Justice, later Chief Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO are public funds of the government, and that, as such, the same may not be garnished, attached or levied upon, is untenable for, as a government owned and controlled corporation, the NASSCO has a personality of its own, distinct and separate from that of the Government. It has — pursuant to Section 2 of Executive Order No. 356, dated October 23, 1950 . . . , pursuant to which the NASSCO has been established - 'all the powers of a corporation under the Corporation Law . . . . ' Accordingly, it may sue and be sue and may be subjected to court processes just like any other corporation (Section 13, Act No. 1459, as amended." 7 The similarities between the aforesaid case and the present litigation are patent. Petitioner was similarly a government-owned corporation. The principal respondent was the Court of Industrial Relations. The prevailing parties were the employee of petitioner. There was likewise a writ of execution and thereafter notices of garnishment served on several banks. There was an objection to such a move and the ruling was adverse to the National Shipyard and Steel Corporation. Hence the filing of a petition for certiorari. To repeat, the ruling was quite categorical. Garnishment was the appropriate remedy for the prevailing party which could proceed against the funds of a corporate entity even if owned or controlled by the government. In a 1941 decision, Manila Hotel Employees Association v. Manila Hotel Company, 8 this Court, through Justice Ozaeta, held: "On the other hand, it is well settled that when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. (Bank of the United States v. Planters' Bank, 9 Wheat, 904, 6 L.ed. 244). By engaging in a particular business thru the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations." 9

2. It is worth noting that the decision referred to, the Bank of the United States v. Planters' Bank, 10 was promulgated by the American Supreme Court as early as 1824, the opinion being penned by the great Chief Justice Marshall. As pointed out by him: "It is, we think, a sound principle when a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business which is to be transacted. Thus, many states of this Union who have an interest in banks, are not suable even in their own courts; yet they never exempt the corporation from being sued. The state of Georgia, by giving to the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign character, so far as respects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never exercises its sovereignty. It acts merely as a corporator, and exercises no other power in the management the affairs of the corporation, that are expressly given by the incorporating act." 11 The National Shipyard and Steel Corporation case, therefore, merely reaffirmed one of the oldest and soundest doctrines in this branch of the law.

3. The invocation of Republic v. Palacio, 12 as well as Commissioner of Public Highways v. San Diego, 13 did not help the cause of petitioner at all. The decisions are not applicable is properly understood they can easily be distinguished. As is clear in the opinion of Justice J.B.L. Reyes in Republic v. Palacio, the Irrigation Service Unit which was sued was an office and agency under the Department of Public Works al Communications. The Republic of the Philippines, through the then Solicitor General, moved for the dismissal of such complaint, alleging that it "has no juridical personality to sue and be sued." 14 Such a motion to dismiss was denied. The case was tried and plaintiff Ildefonso Ortiz, included as private respondent in the Supreme Court proceeding, obtained a favorable money judgment. It became final and executory. Thereafter, it appeared that the Solicitor General was served with a copy of the writ of execution issued by the lower court followed by an order of garnishment. 15 Again, there was an urgent motion lift such order, but it was denied. A certiorari and prohibition proceeding was then filed with the Court of Appeals. The legality of the issuance of such execution and garnishment was upheld, and the matter was elevated to this Tribunal. The Republic was sustained. The infirmity of the decision reached by the Court of Appeals, according to the opinion, could be traced to the belief that there was a waiver of "government immunity and, by implication, consent to the suit." 16 There was no such waiver. Even if there were, it was stressed by Justice J.B.L. Reyes: "It is apparent that this decision of the Court of Appeals suffers from the erroneous assumption that because the State has waived its immunity, its property and funds become liable to seizure under the legal process. This emphatically is not the law. (Merritt v. Insular Government, 34 Phil. 311)." 17 To levy the execution of such funds, according to him, would thus "amount to a disbursement without any proper appropriation as required by law." 18 In Commissioner of Public Highways v. San Diego, the opening paragraph of Justice Teehankee was quite specific as to why there could be neither execution nor garnishment of the money of petitioner Bureau of Public Highways: "In this special civil action for certiorari and prohibition, the Court declares null and void the two questioned orders of respondent Court levying upon funds of petitioner Bureau of Public Highways on deposit with the Philippine National Bank, by virtue of the fundamental precept that government funds are not subject to execution or garnishment." 19 The funds appertained to a governmental office, not to a government owned or controlled corporation with a separate juridical personality. In neither case therefore was there an entity with the capacity to sue and be sued, the funds of which could thereafter be held liable to execution and garnishment in the event of an adverse judgment.

4. Both the Palacio and the Commissioner of Public Highways decisions, insofar as they reiterate the doctrine that one of the corollaries of the fundamental concept of non-suability is that governmental funds are immune from garnishment, refer to Merritt v. Insular Government, decision. 20 Since then such a principle has been followed with undeviating rigidity, the latest case in point being Republic v. Villasor, 21 promulgated in 1973. It is an entirely different matter if, according to Justice Sanchez in Ramos v. Court of Industrial Relations, 22 the office or entity is "possessed of a separate and distinct corporate existence." 23 Then it can sue and be sued. Thereafter, its funds may be levied upon or garnished. That is what happened in this case.

5. With the crucial issue thus resolved in favor of the correctness of the order assailed, the other objection raised, namely that respondent Court acted erroneously in having a special sheriff serve to the writ of execution, hardly needs any extensive discussion. It is true that in the aforesaid Commissions of Public Highways opinion, this Court held that there is no authorization in law for the appointment of special sheriffs for the service of writs of execution. 24 In the order sought to be nullified, the then Judge Joaquin M. Salvador of respondent Court pointed out that under a later Act, 25 the Court of Industrial Relations Act was amended with the proviso that its Clerk of Court was the ex-oficio sheriff. The point raised in the petition that it should be the sheriff of Quezon City that ought to have served the writ of execution would thus clearly appear to be inconclusive. There is to be sure no thought of deviating from the principle announced in the Commissioner of Public Highways case. That is as it ought to be. Even if, however, there is sufficient justification for the infirmity attributed to respondent Court by virtue of such a ruling, still consider all the circumstances of this case, it clearly does not call for the nullification of the order in question. What cannot be denied that the writ of execution was issued as far back as May 5, 1970 by the then Clerk of Court of respondent Tribunal as the authorized sheriff. It would be, to say the least, unfair and unequitable if, on the assumption that such Clerk of Court lacked such competence, a new writ of execution had to be issued by the proper official. At any rate, what is important is that the judgment be executed. That is to achieve justice according to law. It would be to carry technicality, therefore, to an absurd length if just because of such a mistake, assuming that it is, but undoubtedly one committed in good faith, further delay would still be imposed on private respondent by characterizing the order sought to be nullified amounting to a grave abuse of discretion.

WHEREFORE, the petition for certiorari is dismissed. No costs.

Barredo, Antonio and Concepcion, Jr., JJ., concur.

Santos, J., is on leave.

Aquino, J., concurs in the result.


1. Case No. 2810-V of the Court of Industrial Relations.

2. Petition, Annex A.

3. Ibid, 13.

4. Under Presidential Decree No. 757 (1975) the People's Homesite and Housing Corporation was dissolved and the National Housing Authority created.

5. Petition, Annex F.

6. 118 Phil. 782 (1963).

7. Ibid, 788.

8. 73 Phil. 374.

9. Ibid, 388-389.

10. 9 Wheat. 904, 6 L.ed. 244.

11. Ibid, 907-908.

12. L-20322, May 29, 1968, 23 SCRA 899.

13. L-300098, February 18, 1970, 31 SCRA 616.

14. 23 SCRA 899, 901. The other defendant was the Handog Irrigation, Inc.

15. Ibid, 901.

16. Ibid, 905.

17. Ibid.

18. Ibid, 906.

19. 31 SCRA 616, 618.

20. 34 SCRA 311.

21. L-30671, November 28, 1973, 54 SCRA 83.

22. L-22753, December 18, 1967, 21 SCRA 1283.

23. Ibid, 1287.

24. 31 SCRA 616, 631.

25. Republic Act No. 4201 (1965).


[G.R. No. L-41299. February 21, 1983.]


The Solicitor General for petitioner.

Eriberto D. Ignacio for respondents David Cruz, Socorro Concio Cruz and Lorna Cruz.



This Petition for Review on Certiorari of the Decision of the Court of Appeals 1 stems from the following facts, as narrated by the Trial Court, adopted by the Court of Appeals, and quoted by both petitioner 2 and private respondents 3 :

"Sometime in March, 1963 the spouses David B. Cruz and Socorro Concio Cruz applied for and were granted a real estate loan by the SSS with their residential lot located at Lozada Street, Sto. Rosario, Pateros, Rizal covered by Transfer Certificate of Title No. 2000 of the Register of Deeds of Rizal as collateral. Pursuant to this real estate ban said spouses executed on March 26, 1963 the corresponding real estate mortgage originally in the amount of P39,500.00 which was later increased to P48,000.00 covering the aforementioned property as shown in their mortgage contract, Exhibit A and I. From the proceeds of the real estate loan the mortgagors constructed their residential house on the mortgaged property and were furnished by the SSS with a passbook to record the monthly payments of their amortizations (Exhibits B and B-1). The mortgagors, plaintiffs herein, complied with their monthly payments although there were times when delays were incurred in their monthly payments which were due every first five (5) days of the month (Exhibits 3-A to 3-N). On July 9, 1968, defendant SSS filed an application with the Provincial Sheriff of Rizal for the foreclosure of the real estate mortgage executed by the plaintiffs on the ground, among others:

'That the conditions of the mortgage have been broken since October, 1967 with the default on the part of the mortgagor to pay in full the installments then due and payable on the principal debt and the interest thereon, and, all of the monthly installments due and payable thereafter up to the present date; . . .

'That by the terms of the contract herein above referred to, the indebtedness to the mortgagee as of June, 1968 amounts to Ten Thousand Seven Hundred Two Pesos & 58/100 (P10,702.58), Philippine Currency, excluding interests thereon, plus 20% of the total amount of the indebtedness as attorney's fees, also secured by the said mortgage." (Exhibit "C")

"Pursuant to this application for foreclosure, the notice of the Sheriff's Sale of the mortgaged property was initially published in the Sunday Chronicle in its issue of July 14, 1968 announcing the sale at public auction of the said mortgaged property. After this first publication of the notice, and before the second publication of the notice, plaintiff herein thru counsel formally wrote defendant SSS, a letter dated July 19, 1968 and received on the same date by said entity demanding, among others, for said defendant SSS to withdraw the foreclosure and discontinue the publication of the notice of sale of their property claiming that plaintiffs were up-to-date in the payment of their monthly amortizations (Exhibits "E" and "E-1"). In answer to this letter defendant SSS sent a telegram to Atty. Eriberto Ignacio requesting him to come to their office for a conference. This telegram was received by said counsel on July 23, 1968 (Exhibit "G" and "G-1). To this telegraphic answer, Atty. Ignacio sent a telegraphic reply suggesting instead that a representative of the SSS be sent to him because his clients were the aggrieved parties (Exhibit "G-2"). Nothing came out of the telegraphic communications between the parties and the second and third publications of the notice of foreclosure were published successively in the Sunday Chronicle in its issues of July 21 and 28, 1968 (Exhibits "N-1" and "0-1")." 4

On July 24, 1968, the Cruz spouses, together with their daughter Lorna C. Cruz, instituted before the Court of First Instance of Rizal an action for damages and attorney's fees against the Social Security System (SSS) and the Provincial Sheriff of Rizal alleging, among other things, that they had fully and religiously paid their monthly amortizations and had not defaulted in any payment.

In its Answer, with counterclaim, the SSS stressed its right to foreclose the mortgage executed in its favor by private respondents by virtue of the automatic acceleration clause provided in the mortgage contract, even after private respondents had paid their amortization installments. In its counterclaim, the SSS prayed for actual and other damages, as well as attorney's fees, for malicious and baseless statements made by private respondents and published in the Manila Chronicle.

On September 23, 1968, the Trial Court enjoined the SSS from holding the sale at public auction of private respondent's property upon their posting of a P2,000.00 bond executed in favor of the SSS.

The Trial Court rendered judgment on March 5, 1971, the dispositive portion of which reads:

"WHEREFORE, judgment is rendered against defendant SSS, directing it to pay plaintiffs the following amounts:

(a) P2,500.00 as actual damage;

(b) P35,000.00 as moral damage;

(c) P10,000.00 as exemplary or corrective damages; and

(d) P5,000.00 as attorney's fees.

Defendant SSS shall further pay the costs." 5

In respect of the moral and temperate damages awarded, the Trial Court stated:

"With respect to moral and temperate damages, the Court holds that the first publication of the notice was made in good faith but committed by defendant SSS in gross negligence considering the personnel at its command and the ease with which verifications of the actual defaulting mortgagors may be made. On this initial publication of the notice of foreclosure (Exhibits "M" and "M-1"), the Court believes plaintiffs are entitled to the amount of P5,000.00. The second publication of the notice of foreclosure is another matter. There was already notice by plaintiffs to defendant SSS that there was no reason for the foreclosure of their mortgaged property as they were never in default. Instead of taking any corrective measure to rectify its error, defendant SSS adopted a position of righteousness and followed the same course of action contending that no error has been committed. This act of defendant indeed was deliberate, calculated to cow plaintiffs into submission, and made obviously with malice. On this score, the Court believes defendant SSS should pay and indemnify plaintiffs jointly in the sum of P10,000.00. Lastly, on the third publication of the notice of foreclosure, the Court finds this continued publication an outright disregard for the reputation and standing of plaintiffs. The publication having reached a bigger segment of society and also done with malice and callous disregard for the rights of its clients, defendant SSS should compensate plaintiffs jointly in the sum of P20,000.00. All in all, plaintiffs are entitled to P35,000.00 by way of moral damages." 6

On appeal, the Court of Appeals affirmed the lower Court judgment in a Decision promulgated on March 14, 1975, but upon SSS's Motion for Reconsideration, modified the judgment by the elimination of the P5,000.00 moral damages awarded on account of the initial publication of the foreclosure notice. To quote:

xxx xxx xxx

After a re-examination of the evidence, we find that the negligence of the appellant is not so gross as to warrant moral and temperate damages. The amount of P5,000.00 should be deducted from the total damages awarded to the plaintiffs.

"WHEREFORE, the decision promulgated on March 14, 1975 is hereby maintained with the sole modification that the amount of P5,000.00 awarded on account of the initial publication is eliminated so that the said amount should be deducted from the total damages awarded to the plaintiffs.


In so far as exemplary and corrective damages are concerned, the Court of Appeals had this to say.

"The Court finds no extenuating circumstances to mitigate the irresponsible action of defendant SSS and for this reason, said defendant should pay exemplary and corrective damages in the sum of P10,000.00 . . ."

Upon denial of its Motion for Reconsideration by respondent Court, the SSS filed this Petition alleging:

"I. Respondent Court of Appeals erred in not finding that under Condition No. 10 of the Mortgage contract, which is a self-executing, automatic acceleration clause, all amortizations and obligations of the mortgagors become ipso jure due and demandable if they at any time fail to pay any of the amortizations or interest when due;

"II. Respondent Court of Appeals erred in holding that a previous notice to the mortgagor was necessary before the mortgage could be foreclosed;

"III. Respondent Court of Appeals erred in not holding that, assuming that there was negligence committed by subordinate employees of the SSS in mistaking 'Socorro C. Cruz' for 'Socorro J. Cruz' as the defaulting borrower, the fault cannot be attributed to the SSS, much less should the SSS be made liable for their acts done without its knowledge and authority;

"IV. Respondent Court of Appeals erred in holding that there is no extenuating circumstance to mitigate the liability of petitioner;

"V. Respondent Court of Appeals erred in not holding that petitioner is not liable for damages not being a profit-oriented governmental institution but one performing governmental functions." 8

For failure of the First Division to obtain concurrence of the five remaining members (Justices Plana and Gutierrez, Jr. could take no part), the case was referred to the Court en banc.

The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their real estate mortgage contract with the SSS as would have warranted the publications of the notices of foreclosure; and (2) whether or not the SSS can be held liable for damages.

The first issue revolves around the question of appreciation of the evidence by the lower Court as concurred in by the Court of Appeals. The appraisal should be left undisturbed following the general rule that factual findings of the Court of Appeals are not subject to review by this Court, the present case not being one of the recognized exceptions to that rule. 9 Accordingly, we are upholding the finding of the Court of Appeals that the SSS application for foreclosure was not justified, particularly considering that the real estate loan of P48,000.00 obtained by the Cruzes in March, 1963, was payable in 15 years with a monthly amortization of P425.18, and that as of July 14, 1968, the date of the first notice of foreclosure and sale, the outstanding obligation was still P38,875.06 and not P10,701.58, as published.

"The appellant was not justified in applying for the extra-judicial foreclosure of the mortgage contract executed in its favor by the spouses, David B. Cruz and Socorro Concio-Cruz. Exh. 'A'. While it is true that the payments of the monthly installments were previously not regular, it is a fact that as of June 30, 1968 the appellee, David B. Cruz and Socorro Concio-Cruz were up-to-date and current in the payment of their monthly installments. Having accepted the prior late payments of the monthly installments, the appellant could no longer suddenly and without prior notice to the mortgagors apply for the extra-judicial foreclosure of the mortgage in July 1968." 10

A similar conclusion was reached by the trial Court.

"Defendant's contention that there was clerical error in the amount of the mortgage loan due as of June, 1968 as per their application for foreclosure of real estate mortgage is a naive attempt to justify an untenable position. As a matter of fact plaintiffs were able to establish that the mortgagor who actually committed the violation of her mortgage loan was a certain 'Socorro J. Cruz' who was in arrears in the amount of P10,702.58 at the time the application for foreclosure of real estate mortgage was filed (Exhibits "BB" and "EE"). Defendant mortgagee must have committed an error in picking the record of plaintiff 'Socorro C. Cruz' instead of the record of 'Socorro J. Cruz'. Defendant SSS, however, denied having committed any error and insists that their motion for foreclosure covers the real estate mortgage of spouses David E. Cruz and Socorro C. Cruz. This Court is nonetheless convinced that the foreclosure proceedings should have been on the real estate mortgage of 'Socorro J. Cruz' who was in arrears as of June, 1968 in the amount of P10,701.58, the exact amount mentioned in the application for foreclosure of real estate mortgage by defendant SSS." 11

We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds, there should be no question on this score considering that the SSS is a juridical entity with a personality of its own. 12 It has corporate powers separate and distinct from the Government. 13 SSS' own organic act specifically provides that it can sue and be sued in Court. 14 These words "sue and be sued" embrace all civil process incident to a legal action. 15 So that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit provision of the aforecited enabling law, the Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby concede its liability. That statutory law has given to the private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case, to obtain compensation in damages arising from contract 16 , and even for tort.

A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo vs. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:

"It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government owned and controlled corporation, it has a personality of its own, distinct and separate from that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 781). Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause of action and accordingly it can include a tort claim such as the one instituted by the petitioners."

The proposition that the SSS is not profit-oriented was rejected in the case of SSS Employees' Association vs. Hon. Soriano. 17 But even conceding that the SSS is not, in the main, operated for profit, it cannot be denied that, in so far as contractual loan agreements with private parties are concerned, the SSS enters into them for profit considering that the borrowers pay interest, which is money paid for the use of money, plus other charges.

In so far as it is argued that to hold the SSS liable for damages would be to deplete the benefit funds available for its covered members, suffice it to say, that expenditures of the System are not confined to the payment of social security benefits. For example, the System also has to pay the salaries of its personnel. Moreover, drawing a parallel with the NASSCO and the Virginia Tobacco Administration, whose funds are in the nature of public funds, it has been held that those funds may even be made the object of a notice of garnishment. 18

What is of paramount importance in this controversy is that an injustice is not perpetrated and that when damage is caused a citizen, the latter should have a right of redress particularly when it arises from a purely private and contractual relationship between said individual and the System.

We find, however, that under the circumstances of the case, the SSS cannot be held liable for the damages as awarded by the Trial Court and the Appellate Tribunal.

As basis for the award of actual damages, the Trial Court relied on the alleged expenses incurred by private respondents for the wardrobe they were supposed to use during their trip abroad, which was allegedly aborted because of the filing of the foreclosure application by the SSS. We find the foregoing too speculative. There could have been other reasons why the trip did not materialize. Moreover, it appears that private respondents' passports had already expired but that they made no effort to secure new passports. 19 Nor did they secure the necessary visas from the local consulates of foreign countries they intended to visit for their trip abroad. 20

Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals "the negligence of the appellant is not so gross as to warrant moral and temperate damages", 21 except that, said Court reduced those damages by only P5,000.00 instead of eliminating them. Neither can we agree with the findings of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS was of the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of irregular payments made by private respondents, and placed reliance on the automatic acceleration clause in the contract. The filing alone of the foreclosure application should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages. 22

With the ruling out of compensatory, moral and temperate damages, the grant of exemplary or corrective damages should also be set aside. 23 Moreover, no proof has been submitted that the SSS had acted in a wanton, reckless and oppressive manner. 24

However, as found by both the Trial and Appellate Courts, there was clear negligence on the part of SSS when they mistook the loan account of Socorro J. Cruz for that of private respondent Socorro C. Cruz. Its attention was called to the error, but it adamantly refused to acknowledge its mistake. The SSS can be held liable for nominal damages. This type of damages is not for the purpose of indemnifying private respondents for any loss suffered by them but to vindicate or recognize their rights which have been violated or invaded by petitioner SSS. 25

The circumstances of the case also justify the award of attorney's fees, as granted by the Trial and Appellate Courts, particularly considering that private respondents were compelled to litigate for the prosecution of their interests. 26

WHEREFORE, the judgment sought to be reviewed is hereby modified in that petitioner SSS shall pay private respondents: P3,000.00 as nominal damages; and P5,000.00 as attorney's fees.

Costs against petitioner Social Security System.


Teehankee, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Vasquez and Relova, JJ., concur.

Fernando, C.J., in the result.


1. Penned by Justice Ramon C. Fernandez and concurred in by Justices Efren I. Plana and Venicio Escolin.

2. pp. 3-7, Petitioner's Brief.

3. pp. 2-5, Respondents' Brief.

4. pp. 70-71, Record on Appeal.

5. p. 74, Record on Appeal, p. 62 Rollo.

6. pp. 73-74, Record on Appeal.

7. p. 59, Rollo.

8. pp. A-B, Brief for the Petitioner, p. 136, Rollo.

9. Talosig vs. Vda. de Nieva, 43 SCRA 473; Evangelista & Co. vs. Abad Santos, 51 SCRA 416; Tiongco vs. De la Merced, 58 SCRA 90; Perido vs. Perido, 63 SCRA 98; Alaras vs. Court of Appeals, 64 SCRA 671; T.J. Wolff & Co., Inc. vs. Moralde, 81 SCRA 624.

10. p. 54, Rollo.

11. pp. 72-73; Record on Appeal.

12. SSS Employees' Association (PAFLU) vs. Soriano, 7 SCRA 1016 (1963).

13. SSS Employees' Association vs. Soriano, 9 SCRA 511 (1963).

14. Sec. 4(k), RA 1161; Sec. 4(k), PD 24.

15. Sinco, Philippine Political Law, Revised Ed., p. 34.

16. See Noda vs. Social Security System, 109 SCRA 218 (1981).

17. 9 SCRA 511 (1963).

18. NASSCO vs. Court of Industrial Relations, 8 SCRA 781 (1963); PNB vs. Pabalan, 83 SCRA 595 (1978).

19. T.s.n., August 20, 1969, pp. 91-101.

20. T.s.n., ibid., 101; p. 20, Brief for defendant-appellant, Court of Appeals.

21. p. 2, Resolution, p. 59, Rollo.

22. Malonzo vs. Galang, 109 Phil. 16 (1960); Enervida vs. de la Torre, 55 SCRA 339 (1974).

23. Art. 2234, Civil Code.

24. Art. 2232, ibid.

25. Art. 2221, ibid.

26. Art. 2208, ibid.

* Justices Efren I. Plana and Venicio Escolin took part in the Decision under review.

** Justice Hugo E. Gutierrez, Jr., then Acting Solicitor General, filed the Brief for petitioner.


[G.R. No. L-55273-83. December 19, 1981.]


Efren C. Carag for petitioners.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Reynato S. Puno and Solicitor Jesus P. Castilo for respondent NPC.


Separate complaints for damages arising from the precipitate and simultaneous opening of floodgates of the Angat Dam resulting in the inundation of several Bulacan towns were filed by petitioners before respondent Court against the National Power Corporation (NPC) and the plant superintendent of Angat Dam. In its answer, the NPC invoked a special and affirmative defense that in the operation of the Angat Dam, it is performing a purely governmental function, hence it can not be sued without the express consent of the State. It asked for dismissal of the case. Respondent court ordered the dismissal of the complaint against the NPC over the opposition of petitioners stating that the NPC performs governmental function with respect to the management and operation of the Angat Dam, and that its power to sue and be sued under its Charter does not include the power to be sued for tort. Respondent Court denied reconsideration of its order. Hence, this petition.

The Supreme Court held that the NPC is a government owned and controlled corporation which has a personality of its own, distinct and separate from that of the Government; and that under the NPC Charter provision, its power to "sue and be sued in any court" is without qualification on the cause of action, and accordingly, it can include a tort claim such as the one instituted by the petitioner.

Petition granted.



The relevant antecedents of this case are narrated in the petition and have not been controverted, namely:

"3. At about midnight on October 26, 1978, during the height of that infamous typhoon "KADING", the respondent corporation, acting through its plant superintendent, Benjamin Chavez, opened or caused to be opened simultaneously all the three floodgates of the Angat Dam. And as a direct and immediate result of the sudden, precipitate and simultaneous opening of said floodgates several towns in Bulacan were inundated. Hardest-hit was Norzagaray. About a hundred of its residents died or were reported to have died and properties worth million of pesos destroyed or washed away. This flood was unprecedented in Norzagaray.

"4. Petitioners, who were among the many unfortunate victims of that man-caused flood, filed with the respondent Court eleven complaints for damages against the respondent corporation and the plant superintendent of Angat Dam, Benjamin Chavez, docketed as Civil Cases Nos. SM-950, 951, 953, 958, 959, 964, 965, 966, 981, 982 and 983. These complaints though separately filed have a common/similar cause of action . . .

"5. Respondent corporation filed separate answers to each of these eleven complaints. Apart from traversing the material averments in the complaints and setting forth counterclaims for damages respondent corporation invoked in each answer a special and affirmative defense that 'in the operation of the Angat Dam,' it is 'performing a purely governmental function', hence it 'can not be sued without the express consent of the State.'. . .

"6. On motion of the respondent corporation a preliminary hearing was held on its affirmative defense as though a motion to dismiss were filed. Petitioners opposed the prayer for dismissal and contended that respondent corporation is performing not governmental but merely proprietary functions and that under its own organic act, Section 3(d) of Republic Act No. 6395, it can 'sue and be sued in any court.' . . .

"7. On July 29, 1980 petitioners received a copy of the questioned order of the respondent Court dated December 21, 1979 dismissing all their complaints as against the respondent corporation thereby leaving the superintendent of the Angat Dam, Benjamin Chavez, as the sole party-defendant . . .

"8. On August 7, 1980 petitioners filed with the respondent Court a motion for reconsideration of the questioned order of dismissal . . .

"9. The respondent Court denied petitioners' motion for reconsideration in its order dated October 3, 1980.. Hence, the present petition for review on certiorari under Republic Act No. 5440." (Rollo, pp. 3-6.)

The Order of dismissal dated December 12, 1979, reads as follows:

"Under consideration is a motion to dismiss embodied as a special affirmative defense in the answer filed by defendant NPC on the grounds that said defendant performs a purely governmental function in the operation of the Angat Dam and cannot therefore be sued for damages in the instant cases in connection therewith.

"Plaintiffs' opposition to said motion to dismiss, relying on Sec. 3 (d) of Republic Act 6396 which imposes on the NPC the power and liability to sue and be sued in any court, is not tenable since the same refer to such matters only as are within the scope of the other corporate powers of said defendant and not matters of tort as in the instant cases. It being an agency performing a purely governmental function in the operation of the Angat Dam, said defendant was not given any right to commit wrongs upon individuals. To sue said defendant for tort may require the express consent of the State.

"WHEREFORE, the cases against defendant NPC are hereby dismissed." (Rollo, p. 60.)

The Order dated October 3, 1980, denying the motion for reconsideration filed by the plaintiffs is pro forma; the motion was simply denied for lack of merit. (Rollo, p. 74.)

The petition to review the two orders of the public respondent was filed on October 16, 1980, and on October 27, 1980, We required the respondents to comment. It was only on April 13, 1981, after a number of extensions, that the Solicitor General filed the required comment. (Rollo, pp. 107-114.)

On May 27, 1980, We required the parties to file simultaneous memoranda within twenty (20) days from notice. (Rollo, p. 115.) Petitioners filed their memorandum on July 22, 1981. (Rollo, pp. 118-125.) The Solicitor General filed a number of motions for extension of time to file his memorandum. We granted the seventh extension with a warning that there would be no further extension. Despite the warning the Solicitor General moved for an eighth extension which We denied on November 9, 1981. A motion for a ninth extension was similarly denied on November 18, 1981. The decision in this case is, therefore, without the memorandum of the Solicitor General.

The parties are agreed that the Order dated December 21, 1979, raises the following issues:

1. Whether respondent National Power Corporation performs a governmental function with respect to the management and operation of the Angat Dam; and

2. Whether the power of respondent National Power Corporation to sue and be sued under its organic charter includes the power to be sued for tort.

The petition is highly impressed with merit.

It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d].) As a government owned and controlled corporation, it has a personality of its own, distinct and separate from that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that the NPC can "sue and be sued in any court" is without qualification on the cause of action and accordingly it can include a tort claim such as the one instituted by petitioners.

WHEREFORE, the petition is hereby granted; the Orders of the respondent court dated December 12, 1979 and October 3, 1980, are set aside; and said court is ordered to reinstate the complaints of the petitioners. Costs against the NPC.


Barredo, (Chairman), Aquino, De Castro, Ericta and Escolin, JJ., concur.

Concepcion Jr., J., on leave, but the Chairman certified that he voted to grant the petition.


[G.R. No. L-42204. January 21, 1993.]

HON. RAMON J. FAROLAN, JR., in his capacity as Commissioner of Customs, petitioner, vs. COURT OF TAX APPEALS and BAGONG BUHAY TRADING, respondents.

The Solicitor General for petitioner.

Jorge G. Macapagal counsel for respondent.

Aurea Aragon-Casiano for Bagong Buhay Trading.



This is a petition for review on certiorari which seeks to annul and set aside the decision of the Court of Tax Appeals dated December 27, 1974 (CTA Case No. 2490) reversing the decision of the Commissioner of Customs which affirmed the decision of the Collector of Customs. 1

The undisputed facts are as follows:

On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 arrived at the Port of Manila carrying, among others, 80 bales of screen net consigned to Bagong Buhay Trading (Bagong Buhay). Said importation was declared through a customs broker under Entry No. 8651-72 as 80 bales of screen net of 500 rolls with a gross weight of 12,777 kilograms valued at $3,750.00 and classified under Tariff Heading No. 39.06-B of the Tariff and Customs Code 2 at 35% ad valorem. Since the customs examiner found the subject shipment reflective of the declaration, Bagong Buhay paid the duties and taxes due in the amount of P11,350.00 which was paid through the Bank of Asia under Official Receipt No. 042787 dated February 1, 1972. Thereafter, the customs appraiser made a return of duty.

Acting on the strength of an information that the shipment consisted of "mosquito net" made of nylon dutiable under Tariff Heading No. 62.02 of the Tariff and Customs Code, the Office of the Collector of Customs ordered a re-examination of the shipment. A report on the re-examination revealed that the shipment consisted of 80 bales of screen net, each bale containing 20 rolls or a total of 1,600 rolls. 3 Re-appraised, the shipment was valued at $37,560.00 or $0.15 per yard instead of $.075 per yard as previously declared. Furthermore, the Collector of Customs determined the subject shipment as made of synthetic (polyethylene) woven fabric classifiable under Tariff Heading No. 51.04-B at 100% ad valorem. Thus, Bagong Buhay Trading was assessed P272,600.00 as duties and taxes due on the shipment in question. 4 Since the shipment was also misdeclared as to quantity and value, the Collector of Customs forfeited the subject shipment in favor of the government. 5

Private respondent then appealed the decision of the Collector of Customs by filing a petition for review with the Commissioner of Customs. On November 25, 1972 the Commissioner affirmed the Collector of Customs. 6 Private respondent moved for reconsideration but the same was denied on January 22, 1973. 7

From the Commissioner of Customs, private respondent elevated his case before the Court of Tax Appeals. Upon review, the Court of Tax Appeals reversed the decision of the Commissioner of Customs. It ruled that the Commissioner erred in imputing fraud upon private respondent because fraud is never presumed and thus concluded that the forfeiture of the articles in question was not in accordance with law. Moreover, the appellate court stated that the imported articles in question should be classified as "polyethylene plastic" at the rate of 35% ad valorem instead of "synthetic (polyethylene) woven fabric" at the rate of 100% ad valorem based upon the results conducted by the Bureau of Customs Laboratory. Consequently, the Court of Tax Appeals ordered the release of the said article upon payment of the corresponding duties and taxes.(C.T.A. Case No. 2490) 8

Thereafter, the Commissioner of Customs moved for reconsideration. On November 19, 1975, the Court of Tax Appeals denied said motion for reconsideration. 9

On August 20, 1976, private respondent filed a petition asking for the release of the questioned goods which this Court denied. After several motions for the early resolution of this case and for the release of goods and in view of the fact that the goods were being exposed to the natural elements, we ordered the release of the goods on June 2, 1986. Consequently, on July 26, 1986, private respondent posted a cash bond of P149,443.36 to secure the release of 64 bales 10 out of the 80 bales 11 originally delivered on January 30, 1972. Sixteen bales 12 remain missing.

Private respondent alleges that of the 143,454 yards (64 bales) released to Bagong Buhay, only 116,950 yards were in good condition and the 26,504 yards were in bad condition. Consequently, private respondent demands that the Bureau of Customs be ordered to pay for damages for the 43,050 yards 13 it actually lost. 14

Hence, this petition, the issues being: a) whether or not the shipment in question is subject to forfeiture under Section 2530-M subparagraphs (3), (4) and (5) of the Tariff and Customs Code; b) whether or not the shipment in question falls under Tariff Heading No. 39.06-B (should be 39.02-B) of the Tariff and Customs Code subject to ad valorem duty of 35% instead of Tariff Heading No. 51.04-B with ad valorem of 100% and c) whether or not the Collector of Customs may be held liable for the 43,050 yards actually lost by private respondent.

Section 2530, paragraph m, subparagraphs(3), (4) and (5) states:

"SECTION 2530. Property Subject to Forfeiture Under Tariff and Customs Law. — Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subjected to forfeiture.

xxx xxx xxx

m. Any article sought to be imported or exported.

xxx xxx xxx

(3) On the strength of a false declaration or affidavit or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such article;

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article; and

(5) Through any other practice or device contrary to law by means of which such articles was entered through a customhouse to the prejudice of government. (Emphasis supplied).

Petitioner contends that there has been a misdeclaration as to the quantity in rolls of the shipment in question, the undisputed fact being that the said shipment consisted of 1,600 rolls and not 500 rolls as declared in the import entry. We agree with the contention of the petitioner. In declaring the weight of its shipment in an import entry, through its customs broker as 12,777 kilograms when in truth and in fact the actual weight is 13,600 kilograms, an apparent misdeclaration as to the weight of the questioned goods was committed by private respondent. Had it not been for a re-examination and re-appraisal of the shipment by the Collector of Customs which yielded a difference of 823 kilograms, the government would have lost revenue derived from customs duties.

Although it is admitted that indeed there was a misdeclaration, such violation, however, does not warrant forfeiture for such act was not committed directly by the owner, importer, exporter or consignee as set forth in Section 2530, paragraph m, subparagraph (3), and/or (4).

In defense of its position denying the commission of misdeclaration, private respondent contends that its import entry was based solely on the shipping documents and that it had no knowledge of any flaw in the said documents at the time the entry was filed. For this reason, private respondent believes that if there was any discrepancy in the quantity of the goods as declared and as examined, such discrepancy should not be attributed to Bagong Buhay. 15

Private respondent's argument is persuasive. Under Section 2530, paragraph m, subparagraphs (3) and (4), the requisites for forfeiture are: (1) the wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same persons of any invoice, letter or paper — all touching on the importation or exportation of merchandise; and (2) that such declaration, affidavit, invoice, letter or paper is false. 16

In the case at bar, although it cannot be denied that private respondent caused to be prepared through its customs broker a false import entry or declaration, it cannot be charged with the wrongful making thereof because such entry or declaration merely restated faithfully the data found in the corresponding certificate of origin, 17 certificate of manager of the shipper, 18 the packing lists 19 and the bill of lading 20 which were all prepared by its suppliers abroad. If, at all, the wrongful making or falsity of the documents above-mentioned can only be attributed to Bagong Buhay's foreign suppliers or shippers.

With regard to the second requirement on falsity, it bears mentioning that the evidence on record, specifically, the decisions of the Collector of Customs and the Commissioner of Customs, do not reveal that the importer or consignee, Bagong Buhay Trading had any knowledge of any falsity on the subject importation.

Since private respondent's misdeclaration can be traced directly to its foreign suppliers, Section 2530, paragraph m, subparagraphs (3) and (4) cannot find application.

Applying subparagraph (5), fraud must be committed by an importer/consignee to evade payment of the duties due. 21 We support the stance of the Court of Tax Appeals that the Commissioner of Customs failed to show that fraud had been committed by the private respondent. The fraud contemplated by law must be actual and not constructive. It must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right. 22 As explained earlier, the import entry was prepared on the basis of the shipping documents provided by the foreign supplier or shipper. Hence, Bagong Buhay Trading can be considered to have acted in good faith when it relied on these documents.

Proceeding now to the question of the correct classification of the questioned shipments, petitioner contends that the same falls under Tariff Heading No. 51.04 being a "synthetic (polyethylene) woven fabric." On the other hand, private respondent contends that these fall under Tariff Heading No. 39.06 (should be 39.02), having been found to be made of polyethylene plastic.

Heading No. 39.02 of the Tariff and Customs Code provides:

"39.02 — Polymerisation and copolymerisation products (for example, polyethylene, polytetrahaloethylene, polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl acetate, polyvinyl chloroacetate and other polyvinyl derivatives, polyacrylic and polymethacrylic derivatives, coumaroneindene resins).

The principal products included in this heading are:

(1) Polymerization products of ethylene or its substitution derivatives, particularly the halogen derivatives.

Examples of these are polyethylene, polytetrafluro-ethylene and polychlorotrifluro-ethylene. Their characteristic is that they are translucent, flexible and light in weight. They are used largely for insulating electric wire."23

On the other hand, Tariff Heading No. 51.04 provides:

"51.04 — Woven fabrics of man-made fibers (continuous) including woven fabrics of monofil or strip of heading No. 51.01 or 51.02"

"This heading covers woven fabrics (as described in Part [I] [C] of the General Explanatory Note on Section XI) made of yarns of continuous man-made fibers, or of monofil or strip of heading 51.01 and 51.02; it includes a very large variety of dress fabrics, linings, curtain materials, furnishing fabrics, tyre fabrics, tent fabrics, parachute fabrics, etc. 24 (Emphasis supplied)

To correctly classify the subject importation, we need to refer to chemical analysis submitted before the Court of Tax Appeals. Mr. Norberto Z. Manuel, an Analytical Chemist of the Bureau of Customs and an Assistant to the Chief of the Customs Laboratory, testified that a chemical test was conducted on the sample 25 and "the result is that the attached sample submitted under Entry No. 8651 was found to be made wholly of polyethylene plastic." 26

A similar result conducted by the Adamson University Testing Laboratories provides as follows:

"The submitted sample, being insoluble in 10% sodium carbonate; hydrochloric acid, glacial acetic acid, toluene, acetone, formic acid, and nitric acid, does not belong to the man-made fibers, i.e., cellulosic and alginate rayons, poly (vinyl chloride), polyacrylonitrile, copolymer or polyester silicones including Dolan, Dralon, Orlin, PAN, Redon, Courtelle, etc., Tarylene, Dacron; but it is a type of plastic not possessing the properties of the man-made fibers. 27 (Emphasis supplied)

Consequently, the Court of Tax Appeals, relying on the laboratory findings of the Bureau of Customs and Adamson University correctly classified the questioned shipment as polyethylene plastic taxable under Tariff Heading No. 39.02 instead of synthetic (polyethylene) woven fabric under Tariff Heading 51.04, to wit:

"While it is true that the finding and conclusion of the Collector of Customs with respect to classification of imported articles are presumptively correct, yet as matters that require laboratory tests or analysis to arrive at the proper classification, the opinion of the Collector must yield to the finding of an expert whose opinion is based on such laboratory test or analysis unless such laboratory analysis is shown to be erroneous. And this is especially so in this case where the test and analysis were made in the laboratory of the Bureau of Customs itself. It has not been shown why such laboratory finding was disregarded. There is no claim or pretense that an error was committed by the laboratory technician. Significantly, the said finding of the Chief, Customs Laboratory finds support in the 'REPORT OF ANALYSIS' submitted by the Adamson University Testing Laboratories, dated September 21, 1966." 28

On the third issue, we opine that the Bureau of Customs cannot be held liable for actual damages that the private respondent sustained with regard to its goods. Otherwise, to permit private respondent's claim to prosper would violate the doctrine of sovereign immunity. Since it demands that the Commissioner of Customs be ordered to pay for actual damages it sustained, for which ultimately liability will fall on the government, it is obvious that this case has been converted technically into a suit against the state. 29

On this point, the political doctrine that "the state may not be sued without its consent," categorically applies. 30 As an unincorporated government agency without any separate juridical personality of its own, the Bureau of Customs enjoys immunity from suit. Along with the Bureau of Internal Revenue, it is invested with an inherent power of sovereignty, namely, taxation. As an agency, the Bureau of Customs performs the governmental function of collecting revenues which is definitely not a proprietary function. Thus, private respondent's claim for damages against the Commissioner of Customs must fail.

WHEREFORE, the decision of the respondent Court of Tax Appeals is AFFIRMED. The Collector of Customs is directed to expeditiously re-compute the customs duties applying Tariff Heading 39.02 at the rate of 35% ad valorem on the 13,600 kilograms of polyethylene plastic imported by private respondent.


Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ ., concur.


1. Customs Case No. 72-79 entitled "Republic of the Philippines versus 80 bales screen net, Entry No. 8651 (72) ex S/S 'Pacific Hawk,' Reg. No. 170 marks B.B.T. Manila, Bagong Buhay Trading, Claimant."

2. Should be Tariff Heading No. 39.02-B.

3. Rollo, pp. 227-228, Exhibits "D" and "D-1."

4. Rollo, pp. 229-230.

5. Rollo, pp. 42-43, Annex C.

6. Rollo, pp. 48-51, Annex E.

7. Rollo, pp. 54-55, Annex G.

8. Rollo, pp. 30-37, Annex A.

9. Rollo, pp. 38-41, Annex B.

10. Consisting of 143,454 yards.

11. Consisting of 160,000 yards — the total yardage of the questioned goods.

12. Consisting of 16,546 yards.

13. Derived by adding 26,504 yards in bad order condition plus 16,546 yards missing.

14. Rollo, p. 372.

15. Rollo, p. 143 and Brief for Respondent-Appellee, p. 9.

16. Farm Implement and Machinery Co. v. Commissioner of Customs, L-22212, August 30, 1968, 24 SCRA 905.

17. Exhibit "4," p. 220, Customs Records.

18. Exhibit "5," p. 239, Customs Records.

19. Exhibit "6," pp. 217-218, Customs Records.

20. p. 193, Customs Records.

21. Farm Implement and Machinery Co., Id at Footnote 11.

22. Aznar v. Court of Tax Appeals, No. L-20569, August 23, 1974, 58 SCRA 519.

23. Commentaries on the Revised Tariff and Customs Code of the Philippines, Vol. II, pp. 1170-1171, 1984 Revised Edition, Montano A. Tejam.

24. Ibid, p. 1351.

25. TSN, p. 96, Hearing of May 11, 1972.

26. Rollo, p. 251, Exhibit "F," Emphasis supplied.

27. Exhibit "I," p. 223, Records, Rollo. p. 248.

28. Rollo, pp. 35-36.

29. Syquia v. Almeda Lopez, 84 Phil 312.

30. Sec. 3, Article XVI, General Provisions, 1987 Constitution.

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