Subnotes: Doctrine of State Immunity

Process of Suggestion:
Holy See vs Rosario:
FACTS:
This petition arose from a controversy over a parcel of land consisting of 6,000 square meters located in the
Municipality of Paranaque. Said lot was contiguous with two other lots. These lots were sold to Ramon
Licup. In view of the refusal of the squatters to vacate the lots sold, a dispute arose as to who of the
parties has the responsibility of evicting and clearing the land of squatters. Complicating the relations of
the parties was the sale by petitioner of the lot of concern to Tropicana.

Determination of Immunity by the Department of Foreign Affairs

Liang vs People
FACTS:
Petitioner is an economist working with the Asian Development Bank (ADB). Sometime in 1994, for allegedly
uttering defamatory words against fellow ADB worker Joyce Cabal, he was charged before the MeTC of
Mandaluyong City with two counts of oral defamation. Petitioner was arrested by virtue of a warrant issued
by the MeTC. After fixing petitioners bail, the MeTC released him to the custody of the Security Officer of
ADB. The next day, the MeTC judge received an office of protocol from the DFA stating that petitioner is
covered by immunity from legal process under section 45 of the Agreement between the ADB and the
Philippine Government regarding the Headquarters of the ADB in the country. Based on the said protocol
communication that petitioner is immune from suit, the MeTC judge without notice to the prosecution
dismissed the criminal cases. The latter filed a motion for reconsideration which was opposed by the DFA.
When its motion was denied, the prosecution filed a petition for certiorari and mandamus with the RTC of
Pasig City which set aside the MeTC rulings and ordered the latter court to enforce the warrant of arrest it
earlier issued. After the motion for reconsideration was denied, the petitioner elevated the case to the SC
via a petition for review arguing that he is covered by immunity under the Agreement and that no
preliminary investigation was held before the criminal case.

Immunity of International Organizations and Agencies

SEAFDEC vs NLRC
FACTS: SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries
Development Center, organized through an agreement in 1967 by the governments of Malaysia, Singapore,
Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country.

Juvenal Lazaga was employed as a Research Associate on a probationary basis by SEAFDEC-AQD. Lacanilao in
his capacity as Chief of SEAFDEC-AQD sent a notice of termination to Lazaga informing him that due to the
financial constraints being experienced by the department, his services shall be terminated. SEAFDEC-AQD's
failure to pay Lazaga his separation pay forced him to file a case with the NLRC. The Labor Arbiter and
NLRC ruled in favor of Lazaga. Thus SEAFDEC-AQD appealed, claiming that the NLRC has no jurisdiction over
the case since it is immune from suit owing to its international character and the complaint is in effect a
suit against the State which cannot be maintained without its consent.

Callado vs IRRI

Facts:
Ernesto Callado, petitioner, was employed as a driver at the IRRI. One day while driving an IRRI vehicle on an
official trip to the NAIA and back to the IRRI, petitioner figured in an accident. Petitioner was informed of
the findings of a preliminary investigation conducted by the IRRI's Human Resource Development Department
Manager. In view of the findings, he was charged with:(1) Driving an institute vehicle while on official duty
under the influence of liquor;(2) Serious misconduct consisting of failure to report to supervisors the failure
of the vehicle to start because of a problem with the car battery, and (3) Gross and habitual neglect of
duties.
Petitioner submitted his answer and defenses to the charges against him. However, IRRI issued a Notice of
Termination to petitioner.

Thereafter, petitioner filed a complaint before the Labor Arbiter for illegal dismissal, illegal suspension and
indemnity pay with moral and exemplary damages and attorney's fees. IRRI wrote the Labor Arbiter to
inform him that the Institute enjoys immunity from legal process by virtue of Article 3 of Presidential Decree
No. 1620, and that it invokes such diplomatic immunity and privileges as an international organization in the
instant case filed by petitioner, not having waived the same. While admitting IRRI's defense of immunity, the
Labor Arbiter, nonetheless, cited an Order issued by the Institute to the effect that "in all cases of
termination, respondent IRRI waives its immunity," and, accordingly, considered the defense of immunity no
longer a legal obstacle in resolving the case. The NLRC found merit in private respondent's appeal and,
finding that IRRI did not waive its immunity, ordered the aforesaid decision of the Labor Arbiter set aside
and the complaint dismissed. In this petition petitioner contends that the immunity of the IRRI as an
international organization granted by Article 3 of Presidential Decree No. 1620 may not be invoked in the
case at bench inasmuch as it waived the same by virtue of its Memorandum on "Guidelines on the handling
of dismissed employees in relation to P.D. 1620."

DFA vs NLRC
Facts:
On 27 January 1993, private respondent Magnayi filed an illegal dismissal case against Asian Development
Bank. Two summonses were served, one sent directly to the ADB and the other through the Department of
Foreign Affairs. ADB and the DFA notified respondent Labor Arbiter that the ADB, as well as its President and
Officers, were covered by an immunity from legal process except for borrowings, guaranties or the sale of
securities pursuant to Article 50(1) and Article 55 of the Agreement Establishing the Asian Development Bank
(the "Charter") in relation to Section 5 and Section 44 of the Agreement Between The Bank and The
Government Of The Philippines Regarding The Bank's Headquarters (the "Headquarters Agreement").

The Labor Arbiter took cognizance of the complaint on the impression that the ADB had waived its
diplomatic immunity from suit and, in time, rendered a decision in favor Magnayi. The ADB did not appeal
the decision. Instead, on 03 November 1993, the DFA referred the matter to the NLRC; in its referral, the
DFA sought a "formal vacation of the void judgment." When DFA failed to obtain a favorable decision from
the NLRC, it filed a petition for certiorari.

Municipal Corporations

Municipality of San Fernando vs Judge Firme

FACTS: A passenger jeepney, a sand truck and a dump truck of the Municipality of San Fernando, La Union
collided. Due to the impact, several passengers of the jeepney including Laureano Bania Sr. died. The heirs
of Bania filed a complaint for damages against the owner and driver of the jeepney, who, in turn, filed a
Third Party Complaint against the Municipality and its dump truck driver, Alfredo Bislig. Municipality filed its
answer and raised the defense of non-suability of the State. After trial, the court ruled in favor of the
plaintiffs and ordered Municipality and Bislig to pay jointly and severally the heirs of Bania.

If Principal Function is Governmental

Farolan vs CTA

Facts:
S/S Pacific Hawk vessel with Registry No. 170 arrived on January 30, 1972 at the Port of Manila carrying
among others, 80 bales of screen net consigned to Baging Buhay Trading (Baging Buhay).The import was
classified under Tariff Heading no. 39.06-B of the Tariff and Customs Code at 35%ad valorem. Bagong Buhay
paid the duties and taxes due in the amount of P11,350.00. The Office of the Collector of Customs ordered
a re-examination of the shipment upon hearing the information that the shipment consisted of mosquito net
made of nylon under Tariff Heading No. 62.02 of the Tariff and Customs Code. Upon re-examination, it turns
out that the shipment was undervalued in quantity and value as previously declared. Thus the Collector of
Customs forfeited the shipment in favor of the government. Private respondent filed a petition on August 20,
1976 for the release of the questioned goods which the Court denied. On June 2,1986, 64 bales out of the 80
bales were released to Bagong Buhay after several motion. The sixteen remaining bales were missing. The
respondent claims that of the 143,454 yards released, only 116,950 yards were in good condition and the
rest were in bad condition. Thus, respondents demands that the Bureau of Customs be ordered to pay for
damages for the 43,050 yards it actually lost.

Suits Against Public Officer

City of Angeles vs CA
FACTS: In a Deed of Donation , private respondent donated to the City of Angeles, 51 parcels of land
situated inBarrio Pampang, City of Angeles (50,676 sq m). The amended deed provides that: The
propertiesdonated shall be devoted and utilized solely for the site of the Angeles City Sports Center. Any
changeor modification in the basic design or concept of said Sports Center must have the prior written
consentof the DONOR. The properties donated are devoted and described as open spaces of
the DONORssubdivision, and to this effect, the DONEE, upon acceptance of this donation, releases the
DONORand/or assumes any and all obligations and liabilities appertaining to the properties donated.On
1988, petitioners started the construction of a drug rehabilitation center on a portion of the
donatedland. Upon learning thereof, private respondent protested such action for being violative of the
termsand conditions and also offered another site for the rehabilitation center. However,
petitionersrejected the alternative because the site was too isolated and had no electric and water
facilities. Privaterespondent filed a complaint for breach of the conditions imposed in the amended deed of
donationand seeking the revocation of the donation.Petitioners admitted the commencement of
the construction but alleged that the conditions imposed inthe amended deed were contrary to Municipal
Ordinance No. 1, Series of 1962, otherwise known as theSubdivision Ordinance of the Municipality of
Angeles.

Veterans Manpower vs Court of Appeals

FACTS:
Veterans Manpower and Protective Services, Inc. (VMPSI) alleges that the provisions under Section 4 and 17
of Republic Act No. 5487 or the Private Security Agency Law violate the 1987 Constitution against
monopolies, unfair competition and combinations in restraint of trade, and tend to favor and institutionalize
the Philippine Association of Detective and Protective Agency Operators, Inc. (PADPAO) which is monopolistic
because it has an interest in more than one security agency.
Respondent VMPSI likewise questions the validity of paragraph 3, subparagraph (g) of the Modifying
Regulations on the Issuance of License to Operate and Private Security Licenses and Specifying Regulations
for the Operation of PADPAO issued by then PC Chief Lt. Gen. Fidel V. Ramos, through Col. Sabas V. Edades,
requiring that all private security agencies/company security forces must register as members of any
PADPAO Chapter organized within the Region where their main offices are located.... As such membership
requirement in PADPAO is compulsory in nature, it allegedly violates legal and constitutional provisions
against monopolies, unfair competition and combinations in restraint of trade.
A Memorandum of Agreement was executed by PADPAO and the PC Chief, which fixed the minimum monthly
contract rate per guard for eight (8) hours of security service per day at P2,255.00 within Metro Manila and
P2,215.00 outside of Metro Manila.
Odin Security Agency (Odin) filed a complaint with PADPAO accusing VMPSI of cut-throat competition by
undercutting its contract rate for security services rendered to the Metropolitan Waterworks and Sewerage
System (MWSS), charging said customer lower than the standard minimum rates provided in the
Memorandum of Agreement dated May 12, 1986.
PADPAO found VMPSI guilty of cut-throat competition, hence, the PADPAO Committee on Discipline
recommended the expulsion of VMPSI from PADPAO and the cancellation of its license to operate a security
agency. The PC-SUSIA affirmed the findings and likewise recommended the cancellation of VMPSIs license.
As a result, PADPAO refused to issue a clearance/certificate of membership to VMPSI.
VMPSI made a request letter to the PC Chief to set aside or disregard the findings of PADPAO and consider
VMPSIs application for renewal of its license, even without a certificate of membership from PADPAO.

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

Wylie vs Rarang
FACTS:
Petitioner M.H. Wylie was the assistant administrativeofficer while petitioner Capt. James Williams was the
commanding officer of the US Naval Base in Subic Bay, Olongapo City. Private Respondent (PR) Aurora Rarang
was assigned as merchandise control guard in the Office of the Provost Marshal M.H. Wylie, in his capacity as
asst. admin. Officer, supervised the publication of the so-called Plan of the Day (POD) published daily
by the US Naval Base Station. The POD featured important announcements, necessary precautions and
general matters of interest to military personnel. One of the regular features of the POD was the action
line inquiry (NAVSTA ACTION LINEINQUIRY), a telephone answering device in the Office of the Admin Asst
intended to provide personnel access to the Commanding Officer on matters they feel should be brought to
his attention for correction or investigation. On February 3, 1978, the POD under the (NAVSTA) action line
inquiry, published and mentioned a certain AURING as a disgrace to her division and to the Office of the
Provost Marshal. The same article explicitly implied that Auring was consuming and appropriating for herself
confiscated items like cigarettes and food stuff. The PR was the only one who was named Auring in the
Office of the Provost Marshal. As a result thereof, she was investigated by her superior. The PR commenced
an ACTION FOR DAMAGES in the CFI of Zambales against M.H. Wylie, Capt. James Williams and the US Naval
Base alleging that the
articleconstituted false, injurious, and malicious defamation and libel tending to impeach her honesty, virtu
e andreputation exposing her to public hatred, contempt and ridicule. The TC ruled in favour of the PR and
dismissed the suit against the US Naval Base. The IAC (now, CA) affirmed the judgment of the TC with
modifications as to the amount of damages awarded.

Express Consent

Republic vs Feliciano
Facts:
The appeal was filed by 86 settlers of Barrio of Salvacion, representing the Republic of the Philippines to
dismiss the complaint filed by Feliciano, on the ground that the Republic of the Philippines cannot be sued
without its consent.
Prior to this appeal, respondent Pablo Feliciano filed a complaint with the Court of First Instance 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 lots. The trial court rendered a decision declaring Lot No. 1
to be the private property of Feliciano and the rest of the property, Lots 2, 3 and 4, reverted to the public
domain.
The trial court reopened the case due to the filing of a motion to intervene and to set aside the decision of
the trial court by 86 settlers, alleging that they had been in possession of the land for more than 20 years
under claim of ownership. The trial court ordered the settlers to present their evidence but they did not
appear at the day of presentation of evidence. Feliciano, on the other hand, presented additional evidence.
Thereafter, the case was submitted for decision and the trial court ruled in favor of Feliciano.
The settlers immediately filed a motion for reconsideration. The case was reopened to allow them to
present their evidence. But before this motion was acted upon, Feliciano filed a motion for execution with
the Appellate Court but it was denied.
The settlers filed a motion to dismiss 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 Feliciano.

Special Law

Merritt vs Government
The facts of the case took place in the 1910s. E. Merritt was a constructor who was excellent at his work.
One day, while he was riding his motorcycle along Calle Padre Faura, he was bumped by a government
ambulance. The driver of the ambulance was proven to have been negligent. Because of the incident,
Merritt was hospitalized and he was severely injured beyond rehabilitation so much so that he could never
perform his job the way he used to and that he cannot even earn at least half of what he used to earn.
In order for Merritt to recover damages, he sought to sue the government which later authorized Merritt to
sue the government by virtue of Act 2457 enacted by the legislature (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). The lower court then determined the amount of damages and ordered the government
to pay the same.
ISSUE: Whether or not the government is liable for the negligent act of the driver of the ambulance.
HELD: No. 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. It follows therefrom that
the state, by virtue of such provisions of law, is not responsible for the damages suffered by private
individuals in consequence of acts performed by its employees in the discharge of the functions pertaining
to their office, because neither fault nor even negligence can be presumed on the part of the state in the
organization of branches of public service and in the appointment of its agents. The State can only be liable
if it acts through a special agent (and a special agent, in the sense in which these words are employed, is
one who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office
if he is a special official) so that in representation of the state and being bound to act as an agent thereof,
he executes the trust confided to him.
In the case at bar, the ambulance driver was not a special agent nor was a government officer acting as a
special agent hence, there can be no liability from the government. The Government 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.

When State Commences Litigation

Froilan vs Pan Oriental
Facts:
Plaintiff, Fernando Froilan filed a complaint against the defendant-appellant, Pan Oriental Shipping Co.,
alleging that he purchased from the Shipping Commission the vessel for P200,000, paying P50,000 down and
agreeing to pay the balance in instalments. To secure the payment of the balance of the purchase price, he
executed a chattel mortgage of said vessel in favor of the Shipping Commission. For various reasons, among
them the non-payment of the installments, the Shipping Commission tool possession of said vessel and
considered the contract of sale cancelled. The Shipping Commission chartered and delivered said vessel to
the defendant-appellant Pan Oriental Shipping Co. subject to the approval of the President of the
Philippines. Plaintiff appealed the action of the Shipping Commission to the President of the Philippines and,
in its meeting the Cabinet restored him to all his rights under his original contract with the Shipping
Commission. Plaintiff had repeatedly demanded from the Pan Oriental Shipping Co. the possession of the
vessel in question but the latter refused to do so.

Plaintiff, prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin be
issued for the seizure of said vessel with all its equipment and appurtenances, and that after hearing, he be
adjudged to have the rightful possession thereof . The lower court issued the writ of replevin prayed for by
Froilan and by virtue thereof the Pan Oriental Shipping Co. was divested of its possession of said vessel.

Pan Oriental protested to this restoration of Plaintiff s rights under the contract of sale, for the reason that
when the vessel was delivered to it, the Shipping Administration had authority to dispose of said authority to
the property, Plaintiff having already relinquished whatever rights he may have thereon. Plaintiff paid the
required cash of P10,000.00 and as Pan Oriental refused to surrender possession of the vessel, he filed an
action to recover possession thereof and have him declared the rightful owner of said property. The Republic
of the Philippines was allowed to intervene in said civil case praying for the possession of the in order that
the chattel mortgage constituted thereon may be foreclosed.

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

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

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

When State Enters Into a Business Contract

Facts:

At times material to this case, the United States of America had a naval base in Subic, Zambales. The
base was one of those provided in the Military Bases Agreement between the Philippines and the
United States.
US invited the submission of bids for Repair offender system and Repair typhoon damages. Eligio de
Guzman & Co., Inc. responded to the invitation, submitted bids and complied with the requests
based on the letters received from the US.
In June 1972, a letter was received by the Eligio De Guzman & Co indicating that the company did
not qualify to receive an award for the projects because of its previous unsatisfactory performance
rating on a repair contract for the sea wall at the boat landings of the U.S. Naval Station in Subic
Bay.
The company sued the United States of America and Messrs. James E. Galloway, William I. Collins and
Robert Gohier all members of the Engineering Command of the U.S. Navy. The complaint is to order
the defendants to allow the plaintiff to perform the work on the projects and, in the event that
 specific performance was no longer possible, to order the defendants to pay damages. The company
also asked for the issuance of a writ of preliminary injunction to restrain the defendants from
entering into contracts with third parties for work on the projects.
The defendants entered their special appearance for the purpose only of questioning the jurisdiction
of this court over the subject matter of the complaint and the persons of defendants, the subject
matter of the complaint being acts and omissions of the individual defendants as agents of defendant
United States of America, a foreign sovereign which has not given her consent to this suit or any
other suit for the causes of action asserted in the complaint." (Rollo, p. 50.)
Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to
the issuance of the writ of preliminary injunction. The company opposed the motion.
The trial court denied the motion and issued the writ. The defendants moved twice to reconsider but
to no avail.
Hence the instant petition which seeks to restrain perpetually the proceedings in Civil Case No. 779-
M for lack of jurisdiction on the part of the trial court.
Issue/s:

WON the US naval base in bidding for said contracts exercise governmental functions to be able to
invoke state immunity

Held:
WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside and Civil
Case No. is dismissed. Costs against the private respondent.

Ratio:
The traditional rule of State immunity exempts a State from being sued in the courts of another
State without its consent or waiver. This rule is a necessary consequence of the principles of
independence and equality of States. However, the rules of International Law are not petrified; they
are constantly developing and evolving. And because the activities of states have multiplied, it has
been necessary to distinguish them-between sovereign and governmental acts (jure imperii) and
private, commercial and proprietary acts (jure gestionis). The result is that State immunity now
extends only to acts jure imperil (sovereign & governmental acts)
The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a State may be said to have descended to the level of an individual and can thus
be deemed to have tacitly given its consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its sovereign functions. In this case the
projects are an integral part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the highest order; they are
not utilized for nor dedicated to commercial or business purposes.
correct test for the application of State immunity is not the conclusion of a contract by a State but
the legal nature of the act

Suability Not Outright Liability

Fontanilla vs Maliaman
Facts:
The National Irrigation Administration (NIA) maintains that it does not perform solely and primarily
proprietary functions but is an agency of the government tasked with governmental functions, and is
therefore not liable for the tortious act of its driver Hugo Garcia, who was not its special agent.

Issue: whether NIA is performing governmental functions and is thus exempt form suit for damages caused
by the negligent act of its driver who is not its special agent

Held:
No. The functions of government have been classified into governmental or constituent and
proprietary or ministrant. The former involves the exercise of sovereignty and considered as compulsory; the
latter connotes merely the exercise of proprietary functions and thus considered as optional. The functions
of providing water supply and sewerage service are regarded as mere optional functions of government even
though the service rendered caters to the community as a whole and the goal is for the general interest of
society.
 The NIA was not created for purposes of local government. While it may be true that the NIA was
essentially a service agency of the government aimed at promoting public interest and public welfare, such
fact does not make the NIA essentially and purely a government-function corporation. NIA was created for
the purpose of constructing, improving, rehabilitating, and administering all national irrigation systems in
the Philippines, including all communal and pump irrigation projects. Certainly, the state and the
community as a whole are largely benefited by the services the agency renders, but these functions are only
incidental to the principal aim of the agency, which is the irrigation of lands.

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

Immunity cannot be sued to perpetrate an injustice on a citizen

Ministerio vs CFI of Cebu

FACTS: Petitioners sought the payment of just compensation for a registered lot alleging that in 1927 the
National Government through its authorized representatives took physical and material possession of it and
used it for the widening of a national road, without paying just compensation and without any agreement,
either written or verbal. There was an allegation of repeated demands for the payment of its price or return
of its possession, but defendants Public Highway Commissioner and the Auditor General refused to restore
its possession.

ISSUE: Whether or not the defendants are immune from suit.

HOLDING: NO. Where the judgment in such a case would result not only in the recovery of possession of the
property in favor of said citizen but also in a charge against or financial liability to the Government, then
the suit should be regarded as one against the government itself, and, consequently, it cannot prosper or be
validly entertained by the court except with the consent of said Government. In as much as the State
authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of
the State, and an action against the officials or officers by one whose rights have been invaded or violated
by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of
the State from suit.

NOTE: When the government takes any property for public use, which is condition upon the payment of just
compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court.
The Court may proceed with the complaint and determine the compensation to which the petitioner are
entitle
(Ministerio vs.CFI, 40 SCRA 464)