REPUBLIC OF INDONESIA is immune from suit

EN BANC

[G.R. No. 154705. June 26, 2003]

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER COUNSELLOR AZHARI KASIM, petitioners, vs. JAMES VINZON, doing business under the name and style of VINZON TRADE AND SERVICES, respondent.

D E C I S I O N

AZCUNA, J:

This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled “The Republic of Indonesia, His Excellency Ambassador Soeratmin and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC Branch 145, Makati City, and James Vinzon, doing business under the name and style of Vinzon Trade and Services.”

Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a Maintenance Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon Trade and Services. The Maintenance Agreement stated that respondent shall, for a consideration, maintain specified equipment at the Embassy Main Building, Embassy Annex Building and the Wisma Duta, the official residence of petitioner Ambassador Soeratmin. The equipment covered by the Maintenance Agreement are air conditioning units, generator sets, electrical facilities, water heaters, and water motor pumps. It is likewise stated therein that the agreement shall be effective for a period of four years and will renew itself automatically unless cancelled by either party by giving thirty days prior written notice from the date of expiry.[1]

Petitioners claim that sometime prior to the date of expiration of the said agreement, or before August 1999, they informed respondent that the renewal of the agreement shall be at the discretion of the incoming Chief of Administration, Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000. When Minister Counsellor Kasim assumed the position of Chief of Administration in March 2000, he allegedly found respondent’s work and services unsatisfactory and not in compliance with the standards set in the Maintenance Agreement. Hence, the Indonesian Embassy terminated the agreement in a letter dated August 31, 2000.[2] Petitioners claim, moreover, that they had earlier verbally informed respondent of their decision to terminate the agreement.

On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful. Respondent cites various circumstances which purportedly negated petitioners’ alleged dissatisfaction over respondent’s services: (a) in July 2000, Minister Counsellor Kasim still requested respondent to assign to the embassy an additional full-time worker to assist one of his other workers; (b) in August 2000, Minister Counsellor Kasim asked respondent to donate a prize, which the latter did, on the occasion of the Indonesian Independence Day golf tournament; and (c) in a letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked respondent for sponsoring a prize and expressed his hope that the cordial relations happily existing between them will continue to prosper and be strengthened in the coming years.

Hence, on December 15, 2000, respondent filed a complaint[3] against petitioners docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit and cannot be sued as a party-defendant in the Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and therefore enjoy diplomatic immunity.[4] In turn, respondent filed on March 20, 2001, an Opposition to the said motion alleging that the Republic of Indonesia has expressly waived its immunity from suit. He based this claim upon the following provision in the Maintenance Agreement:

“Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the Philippines and by the proper court of Makati City, Philippines.”

Respondent’s Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim can be sued and held liable in their private capacities for tortious acts done with malice and bad faith.[5]

On May 17, 2001, the trial court denied herein petitioners’ Motion to Dismiss. It likewise denied the Motion for Reconsideration subsequently filed.

The trial court’s denial of the Motion to Dismiss was brought up to the Court of Appeals by herein petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be sued and voluntarily submitted itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived their immunity from suit.

On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack of merit.[6] On August 16, 2002, it denied herein petitioners’ motion for reconsideration.[7]

Hence, this petition.

In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in sustaining the trial court’s decision that petitioners have waived their immunity from suit by using as its basis the abovementioned provision in the Maintenance Agreement.

The petition is impressed with merit.

What is the foundation of international law?

International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution.[8] The rule that a State may not be sued without its consent is a necessary consequence of the principles of independence and equality of States.[9]

What is the practical justification of the doctrine of state immunity from suit?

As enunciated in Sanders v. Veridiano II,[10] the practical justification for the doctrine of sovereign immunity is that there can be no legal right against the authority that makes the law on which the right depends. In the case of foreign States, the rule is derived from the principle of the sovereign equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another.[11] A contrary attitude would “unduly vex the peace of nations.”[12]

The rules of International Law, however, are neither unyielding nor impervious to change.

What is the new concept of sovereign immunity?

The increasing need of sovereign States to enter into purely commercial activities remotely connected with the discharge of their governmental functions brought about a new concept of sovereign immunity. This concept, the restrictive theory, holds that the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii, but not with regard to private acts or acts jure gestionis.[13]

In United States v. Ruiz,[14] for instance, we held that the conduct of public bidding for the repair of a wharf at a United States Naval Station is an act jure imperii. On the other hand, we considered as an act jure gestionis the hiring of a cook in the recreation center catering to American servicemen and the general public at the John Hay Air Station in Baguio City,[15] as well as the bidding for the operation of barber shops in Clark Air Base in Angeles City.[16]

Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the start of the inquiry. Is the foreign State engaged in the regular conduct of a business? If the foreign State is not engaged regularly in a business or commercial activity, and in this case it has not been shown to be so engaged, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii.[17]

Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of the agreement shall be settled according to the laws of the Philippines and by a specified court of the Philippines is not necessarily a waiver of sovereign immunity from suit. The aforesaid provision contains language not necessarily inconsistent with sovereign immunity. On the other hand, such provision may also be meant to apply where the sovereign party elects to sue in the local courts, or otherwise waives its immunity by any subsequent act. The applicability of Philippine laws must be deemed to include Philippine laws in its totality, including the principle recognizing sovereign immunity. Hence, the proper court may have no proper action, by way of settling the case, except to dismiss it.

Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given explicitly or by necessary implication. We find no such waiver in this case.

Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On the other hand, he argues that the actual physical maintenance of the premises of the diplomatic mission, such as the upkeep of its furnishings and equipment, is no longer a sovereign function of the State.[18]

We disagree.

What kind of act is the establishment of a diplomatic mission?

There is no dispute that the establishment of a diplomatic mission is an act jure imperii. A sovereign State does not merely establish a diplomatic mission and leave it at that; the establishment of a diplomatic mission encompasses its maintenance and upkeep. Hence, the State may enter into contracts with private entities to maintain the premises, furnishings and equipment of the embassy and the living quarters of its agents and officials. It is therefore clear that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract with respondent for the upkeep or maintenance of the air conditioning units, generator sets, electrical facilities, water heaters, and water motor pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador.

The Solicitor General, in his Comment, submits the view that, “the Maintenance Agreement was entered into by the Republic of Indonesia in the discharge of its governmental functions. In such a case, it cannot be deemed to have waived its immunity from suit.” As to the paragraph in the agreement relied upon by respondent, the Solicitor General states that it “was not a waiver of their immunity from suit but a mere stipulation that in the event they do waive their immunity, Philippine laws shall govern the resolution of any legal action arising out of the agreement and the proper court in Makati City shall be the agreed venue thereof.[19]

On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim may be sued herein in their private capacities, Article 31 of the Vienna Convention on Diplomatic Relations provides:

x x x

1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State. He shall also enjoy immunity from its civil and administrative jurisdiction, except in the case of:

(a) a real action relating to private immovable property situated in the territory of the receiving State, unless he holds it on behalf of the sending State for the purposes of the mission;

(b) an action relating to succession in which the diplomatic agent is involved as executor, administrator, heir or legatee as a private person and not on behalf of the sending State;

(c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions.

x x x

The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the Maintenance Agreement is not covered by the exceptions provided in the abovementioned provision.

The Solicitor General believes that said act may fall under subparagraph (c) thereof,[20] but said provision clearly applies only to a situation where the diplomatic agent engages in any professional or commercial activity outside official functions, which is not the case herein.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 against petitioners is DISMISSED.

No costs.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, and Callejo, Sr., JJ., concur.

Austria-Martinez, J., on leave.

---

[1] Rollo, pp. 168-174.

[2] Rollo, p. 117.

[3] Rollo, pp. 101-108.

[4] Rollo, pp. 77-88.

[5] Rollo, pp. 127-131.

[6] Annex A of Petition; Rollo, pp. 29-39.

[7] Annex B of Petition; Rollo, p. 40.

[8] United States of America v. Guinto, 182 SCRA 644, 653 (1990).

[9] United States of America, et al v. Ruiz, 136 SCRA 487 (1987).

[10] 162 SCRA 88, 96 (1988).

[11] Supra note 8.

[12] Supra note 10 at 97.

[13] The Holy See v. Rosario, et. al., 238 SCRA 524 (1994).

[14] Supra note 9.

[15] United States v. Rodrigo, 182 SCRA 644 (1990).

[16] Supra note 8.

[17] Supra note 14 at 536.

[18] Supra note 16 at 6; Rollo, p. 201.

[19] Comment, pp. 11, 17.

[20] Comment, p. 20.

U.S. A. v. Guinto (1990);SOME GUIDE QUESTIONS

That a state cannot be sued, is what kind of principle?

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

What do you mean by the doctrine of incorporation?

Even without such affirmation, we would still be bound by the generally accepted principles of international law under the doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such principles are deemed incorporated in the law of every civilized state as a condition and consequence of its membership in the society of nations. Upon its admission to such society, the state is automatically obligated to comply with these principles in its relations with other states.

As applied to the local state, the doctrine of state immunity is based on the justification given by Justice Holmes that "there can be no legal right against the authority which makes the law on which the right depends." ¹² There are other practical reasons for the enforcement of the doctrine.

What is the meaning of "par in parem" principle?

In the case of the foreign state sought to be impleaded in the local jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another. A contrary disposition would, in the language of a celebrated case, "unduly vex the peace of nations." ¹³

While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to complaints filed against officials of the state for acts allegedly performed by them in the discharge of their duties. The rule is that if the judgment against such officials will require the state itself to perform an affirmative act to satisfy the same, such as the appropriation of the amount needed to pay the damages awarded against them, the suit must be regarded as against the state itself although it has not been formally impleaded. ¹⁴ In such a situation, the state may move to dismiss the complaint on the ground that it has been filed without its consent.

What is another name for state immunity from suit?

The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the privilege it grants the state to defeat any legitimate claim against it by simply invoking its non-suability. That is hardly fair, at least in democratic societies, for the state is not an unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not absolute and does not say the state may not be sued under any circumstance. On the contrary, the rule says that the state may not be sued without its consent, which clearly imports that it may be sued if it consents.

How does a state manifest its consent to be sued?

The consent of the state to be sued may be manifested expressly or impliedly. Express consent may be embodied in a general law or a special law. Consent is implied when the state enters into a contract or it itself commences litigation.

Give examples of express waiver of immunity?

The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the Philippine government "consents and submits to be sued upon any moneyed claim involving liability arising from contract, express or implied, which could serve as a basis of civil action between private parties." In Merritt v. Government of the Philippine Islands, ¹⁵ a special law was passed to enable a person to sue the government for an alleged tort.

State some examples of implied waiver?

When the government enters into a contract, it is deemed to have descended to the level of the other contracting party and divested of its sovereign immunity from suit with its implied consent. ¹⁶ Waiver is also implied when the government files a complaint, thus opening itself to a counterclaim. ¹⁷

The above rules are subject to qualification. Express consent is effected only by the will of the legislature through the medium of a duly enacted statute. ¹⁸ We have held that not all contracts entered into by the government will operate as a waiver of its non-suability; distinction must be made between its sovereign and proprietary acts. ¹⁹ As for the filing of a complaint by the government, suability will result only where the government is claiming affirmative relief from the defendant. ²⁰

In the case of the United States of America, the customary rule of international law on state immunity is expressed with more specificity in the RP-US Bases Treaty. Article III thereof provides as follows:

It is mutually agreed that the United States shall have the rights, power and authority within the bases which are necessary for the establishment, use, operation and defense thereof or appropriate for the control thereof and all the rights, power and authority within the limits of the territorial waters and air space adjacent to, or in the vicinity of, the bases which are necessary to provide access to them or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, ²¹ along with several other decisions, to support their position that they are not suable in the cases below, the United States not having waived its sovereign immunity from suit. It is emphasized that in Baer, the Court held:

The invocation of the doctrine of immunity from suit of a foreign state without its consent is appropriate. More specifically, insofar as alien armed forces is concerned, the starting point is Raquiza v. Bradford, a 1945 decision. In dismissing a habeas corpus petition for the release of petitioners confined by American army authorities, Justice Hilado speaking for the Court, cited Coleman v. Tennessee, where it was explicitly declared: 'It is well settled that a foreign army, permitted to march through a friendly country or to be stationed in it, by permission of its government or sovereign, is exempt from the civil and criminal jurisdiction of the place.' Two years later, in Tubb and Tedrow v. Griess, this Court relied on the ruling in Raquiza v. Bradford and cited in support thereof excerpts from the works of the following authoritative writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy demands the clarification that after the conclusion of the Philippine-American Military Bases Agreement, the treaty provisions should control on such matter, the assumption being that there was a manifestation of the submission to jurisdiction on the part of the foreign power whenever appropriate. More to the point is Syquia v. Almeda Lopez, where plaintiffs as lessors sued the Commanding General of the United States Army in the Philippines, seeking the restoration to them of the apartment buildings they owned leased to the United States armed forces stationed in the Manila area. A motion to dismiss on the ground of non-suability was filed and upheld by respondent Judge. The matter was taken to this Court in a mandamus proceeding. It failed. It was the ruling that respondent Judge acted correctly considering that the 4 action must be considered as one against the U.S. Government. The opinion of Justice Montemayor continued: 'It is clear that the courts of the Philippines including the Municipal Court of Manila have no jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was raised and interposed at the very beginning of the action. The U.S. Government has not given its consent to the filing of this suit which is essentially against her, though not in name. Moreover, this is not only a case of a citizen filing a suit against his own Government without the latter's consent but it is of a citizen firing an action against a foreign government without said government's consent, which renders more obvious the lack of jurisdiction of the courts of his country. The principles of law behind this rule are so elementary and of such general acceptance that we deem it unnecessary to cite authorities in support thereof then came Marvel Building Corporation v. Philippine War Damage Commission, where respondent, a United States Agency established to compensate damages suffered by the Philippines during World War II was held as falling within the above doctrine as the suit against it would eventually be a charge against or financial liability of the United States Government because ... , the Commission has no funds of its own for the purpose of paying money judgments.' The Syquia ruling was again explicitly relied upon in Marquez Lim v. Nelson, involving a complaint for the recovery of a motor launch, plus damages, the special defense interposed being 'that the vessel belonged to the United States Government, that the defendants merely acted as agents of said Government, and that the United States Government is therefore the real party in interest.' So it was in Philippine Alien Property Administration v. Castelo, where it was held that a suit against Alien Property Custodian and the Attorney General of the United States involving vested property under the Trading with the Enemy Act is in substance a suit against the United States. To the same effect is Parreno v. McGranery, as the following excerpt from the opinion of justice Tuazon clearly shows: 'It is a widely accepted principle of international law, which is made a part of the law of the land (Article II, Section 3 of the Constitution), that a foreign state may not be brought to suit before the courts of another state or its own courts without its consent.' Finally, there is Johnson v. Turner, an appeal by the defendant, then Commanding General, Philippine Command (Air Force, with office at Clark Field) from a decision ordering the return to plaintiff of the confiscated military payment certificates known as scrip money. In reversing the lower court decision, this Tribunal, through Justice Montemayor, relied on Syquia v. Almeda Lopez, explaining why it could not be sustained.

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

There is no question that the United States of America, like any other state, will be deemed to have impliedly waived its non-suability if it has entered into a contract in its proprietary or private capacity. It is only when the contract involves its sovereign or governmental capacity that no such waiver may be implied. This was our ruling in United States of America v. Ruiz, ²² where the transaction in question dealt with the improvement of the wharves in the naval installation at Subic Bay. As this was a clearly governmental function, we held that the contract did not operate to divest the United States of its sovereign immunity from suit. In the words of Justice Vicente Abad Santos:

Expalin the traditional rule of immunity. Distinguish it from the Restrictive Application of State immunity. Which do we adopt? Distinguish jure imperii from jure gestionis? What is its relevance with respect to restrictive application of state immunity?

The traditional rule of immunity exempts a State from being sued in the courts of another State without its consent or waiver. This rule is a necessary consequence of the principles of independence and equality of States. However, the rules of International Law are not petrified; they are constantly developing and evolving. And because the activities of states have multiplied, it has been necessary to distinguish them — between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result is that State immunity now extends only to acts jure imperii The restrictive application of State immunity is now the rule in the United States, the United kingdom and other states in Western Europe.

xxx xxx xxx

The restrictive application of State immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State may be said to have descended to the level of an individual and can thus be deemed to have tacitly given its consent to be sued only when it enters into business contracts. It does not apply where the contract relates to the exercise of its sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the defense of both the United States and the Philippines, indisputably a function of the government of the highest order; they are not utilized for nor dedicated to commercial or business purposes.

The other petitioners in the cases before us all aver they have acted in the discharge of their official functions as officers or agents of the United States. However, this is a matter of evidence. The charges against them may not be summarily dismissed on their mere assertion that their acts are imputable to the United States of America, which has not given its consent to be sued. In fact, the defendants are sought to be held answerable for personal torts in which the United States itself is not involved. If found liable, they and they alone must satisfy the judgment.

In Festejo v. Fernando, ²³ a bureau director, acting without any authority whatsoever, appropriated private land and converted it into public irrigation ditches. Sued for the value of the lots invalidly taken by him, he moved to dismiss the complaint on the ground that the suit was in effect against the Philippine government, which had not given its consent to be sued. This Court sustained the denial of the motion and held that the doctrine of state immunity was not applicable. The director was being sued in his private capacity for a personal tort.

G.R. No. 76607 February 26, 1990

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles City, ROBERTO T. VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR, respondents.

par in parem, non habet imperium

The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of customary international law then closely identified with the personal immunity of a foreign sovereign from suit²⁰ and, with the emergence of democratic states, made to attach not just to the person of the head of state, or his representative, but also distinctly to the state itself in its sovereign capacity.²¹ If the acts giving rise to a suit are those of a foreign government done by its foreign agent, although not necessarily a diplomatic personage, but acting in his official capacity, the complaint could be barred by the immunity of the foreign sovereign from suit without its consent. Suing a representative of a state is believed to be, in effect, suing the state itself. The proscription is not accorded for the benefit of an individual but for the State, in whose service he is, under the maxim - par in parem, non habet imperium - that all states are sovereign equals and cannot assert jurisdiction over one another.²² The implication, in broad terms, is that if the judgment against an official would require the state itself to perform an affirmative act to satisfy the award, such as the appropriation of the amount needed to pay the damages decreed against him, the suit must be regarded as being against the state itself, although it has not been formally impleaded.²³

In United States of America vs. Guinto,²⁴ involving officers of the United States Air Force and special officers of the Air Force Office of Special Investigators charged with the duty of preventing the distribution, possession and use of prohibited drugs, this Court has ruled -

"While the doctrine (of state immunity) appears to prohibit only suits against the state without its consent, it is also applicable to complaints filed against officials of the state for acts allegedly performed by them in the discharge of their duties. x x x. It cannot for a moment be imagined that they were acting in their private or unofficial capacity when they apprehended and later testified against the complainant. It follows that for discharging their duties as agents of the United States, they cannot be directly impleaded for acts imputable to their principal, which has not given its consent to be sued. x x x As they have acted on behalf of the government, and within the scope of their authority, it is that government, and not the petitioners personally, [who were] responsible for their acts."²⁵

This immunity principle, however, has its limitations. Thus, Shauf vs. Court of Appeals²⁶ elaborates:

"It is a different matter where the public official is made to account in his capacity as such for acts contrary to law and injurious to the rights of the plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al., vs. Aligaen, et al. (33 SCRA 368): `Inasmuch as the State authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at law or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act for the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or under an assumption of authority which he does not have, is not a suit against the State within the constitutional provision that the State may not be sued without its consent. The rationale for this ruling is that the doctrine of state immunity cannot be used as an instrument for perpetrating an injustice.

"x x x x x x x x x

"(T)he doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued in his private and personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of the government is removed the moment they are sued in their individual capacity. This situation usually arises where the public official acts without authority or in excess of the powers vested in him. It is a well-settled principle of law that a public official may be liable in his personal private capacity for whatever damage he may have caused by his act done with malice and in bad faith or beyond the scope of his authority and jurisdiction."²⁷

A foreign agent, operating within a territory, can be cloaked with immunity from suit but only as long as it can be established that he is acting within the directives of the sending state. The consent of the host state is an indispensable requirement of basic courtesy between the two sovereigns. Guinto and Shauf both involve officers and personnel of the United States, stationed within Philippine territory, under the RP-US Military Bases Agreement. While evidence is wanting to show any similar agreement between the governments of the Philippines and of the United States (for the latter to send its agents and to conduct surveillance and related activities of suspected drug dealers in the Philippines), the consent or imprimatur of the Philippine government to the activities of the United States Drug Enforcement Agency, however, can be gleaned from the facts heretofore elsewhere mentioned. The official exchanges of communication between agencies of the government of the two countries, certifications from officials of both the Philippine Department of Foreign Affairs and the United States Embassy, as well as the participation of members of the Philippine Narcotics Command in the "buy-bust operation" conducted at the residence of Minucher at the behest of Scalzo, may be inadequate to support the "diplomatic status" of the latter but they give enough indication that the Philippine government has given its imprimatur, if not consent, to the activities within Philippine territory of agent Scalzo of the United States Drug Enforcement Agency. The job description of Scalzo has tasked him to conduct surveillance on suspected drug suppliers and, after having ascertained the target, to inform local law enforcers who would then be expected to make the arrest. In conducting surveillance activities on Minucher, later acting as the poseur-buyer during the buy-bust operation, and then becoming a principal witness in the criminal case against Minucher, Scalzo hardly can be said to have acted beyond the scope of his official function or duties.

FIRST DIVISION

G.R. No. 142396 February 11, 2003

KHOSROW MINUCHER, petitioner,
vs.
HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.

the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen.

Neither can petitioners escape the obligation to compensate respondent for services rendered and work done by invoking the state’s immunity from suit. This Court has long established in Ministerio v. CFI of Cebu,¹⁶ and recently reiterated in Heirs of Pidacan v. ATO,¹⁷ that the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen. As this Court enunciated in EPG Construction:¹⁸1avvphi1

To our mind, it would be the apex of injustice and highly inequitable to defeat respondent’s right to be duly compensated for actual work performed and services rendered, where both the government and the public have for years received and accepted benefits from the project and reaped the fruits of respondent’s honest toil and labor.

x x x           x x x          x x x

Under these circumstances, respondent may not validly invoke the Royal Prerogative of Dishonesty and conveniently hide under the State's cloak of invincibility against suit, considering that this principle yields to certain settled exceptions. True enough, the rule, in any case, is not absolute for it does not say that the state may not be sued under any circumstance.

x x x           x x x          x x x

Although the Amigable and Ministerio cases generously tackled the issue of the State's immunity from suit vis a vis the payment of just compensation for expropriated property, this Court nonetheless finds the doctrine enunciated in the aforementioned cases applicable to the instant controversy, considering that the ends of justice would be subverted if we were to uphold, in this particular instance, the State's immunity from suit.

To be sure, this Court — as the staunch guardian of the citizens' rights and welfare — cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the perpetration thereof. Justice and equity sternly demand that the State's cloak of invincibility against suit be shred in this particular instance, and that petitioners-contractors be duly compensated — on the basis of quantum meruit — for construction done on the public works housing project

EN BANC

G.R. No. 180388               January 18, 2011

GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), DPWH UNDERSECRETARIES TEODORO E. ENCARNACION AND EDMUNDO E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT SECRETARY JOEL L. ALTEA, DPWH REGIONAL DIRECTOR VICENTE B. LOPEZ, DPWH DISTRICT ENGINEER ANGELITO M. TWAÑO, FELIX A. DESIERTO OF THE TECHNICAL WORKING GROUP VALIDATION AND AUDITING TEAM, AND LEONARDO ALVARO, ROMEO N. SUPAN, VICTORINO C. SANTOS OF THE DPWH PAMPANGA 2ND ENGINEERING DISTRICT, Petitioners,
vs.
ARNULFO D. AQUINO, Respondent.

GSIS is suable, and can be made liable for damages

We rule that the GSIS is liable for damages. We deny the petition for lack of merit.

GSIS, citing the sixth paragraph of Article 2180 of the Civil Code argues that as a GOCC, it falls within the term "State" and cannot be held vicariously liable for negligence committed by its employee acting within his functions.²⁶

"Article 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.

xxx

"Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business of industry.

"The State is responsible in like manner when it acts though a special agent, but not when the damage has been caused by the official to whom the task was done properly pertains, in which case what is provided in Article 2176 shall be applicable.

xxx (italics ours)"

The argument is untenable. The cited provision of the Civil Code is not applicable to the case at bar. However, the trial court and the Court of Appeals erred in citing it as the applicable law. Nonetheless, the conclusion is the same. As heretofore stated, we find that GSIS is liable for damages.

The trial court and the Court of Appeals treated the obligation of GSIS as one springing from quasi-delict.²⁷ We do not agree. Article 2176 of the Civil Code defines quasi-delict as follows:

"Whoever by act or omission causes damages to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter (italics ours)."

Under the facts, there was a pre-existing contract between the parties. GSIS and the spouses Deang had a loan agreement secured by a real estate mortgage. The duty to return the owner's duplicate copy of title arose as soon as the mortgage was released.²⁸ GSIS insists that it was under no obligation to return the owner's duplicate copy of the title immediately. This insistence is not warranted. Negligence is obvious as the owners' duplicate copy could not be returned to the owners. Thus, the more applicable provisions of the Civil Code are:

"Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof are liable for damages."

"Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted x x x."

Since good faith is presumed and bad faith is a matter of fact which should be proved,²⁹ we shall treat GSIS as a party who defaulted in its obligation to return the owners' duplicate copy of the title. As an obligor in good faith, GSIS is liable for all the "natural and probable consequences of the breach of the obligation." The inability of the spouses Deang to secure another loan and the damages they suffered thereby has its roots in the failure of the GSIS to return the owners' duplicate copy of the title.

We come now to the amount of damages. In a breach of contract, moral damages are not awarded if the defendant is not shown to have acted fraudulently or with malice or bad faith.³⁰ The fact that the complainant suffered economic hardship³¹ or worries and mental anxiety³² is not enough.

FIRST DIVISION

G.R. No. 135644            September 17, 2001
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
SPOUSES GONZALO and MATILDE LABUNG-DEANG, respondents.

TESDA, as an agency of the State, cannot be sued without its consent.

TESDA, as an agency of the State, cannot be sued without its consent.

The rule that a state may not be sued without its consent is embodied in Section 3, Article XVI of the 1987 Constitution and has been an established principle that antedates this Constitution.²⁷ It is as well a universally recognized principle of international law that exempts a state and its organs from the jurisdiction of another state.²⁸ The principle is based on the very essence of sovereignty, and on the practical ground that there can be no legal right as against the authority that makes the law on which the right depends.²⁹ It also rests on reasons of public policy — that public service would be hindered, and the public endangered, if the sovereign authority could be subjected to law suits at the instance of every citizen and, consequently, controlled in the uses and dispositions of the means required for the proper administration of the government.³⁰

 What are the various forms of state immunity from suit?

The proscribed suit that the state immunity principle covers takes on various forms, namely:

 a suit against the Republic by name;

 a suit against an unincorporated government agency; 

a suit against a government agency covered by a charter with respect to the agency’s performance of governmental functions;

 and a suit that on its face is against a government officer, but where the ultimate liability will fall on the government.

 In the present case, the writ of attachment was issued against a government agency covered by its own charter. As discussed above, TESDA performs governmental functions, and the issuance of certifications is a task within its function of developing and establishing a system of skills standardization, testing, and certification in the country. From the perspective of this function, the core reason for the existence of state immunity applies – i.e., the public policy reason that the performance of governmental function cannot be hindered or delayed by suits, nor can these suits control the use and disposition of the means for the performance of governmental functions. In Providence Washington Insurance Co. v. Republic of the Philippines,³¹ we said:

[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.

PROVI argues that TESDA can be sued because it has effectively waived its immunity when it entered into a contract with PROVI for a commercial purpose. According to PROVI, since the purpose of its contract with TESDA is to provide identification PVC cards with security seal which TESDA will thereafter sell to TESDA trainees, TESDA thereby engages in commercial transactions not incidental to its governmental functions.

TESDA’s response to this position is to point out that it is not engaged in business, and there is nothing in the records to show that its purchase of the PVC cards from PROVI is for a business purpose. While TESDA admits that it will charge the trainees with a fee for the PVC cards, it claims that this fee is only to recover their costs and is not intended for profit. 

SECOND DIVISION

G.R. No. 155504               June 26, 2009
PROFESSIONAL VIDEO, INC., Petitioner,
vs.
TECHNICAL EDUCATION AND SKILLS DEVELOPMENT AUTHORITY, Respondent.

doctrine of state immunity

The doctrine of state immunity and the exceptions thereto are summarized in Shauf vs. Court of Appeals, ⁴⁰ thus:

Q: What is the constitutional basis of state immunity from suit?

I. The rule that a state may not be sued without its consent, now expressed in Article XVI Section 3, of the 1987 Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law of our land under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and also intended to manifest our resolve to abide by the rules of the international community. ⁴¹

Q: What is the scope of state immunity from suit?

While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to complaints filed against officials of the state for acts allegedly performed by them in the discharge of their duties. The rule is that if the judgment against such officials will require the state itself to perform an affirmative act to satisfy the same, such as the appropriation of the amount needed to pay the damages awarded against them, the suit must be regarded as against the state itself although it has not been formally impleaded. ⁴² It must be noted, however, that the rule is not so all-encompassing as to be applicable under all circumstances.

It is a different matter where the public official is made to account in his capacity as such for acts contrary to law and injurious to the rights of plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al. vs. Aligaen, etc., et al. ⁴³ "Inasmuch as the State authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at law or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act or the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or under an assumption of authority which he does not have, is not a suit against the State within
the constitutional provision that the State may not be sued without its consent." ⁴⁴ The rationale for this ruling is that the doctrinaire of state immunity cannot be used as an instrument for perpetrating an injustice. ⁴⁵

In the case of Baer, etc. vs. Tizon, etc., et al., ⁴⁶ it was ruled that:

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

Also, in Animos, et al. vs. Philippine Veterans Affairs Office, et al., ⁴⁷ we held that:

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

The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued in his private and personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of the government is removed the moment they are sued in their individual capacity. This situation usually arises where the public official acts without authority or in excess of the powers vested in him. It is a well-settled principle of law that a public official may be liable in his personal private capacity for whatever damage he may have caused by his act done
with malice and in bad faith, or beyond the scope of his authority or jurisdiction. ⁴⁸

The agents and officials of the United States armed forces stationed in Clark Air Base are no exception to this rule. In the case of United States of America, et al. vs. Guinto, etc., et al., ante, ⁴⁹ we declared:

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

Since it is apparent from the complaint that Bradford was sued in her private or personal capacity for acts allegedly done beyond the scope and even beyond her place of official functions, said complaint is not then vulnerable to a motion to dismiss based on the grounds relied upon by the petitioners because as a consequence of the hypothetical admission of the truth of the allegations therein, the case falls within the exception to the doctrine of state immunity.

In the recent cases of Williams vs. Rarang ⁵⁰ and Minucher vs. Court of Appeals, ⁵¹ this Court reiterated this exception. In the former, this Court observed:

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

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

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

In the latter, even on the claim of diplomatic immunity — which Bradford does not in fact pretend to have in the instant case as she is not among those granted diplomatic immunity under Article 16(b) of the 1953 Military Assistance Agreement creating the JUSMAG ⁵² — this Court ruled:

Even Article 31 of the Vienna Convention on Diplomatic Relations admits of exceptions. It reads:

1. A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving State. He shall also enjoy immunity from its civil and administrative jurisdiction except in the case of:

xxx xxx xxx

(c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions (Emphasis supplied).

There can be no doubt that on the basis of the allegations in the complaint, Montoya has a sufficient and viable cause of action. Bradford's purported non-suability on the ground of state immunity is then a defense which may be pleaded in the answer and proven at the trial.

G.R. No. 79253 March 1, 1993
UNITED STATES OF AMERICA and MAXINE BRADFORD, petitioners,
vs.
HON. LUIS R. REYES, as Presiding Judge of Branch 22, Regional Trial Court of Cavite, and NELIA T. MONTOYA, respondents.

THE REPUBLIC OF THE PHILIPPINES MAY WAIVE SOVEREIGN IMMUNITY FROM SUIT AND OTHER LEGAL PROCEEDING WITH RESPECT TO ITSELF OR ITS PROPERTY IN CONNECTION WITH FOREIGN OBLIGATIONS CONTRACTED BY IT PURSUANT TO LAW

PRESIDENTIAL DECREE No. 1807

PRESCRIBING THE PROCEDURE WHEREBY THE REPUBLIC OF THE PHILIPPINES MAY WAIVE SOVEREIGN IMMUNITY FROM SUIT AND OTHER LEGAL PROCEEDING WITH RESPECT TO ITSELF OR ITS PROPERTY IN CONNECTION WITH FOREIGN OBLIGATIONS CONTRACTED BY IT PURSUANT TO LAW

WHEREAS, in the pursuit of economic growth and development, it has become imperative for the Republic of the Philippines to enter into contracts or transactions with international banking, financial and other foreign enterprises;

WHEREAS, recognizing this need, existing legislation expressly authorize the Republic of the Philippines to contract foreign obligations, including borrowings in foreign currency, and to guarantee foreign obligations of corporations and other entities owned or controlled by the Government of the Philippines;

WHEREAS, circumstances in the international market may require that sovereign states entering into contracts or transactions make express waivers of sovereign immunity in connection with such contracts or transactions;

WHEREAS, it is in the national interest that a procedure be prescribed with respect to the waiver of sovereign immunity of the Republic of the Philippines in respect of international contracts or transactions entered into by it;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree:

Section 1. Procedure for, and Conditions of, Waiver of Sovereign Immunity. In instances where the law expressly authorizes the Republic of the Philippines to contract or incur a foreign obligation, it may consent to be sued in connection therewith. The President of the Philippines or his duly designated representative may, in behalf of the Republic of the Philippines, contractually agree to waive any claim to sovereign immunity from suit or legal proceedings and from set-off, attachment or executive with respect to its property, and to be sued in any appropriate jurisdiction in regard to such foreign obligation.

For purposes of this decree, a foreign obligation means any direct, indirect, or contingent obligation or liability capable of pecuniary estimation and payable in a currency other than Philippine currency.

Section 2. Validity of existing Waivers. Nothing in this Decree shall be construed to revoke or repeal any waiver of sovereign immunity from suit or legal proceedings or from set-off, attachment or execution granted under or pursuant to other provisions of law.

Section 3. Effectivity. This Decree shall take effect immediately.

Done in the City of Manila, this 16th day of January in the year of Our Lord, nineteen hundred and eighty-one.