Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-30671 November 28, 1973REPUBLIC OF THE PHILIPPINES,petitioner,vs.HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY OF MANILA, THE CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO UNCHUAN, AND INTERNATIONAL CONSTRUCTION CORPORATION,respondents.Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for petitioner.Andres T. Velarde and Marcelo B. Fernan for respondents.FERNANDO,J.:The Republic of the Philippines in thiscertiorariand prohibition proceeding challenges the validity of an order issued by respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch I,1declaring a decision final and executory and of an alias writ of execution directed against the funds of the Armed Forces of the Philippines subsequently issued in pursuance thereof, the alleged ground being excess of jurisdiction, or at the very least, grave abuse of discretion. As thus simply and tersely put, with the facts being undisputed and the principle of law that calls for application indisputable, the outcome is predictable. The Republic of the Philippines is entitled to the writs prayed for. Respondent Judge ought not to have acted thus. The order thus impugned and the alias writ of execution must be nullified.In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth thus: "7. On July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R in favor of respondents P. J. Kiener Co., Ltd., Gavino Unchuan, and International Construction Corporation, and against the petitioner herein, confirming the arbitration award in the amount of P1,712,396.40, subject of Special Proceedings. 8. On June 24, 1969, respondent Honorable Guillermo P. Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila to execute the said decision. 9. Pursuant to the said Order dated June 24, 1969, the corresponding Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On the strength of the afore-mentioned Alias Writ of Execution dated June 26, 1969, the Provincial Sheriff of Rizal (respondent herein) served notices of garnishment dated June 28, 1969 with several Banks, specially on the "monies due the Armed Forces of the Philippines in the form of deposits sufficient to cover the amount mentioned in the said Writ of Execution"; the Philippine Veterans Bank received the same notice of garnishment on June 30, 1969 .... 11. The funds of the Armed Forces of the Philippines on deposit with the Banks, particularly, with the Philippine Veterans Bank and the Philippine National Bank [or] their branches are public funds duly appropriated and allocated for the payment of pensions of retirees, pay and allowances of military and civilian personnel and for maintenance and operations of the Armed Forces of the Philippines, as per Certification dated July 3, 1969 by the AFP Controller,..."2. The paragraph immediately succeeding in such petition then alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of jurisdiction [or] with grave abuse of discretion amounting to lack of jurisdiction in granting the issuance of an alias writ of execution against the properties of the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of garnishment issued pursuant thereto are null and void."3In the answer filed by respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set forth were admitted with the only qualification being that the total award was in the amount of P2,372,331.40.4The Republic of the Philippines, as mentioned at the outset, did right in filing thiscertiorariand prohibition proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. .It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as well as its government is immune from suit unless it gives its consent. It is readily understandable why it must be so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends."5Sociological jurisprudence supplies an answer not dissimilar. So it was indicated in a recent decision,Providence Washington Insurance Co. v. Republic of the Philippines,6with its affirmation that "a continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused private parties, the loss of governmental efficiency and the obstacle to the performance of its multifarious functions are far greater if such a fundamental principle were abandoned and the availability of judicial remedy were not thus restricted. With the well known propensity on the part of our people to go to court, at the least provocation, the loss of time and energy required to defend against law suits, in the absence of such a basic principle that constitutes such an effective obstacle, could very well be imagined."7This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein expressly provided: "The State may not be sued without its consent."8A corollary, both dictated by logic and sound sense from a basic concept is that public funds cannot be the object of a garnishment proceeding even if the consent to be sued had been previously granted and the state liability adjudged. Thus in the recent case ofCommissioner of Public Highways v. San Diego,9such a well-settled doctrine was restated in the opinion of Justice Teehankee: "The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit claimant's action 'only up to the completion of proceedings anterior to the stage of execution' and that the power of the Courts ends when the judgment is rendered, since government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public funds must be covered by the corresponding appropriation as required by law. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law."10Such a principle applies even to an attempted garnishment of a salary that had accrued in favor of an employee.Director of Commerce and Industry v. Concepcion,11speaks to that effect. Justice Malcolm as ponente left no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money in the hands of public officers, although it may be due government employees, is not liable to the creditors of these employees in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may not be sued in its own courts except by express authorization by the Legislature, and to subject its officers to garnishment would be to permit indirectly what is prohibited directly. Another reason is that moneys sought to be garnished, as long as they remain in the hands of the disbursing officer of the Government, belong to the latter, although the defendant in garnishment may be entitled to a specific portion thereof. And still another reason which covers both of the foregoing is that every consideration of public policy forbids it."12In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully allege a legitimate grievance.WHEREFORE, the writs ofcertiorariand prohibition are granted, nullifying and setting aside both the order of June 24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued thereunder. The preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent.Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur.Republic of the PhilippinesSUPREME COURTManila

EN BANC

April 30, 1952

G.R. No. L-5122NATIONAL AIRPORTS CORPORATION, petitioner, vs.JOSE TEODORO, SR., as Judge of the Court of First Instance of Negros Occidental and PHILIPPINE AIRLINES, INC., respondents.

Office of the Solicitor General Pompeyo Diaz and Solicitor Augusto M. Luciano for petitioner.Ozeata, Roxas, Lichauco and Picazo for respondents.

TUASON, J.:

The National Airports Corporation was organized under Republic Act No. 224, which expressly made the provisions of the Corporation Law applicable to the said corporation. On November 10, 1950, the National Airports Corporation was abolished by Executive Order No. 365 and to take its place the Civil Aeronautics Administration was created. Before the abolition, the Philippine Airlines, Inc. paid to the National Airports Corporation P65,245 as fees for landing and parking on Bacolod Airport No. 2 for the period up to and including July 31, 1948. These fees are said to have been due and payable to the Capitol Subdivision, Inc. which owned the land used by the National Airports Corporation as airport, and the owner commenced an action in the Court of First Instance of Negros Occidental against the Philippine Airlines, Inc., in 1951 to recover the above amount. The Philippine Airlines, Inc. countered with a third-party complaint against the National Airports Corporation, which by that time had been dissolved, and served summons on the Civil Aeronautics Administration. The third party plaintiff alleged that it had paid to the National Airports Corporation the fees claimed by the Capitol Subdivision, Inc. "on the belief and assumption that the third party defendant was the lessee of the lands subject of the complaint and that the third party defendant and its predecessors in interest were the operators and maintainers of said Bacolod Airport No. 2 and, further, that the third party defendant would pay to the landowners, particularly the Capitol Subdivision, Inc., the reasonable rentals for the use of their lands."

The Solicitor General, after answering the third party complaint, filed a motion to dismiss on the ground that the court lacks jurisdiction to entertain the third- party complaint, first, because the National Airports Corporation "has lost its juridical personality," and, second, because agency of the Republic of the Philippines, unincorporated and not possessing juridical personality under the law, is incapable of suing and being sued."

Section 7 of Executive Order No. 365 reads:

All records, properties, equipment, assets, rights, choses in action, obligations, liabilities and contracts of the National Airport Corporation abolished under this Order, are hereby transferred to, vested in, and assumed by, the Civil Aeronautics Administration. All works, construction, and improvements made by the National Airports Corporation or any agency of the National Government in or upon government airfields, including all appropriations or the unreleased and unexpended balances thereof, shall likewise be transferred to the Civil Aeronautics Administration.

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concession rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. And if it has the power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have the power to prosecute and defend suits for and against the National Airports Corporation, having acquired all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny the National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics Administration is to say that the government could impair the obligation of its corporations by the simple expedient of converting them into unincorporated agencies.

But repudiation of the National Airports Corporation's obligation was far from the intention in its dissolution and the setting up of the Civil Aeronautics Administration. Nor would such scheme work even if the executive order had so expressly provided.

Not all government entities, whether corporate or non corporate, are immune from suits. Immunity from suits is determined by the character of the obligations for which the entity was organized. The rule is thus stated in Corpus Juris:

Suits against state agencies with relation to matters in which they have assumed to act in private or nongovernment capacity, and various suits against certain corporations created by the state for public purposes, but to engage in matters partaking more of the nature of ordinary business rather than functions of a governmental or political character, are not regarded as suits against the state. The Latter is true, although the state may own stock or property of such a corporation for by engaging in business operations through a corporation the state divests itself so far of its sovereign character, and by implication consents to suits against the corporation. (59 C. J., 313.)

This rule has been applied to such government agencies as State Dock Commissions carrying on business relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 26 Fed. (2d) 480), and State Highway Commissions created to build public roads, and given appropriations in advance to discharge obligations incurred in that behalf (Arkansas State Highway Commission of Missouri vs. Bates, 269, S W 418.)

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the travelling public. It is engaged in an enterprise which, far from being the exclusive prerogative of state, may, more than the construction of public roads, be undertaken by private concerns.

In the light of a well-established precedents, and as a matter of simple justice to the parties who dealt with the National Airports Corporation on the faith of equality in the enforcement of their mutual commitments, the Civil Aeronautics Administration may not, and should not, claim for itself the privileges and immunities of the sovereign state.

The case of National Airports Corporation vs. Hon. V. Jimenez Yanzon et al., (89 Phil. 745), relied upon by counsel, is not controlling. That was a labor dispute and can be distinguished from the case at bar in at least one fundamental respect.

Involving labor demands and labor- management relations, any decision in that case would, if given force and effect, operate prospectively and for an indefinite period against the Civil Aeronautics Administration whose rights and obligations with respect to its officers and employees were regulated by the regular law on civil service. Moreover, some of the petitioners might already have ceased. By Sections 5 and 8 of Executive Order No. 365 all employees of the National Airports Corporation were, upon the latter's dissolution, automatically separated from the service, and the part of the personnel whose employment was "necessary and convenient" to the Civil Aeronautics Administration would have to be reappointed and, what was more important, "in accordance with the Civil Service rules and regulations." If the petitioners in that case had been absorbed into the Civil Aeronautics Administration, the Matters raised in their petition were outside the jurisdiction of the Court of Industrial Relations, and of this Court on Appeal, to entertain. Their rights, privileges, hours of work, and rates of compensation were already governed by the Civil Service Law.

The Philippine Airlines' third party-complaint is premised on the assumption that the National Airports Corporation is still in existence, at least for the limited object of winding up its affairs under Section 77 of the Corporation Law. Our opinion is that by its abolition that corporation stands abolished for all purposes. No trustees, assignees or receivers have been designated to make a liquidation and, what is more, there is nothing to liquidate. Everything the National Airports Corporation had, has been taken over by the Civil Aeronautics Administration. To all legal intents and practical purposes, the National Airports Corporation is dead and the Civil Aeronautics Administration is its heir or legal representative, acting by the law of its creation upon its own rights and in its own name. The better practice then should have been to make the Civil Aeronautics Administration the third party defendant instead of the National Airports Corporation. The error, however, is purely procedural, not put in issue, and may be corrected by amendment of the pleadings if deemed necessary.

Wherefore, the petition is denied with costs against the Civil Aeronautics Administration.

Paras, C. J., Feria, Pablo, Bengzon, Montemayor, Reyes and Bautista Angelo, JJ., concur.

Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 70547 January 22, 1993PHILIPPINE NATIONAL RAILWAYS and HONORIO CABARDO,petitioners,vs.INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT, INC.,respondents.The Solicitor General for petitioner.Leopoldo Sta. Maria for private respondents.MELO,J.:The imputation ofculpaon the part of herein petitioners as a result of the collision between its strain, bound for Manila from La Union, with a Baliwag transit bus at the railroad crossing on the road going to Hagonoy, Bulacan on August l0, 1974, is the subject of the petition at bar directed against the judgment of affirmance rendered by respondent court, through the Fourth Civil Cases Division (Sison, Bidin (P), Veloso, JJ.),vis-a-visthe decretal portion handed down by the court of origin in:1. Ordering the defendants, jointly and severally to pay the plaintiff the amount of P179,511.52 as actual damages.2. Ordering the defendants jointly and severally to pay the plaintiff P436,642.03 as reimbursement for the damages paid by the plaintiff to death, injury and damage claimants.3. Ordering the defendants jointly and severally to pay exemplary damages in the amount of P50, 000.00 to the plaintiff.4. Ordering the defendants jointly and severally to pay the plaintiff attorney's fees in the amount of P5, 000.00.5. Ordering the defendants, jointly and severally to pay the plaintiff interest at the legal rate on the above amounts due the plaintiff from August 10, 1974 until fully paid.6. Ordering the defendants to pay the cost of this suit.7. Ordering the dismissal of the defendants' counterclaim for lack of factual and legal basis. (p. 101, Record on Appeal; p. 103.Rollo.)Culled from the text of the assailed disposition are the facts of the case at bar which are hereunder adoptedverbatim:The case arose from a collision of a passenger express train of defendant Philippine National Railways, (PNR) coming from San Fernando, La Union and bound for Manila and a passenger bus of Baliwag Transit, Inc. which was on its way to Hagonoy, Bulacan, from Manila, but upon reaching the railroad crossing at Barrio Balungao, Calumpit, Bulacan at about 1:30 in the afternoon of August 10, 1974, got stalled and was hit by defendant's express train causing damages to plaintiff's bus and its passengers, eighteen (18) of whom died and fifty-three (53) others suffered physical injuries. Plaintiff alleging that the proximate cause of the collision was the negligence and imprudence of defendant PNR and its locomotive engineer, Honorio Cirbado, in operating its passenger train in a busy intersection without any bars, semaphores, signal lights, flagman or switchman to warn the public of approaching train that would pass through the crossing, filed the instant action for Damages against defendants. The defendants, in their Answer traversed the material allegation of the Complaint and as affirmative defense alleged that the collision was caused by the negligence, imprudence and lack of foresight of plaintiff's bus driver, Romeo Hughes.At the pre-trial conference held on June 23, 1976, the parties agreed on a partial stipulation of facts and issues which as amplified at the continuation of the pre-trial conference, on July 12, 1976, are as follows:1 That plaintiff is a duly constituted corporation registered with the Securities and Exchange Commission engaged in the business of transportation and operating public utility buses for the public with lines covering Manila, Caloocan City, Quezon City, Malabon, Rizal, Bulacan, Pampanga and Nueva Ecija, and particularly from Manila to Hagonoy, Bulacan and return in the month of August, l974 passing thru the town of Calumpit Bulacan, temporarily while the bridge at Hagonoy, Bulacan was under construction;2 That defendant Philippine National Railways is a purely government owned and controlled corporation duly registered and existing virtue of Presidential Decree No. 741, with capacity to sue and be sued, and is likewise engaged in transporting passengers and cargoes by trains and buses and that, it operates a train line between San Fernando, La Union and Manila particularly Passenger Express Train with Body No. 73, passing along the intersection of Barrio Balungao, Calumpit, Bulacan, in going to San Fernando, La Union from Manila and return;3. That on August 10, 1974, at about 1:20 o'clock in the afternoon, a Baliuag Transit Bus with Body No. 1066 and Plate No. XS-929 PUB-Bulacan '74 was driven by its authorized driver Romeo Hughes and PNR Train No. 73 was operated by Train Engineer Honorio Cabardo alias Honorio Cirbado and at the railroad intersection at Barrio Balungao, Calumpit, Bulacan, said passenger train No. 73 hit and bumped the right mid portion of the plaintiff's passenger bus No. 1066, while the rear portion of said bus was at the railroad track and its direction was towards Hagonoy, Bulacan at about 1:30 o'clock in the afternoon;4. That at the time of the collision there was a slight rainfall in the vicinity of the scene of the accident and that there was at said intersection no bars, semaphores, and signal lights that would warn the public of the approaching train that was about to pass through the intersection and likewise there was no warning devices to passing trains showing that they were about to pass an intersection in going to Manila from San Fernando, La Union and back;5. That on account of said collision, the Baliuag Transit Bus with Body No. 1066 driven by Romeo Hughes was damaged and eighteen (18) of its passengers died and the rest who were more than fifty three (53) passengers suffered physical injuries;6. That after the investigation the Chief of Police of Calumpit, Bulacan, filed a criminal case of Reckless Imprudence Causing Multiple Homicide with Multiple Physical Injuries and Damage to Property against Romeo Hughes y Parfan, driver of the Baliuag Transit bus docketed under Crim. Case No. 2392; while the train Engineer Honorio Cabardo alias Honorio Cirbado was not included as an accused in said case, although his train No. 73 was the one that hit and bumped the right rear portion of the said bus;7. That immediately after the said accident Major Manuel A. Macam, Chief of the Municipal Police of Calumpit, Bulacan, together with some of his policemen conducted an investigation of the accident;8. That at the railroad crossing in Calumpit, Bulacan where the accident took place there is no railroad crossing bar, however, during the pre-war days there was a railroad crossing bar at said intersection; that, however, there was only one sign of railroad crossing "Stop, Look and Listen" placed on a concrete slab and attached to a concrete post existing at the approach of the railroad track from the Highway going towards Hagonoy, Bulacan and that after the said railroad track there was a designated jeep parking area at the right side in the direction from the Highway to Hagonoy Bulacan;9. That the train No. 73 driven by Train Engineer Honorio Cabardo alias Honorio Cirbado stopped after passing the railroad crossing at a distance of about 50 meters from the said intersection after the collision on August, 1974;10. That the expected time of arrival of said Train No. 73 in Manila was 2:41 P.M. and its departure time from San Fernando, La Union was 9:00 A.M. and its expected arrival at Calumpit, Bulacan was 1:41 P.M. with no stop at Calumpit, Bulacan.SIMPLIFICATION OF ISSUES11. That the principal issue in the instant case is who between the driver Romeo Hughes of Baliuag Transit, Incorporated and the train engineer Honorio Cabardo alias Honorio Cirbado of the Philippine National Railways was negligent or whether or not both are negligent; that likewise which of said companies was negligent at said railroad intersection;12. That another additional issue is whether the Baliuag Transit Incorporated has exercised the diligence of a good father of the family in the selection and supervision of its employees. (pp.85-87, Record on Appeal). ( Annex A, Petition; pp. 79-82,Rollo)In addition, respondent court deemed it necessary to reflect the salient findings of the case for damages as formulated by the trial court:Posed for resolution are the following issues: Who between the driver Romeo Hughes of the Baliuag Transit Incorporated and Honorio Cabardo, train Engineer of the Philippine National Railways was negligent in the operation of their respective vehicles, or whether or both were negligent? Could either of the companies Baliuag Transit Incorporated and the Philippine National Railways be held accountable for the collision because of negligence?The defendants presented several statements or affidavits of alleged witnesses to the collision, specifically Exhibits 2, 3, 4, 5, 6, 11, 13, 14, 15, 16, 17, 18 and 19; the Court is at a loss as to why the persons who gave the said statements were not presented as witnesses during the trial of thecase, as aptly said, the statements are hearsay evidence (Azcueta v. Cabangbang, 45 O.G. 144); at most they be taken as proof only of the fact that statements of said persons were taken and that investigation was conducted of the incident; the Court cannot consider the averments in said statements as testimonies or evidence of truth.Defendants endeavored to show that the proximate and immediate cause of the collision was the negligence of the bus driver because the driver did not make a stop before ascending the railtrack; he did not heed the warning or shoutings of bystanders and passengers and proceeded in traversing the railtrack at a fast speed; that the bus driver was in fact violating Section 42(d) of R.A. 4136, otherwise known as the Land Transportation and Traffic Code for failure to "stop, look, and listen" at the intersection, before crossing the railtrack; that it is incumbent upon him to take the necessary precautions at the intersection because the railroad track is in itself a warning; and the bus driver ignored such a warning and must assume the responsibility for the result of the motion taken by him (U.S. v. Mananquil, 42 Phil. 90)Except the testimony of the train engineer Cabardo, there is no admissible evidence to show that indeed, the bus driver did not take the necessary precaution in traversing the track. Note that he first noticed the bus when it was only 15 meters away from him; he could not have possibly noticed the position of the bus before negotiating the track.On the other hand, it was shown by plaintiff that the bus driver Romeo Hughes took the necessary precautions in traversing the track.The bus driver had stopped before traversing the track and in fact asked the conductor to alight and made a "Look and Listen" before proceeding; the conductor had done just that and made a signal to proceed when he did not see any oncoming train. (TSN, October 2l, 1976, p. 4); plaintiff's bus drivers and conductors are enjoined to observe such a precautionary measure in seminars conducted by the company. (TSN, September 23, 1976. pp. 26-27).The evidence disclosed that the train was running fast because by his own testimony, the train engineer had testified that before reaching the station of Calumpit the terrain was downgrade and levelled only after passing the Calumpit bridge (TSN, July 28, 1976, p. 14 ); the tendency of the train, coming from a high point is to accelerate as the gravity will necessarily make it so, especially when it is pulling seven coaches loaded with goods and passengers.Moreover, upon impact, the bus loaded with passengers was dragged and thrown into a ditch several meters away; the train had stopped only after the engine portion was about 190 meters away from the fallen bus; several passengers were injured and at least 20 died; such facts conclusively indicate that the train was speeding, because if it were moving at moderate speed, it would not run some 190 meters after impact and throw the bus at quite a distance especially so when it is claimed that the train's emergency brakes were applied.Further, the train was an express train; its departure was 9:00 A.M. at San Fernando, La Union and expected in Manila at 2:41 P.M.; the collision occurred at 1:30 P.M. or 4 1/2 hours after it left La Union; surely, the train could have not negotiated such a distance in so short a time if it were not running at fast speed.It may be argued that a railroad is not subject to the same restrictions to the speed of its train as a motorists (Mckelvey v. Delaware L. and W.R. Co. 253 App. D.V. 109, 300 NYS 1263 ); but it does not follow that a train will be permitted to run fast under all conditions at any rate of speed it may choose. It must regulate its speed with proper regard for the safety of human life and property (Johnson v. Southern Pacific Company (Cal. App. 288 p. 81), considering the surrounding circumstances particularly the nature of the locality (Atchinson, T. and SFR Co. v. Nicks (Arts) 165 p. 2d 167).Cabardo's route included the passage over the said intersection; he could have noticed that it is a very busy intersection because the crossroad leads to the Calumpit Poblacion as well as to the neighboring town of Hagonoy; there was a parking lot by the side of the track whereat passengers board jeepneys for the neighboring barrios and towns; stalls abound in the vicinity and bystanders congregate nearby. A prudent train operator must, under the circumstances, slacken his speed almost for the protection of motorists and pedestrians, not only when a collision is inevitable but even if no hindrance is apparent on the way;Moreover, there was an intermittent rain at the time of the collision (see stipulation of facts and photographs); the condition of the weather was such that even if for this reason alone, the train engineer should have foreseen that danger of collision lurked because of poor visibility of slippery road; he should have taken extra precaution by considerably slackening its speed. This he failed to do even if the nature of his job required him to observe care exercised by a prudent man.Contributory negligence may not be ascribed to the bus driver; it was evident that he had taken the necessary precautions before passing over the railway track; if the bus was hit, it was for reasons beyond the control of the bus driver because he had no place to go; there were vehicles to his left which prevented him in swerving towards that direction; his bus stalled in view of the obstructions in his front where a sand and gravel truck stopped because of a jeep maneuvering into a garage up front. All the wheels at the bus have already passed the rail portion of the track and only the rear portion of the bus' body occupied or covered the railtrack. This was evident because the part of the bus hit by the train was the rear since the bus fell on a nearby ditch. Otherwise, if the bus was really hit in mid-body, the bus could have been halved into two because of the force of the impact.The stipulation of facts between the parties show that there was no crossing bar at the railroad intersection at Calumpit, Bulacan at the time of collision (par. 8, Stipulation of Facts); the plaintiff contended and the defendants did not deny, that there were no signal lights, semaphores, flagman or switchman thereat; the absence of such devices, the plaintiff argues constitute negligence on the part of the Philippine National Railways.A railroad is not required to have a gate (crossing bar) or a flagman, or to maintain signals at every intersection; only at such places reasonably necessary; what is considered reasonably necessary will depend on the amount of travel upon the road, the frequency with which trains pass over it and the view which could be obtained of trains as they approach the crossing, and other conditions (Pari v. Los Angeles, Ry. Corporation (Cal A2d) 128 p2d 563; Swdyk v. Indiana Harbor Belt R. Co. 148 F. 2d 795, and others).As has been amply discussed, the crossroad at the intersection at Calumpit is one which is a busy thoroughfare; it leads to the Poblacion at Calumpit and other barrios as well as the town of Hagonoy; the vicinity is utilized as a parking and waiting area for passengers of jeepneys that ply between the barrios, clearly, the flow of vehicular traffic thereat is huge. It can be said also that, since there is no other railtrack going North except that one passing at Calumpit, trains pass over it frequently;A portion of the intersection is being used as a parking area with stalls and other obstructions present making it difficult, if not impossible, to see approaching trains (see photographs).The failure of the Philippine National Railways to put a cross bar, or signal light, flagman or switchman, or semaphores is evidence of negligence and disregard of the safety of the public, even if there is no law or ordinance requiring it, because public safety demands that said devices or equipments be installed, in the light of aforesaid jurisprudence. In the opinion of this Court the X sign or the presence of "STOP, LOOK, LISTEN" warnings would not be sufficient protection of the motoring public as well as the pedestrians, in the said intersection;The parties likewise have stipulated that during the pre-war days, there was a railroad crossing bar at the said intersection (Par-8, Stipulation of Facts). It appears that it was a self imposed requirement which has been abandoned. In a case it was held that where the use of a flagman was self imposed, the abandonment thereof may constitute negligence. (Fleming v. Missouri and A. Ry. Co. 198 ARDC 290, 128 S.W. 2d 286 and others; cited in Sec. 1082 SCRWARTZ, Vol. 2). Similarly, the abandonment by the PNR of the use of the crossing bar at the intersection at Calumpit constitutes negligence, as its installation has become imperative, because of the prevailing circumstances in the place.A railroad company has been adjudged guilty of negligence and civilly liable for damages when it failed to install semaphores, or where it does not see to it that its flagman or switchman comply with their duties faithfully, to motorist injured by a crossing train as long as he had crossed without negligence on his part (Lilius vs. MRR, 39 Phil. 758). (Decision, pages 94-100, R A.; pp. 83-89,Rollo).On the aspect of whether the Philippine National Railways enjoys immunity from suit, respondent court initially noted that an exculpation of this nature that was raised for the first time on appeal may no longer be entertained in view of the proscription under Section 2, Rule 9 of the Revised Rules of Court, apart from the fact that the lawyer of petitioner agreed to stipulateinter aliathat the railroad company had capacity to sue and be sued. This being so, respondent court continued, PNR was perforce estopped from disavowing the prejudicial repercussion of an admissionin judicio. Even as the laws governing the creation and rehabilitation of the PNR were entirely mute on its power to sue and be sued, respondent court nonetheless opined that such prerogative was implied from the general power to transact business pertinent or indispensable to the attainment of the goals of the railroad company under Section 4 of Republic Act No. 4156 as amended by Republic Act No. 6366:Sec. 4 General Powers The Philippine National Railways shall have the following general powers:(a) To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to the attainment of the purpose of the corporation; and(b) Generally, to exercise all powers of a railroad corporation under the Corporation law.in conjunction with Section 2(b) of Presidential Decree No. 741:(b) To own or operate railroad transways, bus lines, trucklines, subways, and other kinds of land transportation, vessels, and pipelines, for the purpose of transporting for consideration, passengers, mail and property between any points in the Philippines;Thus, respondent court utilized the doctrine of implied powers announced inNational Airports Corporation vs. Teodoro, Sr. and Philippine Airlines, Inc. (91 Phil. 203 [1952]), to the effect that the power to sue and be sued is implicit from the faculty to transact private business. At any rate, respondent court characterized the railroad company as a private entity created not to discharge a governmental function but, among other things, to operate a transport service which is essentially a business concern, and thus barred from invoking immunity from suit.In brushing aside petitioners' asseveration that the bus driver outraced the train at the crossing, respondent court observed that the bus was hit by the train at its rear portion then protruding over the tracks as the bus could not move because another truck at its front was equally immobile due to a jeep maneuvering into a nearby parking area. Under these tight conditions, respondent court blamed the train engineer who admitted to have seen the maneuvering jeep at a distance (TSN, July 28, 1976, page 18) and had the last clear chance to apply the brakes, knowing fully well that the vehicles following the jeep could not move away from the path of the train. Apart from these considerations, it was perceived below that the train was running fast during the entire trip since the train stopped 190 meters from the point of impact and arrived at Calumpit, Bulacan earlier than its expected time of arrival thereat.Moreover, respondent court agreed with the conclusion reached by the trial court that the absence of a crossing bar, signal light, flagman or switchman to warn the public of an approaching train constitutes negligence per the pronouncement of this Court inLilius vs. Manila Railroad Company(59 Phil 758 [1934]).Concerning the exercise of diligence normally expected of an employer in the selection and supervision of its employees, respondent court expressed the view that PNR was remiss on this score since it allowed Honorio Cabardo, who finished only primary education and became an engineer only through sheer experience, to operate the locomotive, not to mention the fact that such plea in avoidance was not asserted in the answer and was thus belatedly raised on appeal.Petitioner moved to reconsider, but respondent court was far from persuaded. Hence, the petition before Us which, in essence, incorporates similar disputations anent PNR's immunity from suit and the attempt to toss the burden of negligence from the train engineer to the bus driver of herein private respondent.The bone of contention for exculpation is premised on the familiar maxim in political law that the State, by virtue of its sovereign nature and as reaffirmed by constitutional precept, is insulated from suits without its consent (Article 16, Section 3, 1987 Constitution). However, equally conceded is the legal proposition that the acquiescence of the State to be sued can be manifested expressly through a general or special law, or indicated implicitly, as when the State commences litigation for the purpose of asserting an affirmative relief or when it enters into a contract (Cruz,Philippine Political Law, 1991 edition, page 33;Sinco, Philippine Political Law, Eleventh Edition, 1962, page 34). When the State participates in a covenant, it is deemed to have descended from its superior position to the level of an ordinary citizen and thus virtually opens itself to judicial process. Of course, We realize that this Court qualified this form of consent only to those contracts concluded in a proprietary capacity and therefore immunity will attach for those contracts entered into in a governmental capacity, following the ruling in the 1985 case ofUnited States of America vs. Ruiz(136 SCRA 487 [1985]; cited byCruz,supraat pages 36-37). But the restrictive interpretation laid down therein is of no practical worth nor can it give rise to herein petitioner PNR's exoneration since the case ofMalong vs. Philippine National Railways(138 SCRA 63, [1985]); 3Padilla, 1987 Constitution with Comments and Cases, 1991 edition, page 644), decided three months afterRuizwas promulgated, was categorical enough to specify that the Philippine National Railways "is not performing any governmental function" (supra, at page 68).InMalong, Justice Aquino, speaking for the Courten banc, declared:The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not immune from suit under Act No. 1510, its charter.The PNR Charter, Republic Act No. 4156, as amended by Republic Act No. 6366 and Presidential Decree No. 741, provides that the PNR is a government instrumentality under government ownership during its 50-year term, 1964 to 2014. It is under the Office of the President of the Philippines. Republic Act No. 6366 provides:Sec. 1-a. Statement of policy. The Philippine National Railways, being a factor for socio-economic development and growth, shall be a part of the infrastructure program of the government and as such shall remain in and under government ownership during its corporate existence. The Philippine National Railways must be administered with the view of serving the interests of the public by providing them the maximum of service and, while aiming at its greatest utility by the public, the economy of operation must be ensured so that service can be rendered at the minimum passenger and freight prices possible.The charter also provides:Sec. 4. General powers. The Philippine National Railways shall have the following general powers:(a) To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to the attainment of the purpose of the corporation; and(b) Generally, to exercise all powers of a railroad corporation under the Corporation Law. (This refers to Sections 81 to 102 of the Corporation Law on railroad corporations, not reproduced in the Corporation Code.)Section 36 of the Corporation Code provides that every corporation has the power to sue and be sued in its corporate name. Section 13(2) of the Corporation Law provides that every corporation has the power to sue and be sued in any court.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 (Justice Holmes in Kawananakoa vs. Polyblank, 205 U.S. 353, 51 L. 3d 834).The public service would be hindered, and public safety endangered, if the supreme authority could be subjected to suit at the instance of every citizen and, consequently, controlled in the use and disposition of the means required for the proper administration of the Government (The Siren vs. U.S., 7 Wall. 152, 19 L. ed. 129). (at pp.65-66).To the pivotal issue of whether the State acted in a sovereign capacity when it organized the PNR for the purpose of engaging in transportation,Malongcontinued to hold that:. . . in the instant case the State divested itself of its sovereign capacity when it organized the PNR which is no different from its predecessor, the Manila Railroad Company. The PNR did not become immune from suit. It did not remove itself from the operation of Articles 1732 to 1766 of the Civil Code on common carriers.The correct rule is that "not all government entities, whether corporate or noncorporate, are immune from suits. Immunity from suit is determined by the character of the objects for which the entity was organized." (Nat. Airports Corp. vs. Teodoro and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs. Santos, 92 Phil. 281, 285; Harry Lyons, Inc. vs. USA, 104 Phil. 593).Suits against State agencies with respect to matters in which they have assumed to act in a private or nongovernmental capacity are not suits against the State (81 C.J.S. 1319).Suits against State agencies with relation to matters in which they have assumed to act in a private or nongovernmental capacity, and various suits against certain corporations created by the State for public purposes, but to engage in matters partaking more of the nature of ordinary business rather than functions of a governmental or political character, are not regarded as suits against the State.The latter is true, although the State may own the stock or property of such a corporation, for by engaging in business operations through a corporation the State divests itself so far of its sovereign character, and by implicating consents to suits against the corporation. (81 C.J.S. 1319).The foregoing rule was applied to State Dock Commissions carrying on business relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 27 Fed. 2nd 370) and to State Highways Commissions created to build public roads and given appropriations in advance to discharge obligations incurred in their behalf (Arkansas State Highway Commission vs. Dodge, 26 SW 2nd 879 and State Highway Commission of Missouri vs. Bates, 296 SW 418, cited in National Airports case).The point is that when the government enters into a commercial business it abandons its sovereign capacity and is to be treated like any other private corporation (Bank of the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L ed. 244, cited in Manila Hotel Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374, 388). The Manila Hotel case also relied on the following rulings:By engaging in a particular business through the instrumentality of a corporation, the government divests itselfpro hac viceof its sovereign character, so as to render the corporation subject to the rules of law governing private corporations.When the State acts in its proprietary capacity, it is amenable to all the rules of law which bind private individuals.There is not one law for the sovereign and another for the subject, but when the sovereign engages in business and the conduct of business enterprises, and contracts with individuals, whenever the contract in any form comes before the courts, the rights and obligation of the contracting parties must be adjusted upon the same principles as if both contracting parties were private persons. Both stand upon equality before the law, and the sovereign is merged in the dealer, contractor and suitor (People vs. Stephens, 71 N.Y. 549).It should be noted that in Philippine National Railways vs. Union de Maquinistas, etc., L-31948, July 25, 1978, 84 SCRA 223, it was held that the PNR funds could be garnished at the instance of a labor union.It would be unjust if the heirs of the victim of an alleged negligence of the PNR employees could not sue the PNR for damages. Like any private common carrier, the PNR is subject to the obligations of persons engaged in that private enterprise. It is not performing any governmental function.Thus, the National Development Company is not immune from suit. It does not exercise sovereign functions. It is an agency for the performance of purely corporate, proprietary or business functions (National Development Company vs. Tobias, 117 Phil. 703, 705 and cases cited therein; National Development Company vs. NDC Employees and Workers' Union, L-32387, August 19, 1975, 66 SCRA 18l, 184).Other government agencies not enjoying immunity from suit are the Social Security System (Social Security System vs. Court of Appeals,L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank (Republic vs. Philippine National Bank, 121 Phil. 26). (at pp. 66-68).We come now to the question of whether respondent court properly agreed with the trial court in imputing negligence on the part of the train engineer and his employer.It was demonstrated beyond cavil in the course of the pre-trial hearings held for the purpose of stipulating on crucial facts that the bus was hit on the rear portion thereof after it crossed the railroad tracks. Then, too the train engineer was frank enough to say that he saw the jeep maneuvering into a parking area near the crossing which caused the obstruction in the flow of traffic such that the gravel and sand truck including the bus of herein private respondent were not able to move forward or to take the opposite lane due to other vehicles. The unmindful demeanor of the train engineer in surging forward despite the obstruction before him is definitely anathema to the conduct of a prudent person placed under the same set of perceived danger. Indeed:When it is apparent, or when in the exercise of reasonable diligence commensurate with the surroundings it should be apparent, to the company that a person on its track or to get on its track is unaware of his danger or cannot get out of the way, it becomes the duty of the company to use such precautions, by warnings, applying brakes, or otherwise, as may be reasonably necessary to avoid injury to him. (65Am. Jur., Second Edition. p. 649).Likewise, it was established that the weather condition was characterized with intermittent rain which should have prompted the train engineer to exercise extra precaution. Also, the train reached Calumpit, Bulacan ahead of scheduled arrival thereat, indicating that the train was travelling more than the normal speed of 30 kilometers per hour. If the train were really running at 30 kilometers per hour when it was approaching the intersection, it would probably not have travelled 190 meters more from the place of the accident (page 10, Brief for Petitioners). All of these factors, taken collectively, engendered the concrete and yes, correct conclusion that the train engineer was negligent who, moreover, despite the last opportunity within his handsvis-a-visthe weather condition including the presence of people near the intersection, could have obviated the impending collision had he slackened his speed and applied the brakes (Picart vs. Smith, 37 Phil. 809 [1918]).Withal, these considerations were addressed to the trial judge who, unlike appellate magistrates, was in a better position to assign weight on factual questions. Having resolved the question of negligence between the train engineer and the bus driver after collating the mass of evidence, the conclusion reached thereafter thus commands great respect especially so in this case where respondent court gave its nod of approval to the findings of the court of origin (Co vs. Court of Appeals, 193 SCRA 198; 206 [1991]);Amigo vs. Teves, 50 O.G. 5799;Regalado, Remedial Law Compendium, Fifth edition, page 353).What exacerbates against petitioners' contention is the authority in this jurisdiction to the effect that the failure of a railroad company to install a semaphore or at the very least, to post a flagman or watchman to warn the public of the passing train amounts to negligence (Lilius vs. Manila Railroad Company, 59 Phil. 758 [1934]).WHEREFORE, the petition is hereby DISMISSED and the decision of respondent court AFFIRMED.SO ORDERED.

G.R. No. L-5122, Corporation v. Inc., 91 Phil. 203Republic of the PhilippinesSUPREME COURTManila

EN BANC

April 30, 1952

G.R. No. L-5122NATIONAL AIRPORTS CORPORATION, petitioner, vs.JOSE TEODORO, SR., as Judge of the Court of First Instance of Negros Occidental and PHILIPPINE AIRLINES, INC., respondents.

Office of the Solicitor General Pompeyo Diaz and Solicitor Augusto M. Luciano for petitioner.Ozeata, Roxas, Lichauco and Picazo for respondents.

TUASON, J.:

The National Airports Corporation was organized under Republic Act No. 224, which expressly made the provisions of the Corporation Law applicable to the said corporation. On November 10, 1950, the National Airports Corporation was abolished by Executive Order No. 365 and to take its place the Civil Aeronautics Administration was created. Before the abolition, the Philippine Airlines, Inc. paid to the National Airports Corporation P65,245 as fees for landing and parking on Bacolod Airport No. 2 for the period up to and including July 31, 1948. These fees are said to have been due and payable to the Capitol Subdivision, Inc. which owned the land used by the National Airports Corporation as airport, and the owner commenced an action in the Court of First Instance of Negros Occidental against the Philippine Airlines, Inc., in 1951 to recover the above amount. The Philippine Airlines, Inc. countered with a third-party complaint against the National Airports Corporation, which by that time had been dissolved, and served summons on the Civil Aeronautics Administration. The third party plaintiff alleged that it had paid to the National Airports Corporation the fees claimed by the Capitol Subdivision, Inc. "on the belief and assumption that the third party defendant was the lessee of the lands subject of the complaint and that the third party defendant and its predecessors in interest were the operators and maintainers of said Bacolod Airport No. 2 and, further, that the third party defendant would pay to the landowners, particularly the Capitol Subdivision, Inc., the reasonable rentals for the use of their lands."

The Solicitor General, after answering the third party complaint, filed a motion to dismiss on the ground that the court lacks jurisdiction to entertain the third- party complaint, first, because the National Airports Corporation "has lost its juridical personality," and, second, because agency of the Republic of the Philippines, unincorporated and not possessing juridical personality under the law, is incapable of suing and being sued."

Section 7 of Executive Order No. 365 reads:

All records, properties, equipment, assets, rights, choses in action, obligations, liabilities and contracts of the National Airport Corporation abolished under this Order, are hereby transferred to, vested in, and assumed by, the Civil Aeronautics Administration. All works, construction, and improvements made by the National Airports Corporation or any agency of the National Government in or upon government airfields, including all appropriations or the unreleased and unexpended balances thereof, shall likewise be transferred to the Civil Aeronautics Administration.

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concession rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. And if it has the power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have the power to prosecute and defend suits for and against the National Airports Corporation, having acquired all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny the National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics Administration is to say that the government could impair the obligation of its corporations by the simple expedient of converting them into unincorporated agencies.

But repudiation of the National Airports Corporation's obligation was far from the intention in its dissolution and the setting up of the Civil Aeronautics Administration. Nor would such scheme work even if the executive order had so expressly provided.

Not all government entities, whether corporate or non corporate, are immune from suits. Immunity from suits is determined by the character of the obligations for which the entity was organized. The rule is thus stated in Corpus Juris:

Suits against state agencies with relation to matters in which they have assumed to act in private or nongovernment capacity, and various suits against certain corporations created by the state for public purposes, but to engage in matters partaking more of the nature of ordinary business rather than functions of a governmental or political character, are not regarded as suits against the state. The Latter is true, although the state may own stock or property of such a corporation for by engaging in business operations through a corporation the state divests itself so far of its sovereign character, and by implication consents to suits against the corporation. (59 C. J., 313.)

This rule has been applied to such government agencies as State Dock Commissions carrying on business relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 26 Fed. (2d) 480), and State Highway Commissions created to build public roads, and given appropriations in advance to discharge obligations incurred in that behalf (Arkansas State Highway Commission of Missouri vs. Bates, 269, S W 418.)

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the travelling public. It is engaged in an enterprise which, far from being the exclusive prerogative of state, may, more than the construction of public roads, be undertaken by private concerns.

In the light of a well-established precedents, and as a matter of simple justice to the parties who dealt with the National Airports Corporation on the faith of equality in the enforcement of their mutual commitments, the Civil Aeronautics Administration may not, and should not, claim for itself the privileges and immunities of the sovereign state.

The case of National Airports Corporation vs. Hon. V. Jimenez Yanzon et al., (89 Phil. 745), relied upon by counsel, is not controlling. That was a labor dispute and can be distinguished from the case at bar in at least one fundamental respect.

Involving labor demands and labor- management relations, any decision in that case would, if given force and effect, operate prospectively and for an indefinite period against the Civil Aeronautics Administration whose rights and obligations with respect to its officers and employees were regulated by the regular law on civil service. Moreover, some of the petitioners might already have ceased. By Sections 5 and 8 of Executive Order No. 365 all employees of the National Airports Corporation were, upon the latter's dissolution, automatically separated from the service, and the part of the personnel whose employment was "necessary and convenient" to the Civil Aeronautics Administration would have to be reappointed and, what was more important, "in accordance with the Civil Service rules and regulations." If the petitioners in that case had been absorbed into the Civil Aeronautics Administration, the Matters raised in their petition were outside the jurisdiction of the Court of Industrial Relations, and of this Court on Appeal, to entertain. Their rights, privileges, hours of work, and rates of compensation were already governed by the Civil Service Law.

The Philippine Airlines' third party-complaint is premised on the assumption that the National Airports Corporation is still in existence, at least for the limited object of winding up its affairs under Section 77 of the Corporation Law. Our opinion is that by its abolition that corporation stands abolished for all purposes. No trustees, assignees or receivers have been designated to make a liquidation and, what is more, there is nothing to liquidate. Everything the National Airports Corporation had, has been taken over by the Civil Aeronautics Administration. To all legal intents and practical purposes, the National Airports Corporation is dead and the Civil Aeronautics Administration is its heir or legal representative, acting by the law of its creation upon its own rights and in its own name. The better practice then should have been to make the Civil Aeronautics Administration the third party defendant instead of the National Airports Corporation. The error, however, is purely procedural, not put in issue, and may be corrected by amendment of the pleadings if deemed necessary.

Wherefore, the petition is denied with costs against the Civil Aeronautics Administration.

G.R. No. L-23139, Inc. v. Customs, 18 SCRA 1120Republic of the PhilippinesSUPREME COURTManila

EN BANC

December 17, 1966

G.R. No. L-23139MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant, vs.CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.

Alejandro Basin, Jr. and Associates for plaintiff-appellant.Felipe T. Cuison for defendants-appellees.

BENGZON, J.P., J.:

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

On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila against the Customs Arrastre Service and the Bureau of Customs to recover the value of the undelivered case in the amount of P18,493.37 plus other damages.

On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not being persons under the law, defendants cannot be sued.

After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the ground that neither the Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff appealed to Us from the order of dismissal.

Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the facts stated.

Appellant contends that not all government entities are immune from suit; that defendant Bureau of Customs as operator of the arrastre service at the Port of Manila, is discharging proprietary functions and as such, can be sued by private individuals.

The Rules of Court, in Section 1, Rule 3, provide:

SECTION 1. Who may be parties.Only natural or juridical persons or entities authorized by law may be parties in a civil action.

Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an entity authorized by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit, the Customs Arrastre Service, is a person. They are merely parts of the machinery of Government. The Bureau of Customs is a bureau under the Department of Finance (Sec. 81, Revised Administrative Code); and as stated, the Customs Arrastre Service is a unit of the Bureau of Custom, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that the defendants herein cannot he sued under the first two abovementioned categories of natural or juridical persons.

Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the law thereby impliedly authorizes it to be sued as arrastre operator, for the reason that the nature of this function (arrastre service) is proprietary, not governmental. Thus, insofar as arrastre operation is concerned, appellant would put defendants under the third category of "entities authorized by law" to be sued. Stated differently, it is argued that while there is no law expressly authorizing the Bureau of Customs to sue or be sued, still its capacity to be sued is implied from its very power to render arrastre service at the Port of Manila, which it is alleged, amounts to the transaction of a private business.

The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and Customs Code, effective June 1, 1957), and it states:

SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.The Bureau of Customs shall have exclusive supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at all ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and superintend such plants and facilities as may be necessary for the receiving, handling, custody and delivery of articles, and the convenience and comfort of passengers and the handling of baggage; as well as to acquire fire protection equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and delivery of articles can be carried on by private parties with greater efficiency, the Commissioner may, after public bidding and subject to the approval of the department head, contract with any private party for the service of receiving, handling, custody and delivery of articles, and in such event, the contract may include the sale or lease of government-owned equipment and facilities used in such service.

In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397, resolution of August 6, 1963, this Court indeed held "that the foregoing statutory provisions authorizing the grant by contract to any private party of the right to render said arrastre services necessarily imply that the same is deemed by Congress to be proprietary or non-governmental function." The issue in said case, however, was whether laborers engaged in arrastre service fall under the concept of employees in the Government employed in governmental functions for purposes of the prohibition in Section 11, Republic Act 875 to the effect that "employees in the Government . . . shall not strike," but "may belong to any labor organization which does not impose the obligation to strike or to join in strike," which prohibition "shall apply only to employees employed in governmental functions of the Government . . .

Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject matter of the case, but not that the Bureau of Customs can be sued. Said issue of suability was not resolved, the resolution stating only that "the issue on the personality or lack of personality of the Bureau of Customs to be sued does not affect the jurisdiction of the lower court over the subject matter of the case, aside from the fact that amendment may be made in the pleadings by the inclusion as respondents of the public officers deemed responsible, for the unfair labor practice acts charged by petitioning Unions".

Now, the fact that a non-corporate government entity performs a function proprietary in nature does not necessarily result in its being suable. If said non-governmental function is undertaken as an incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit extended to such government entity. This is the doctrine recognized in Bureau of Printing, et al. vs. Bureau of Printing Employees Association, et al., L-15751, January 28, 1961:

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

xxx xxx xxx

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

xxx xxx xxx

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot be sued (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against it, if it were to produce any effect, would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the Government cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44, December 28, 1957.)

The situation here is not materially different. The Bureau of Customs, to repeat, is part of the Department of Finance (Sec. 81, Rev. Adm. Code), with no personality of its own apart from that of the national government. Its primary function is governmental, that of assessing and collecting lawful revenues from imported articles and all other tariff and customs duties, fees, charges, fines and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a necessary incident. For practical reasons said revenues and customs duties can not be assessed and collected by simply receiving the importer's or ship agent's or consignee's declaration of merchandise being imported and imposing the duty provided in the Tariff law. Customs authorities and officers must see to it that the declaration tallies with the merchandise actually landed. And this checking up requires that the landed merchandise be hauled from the ship's side to a suitable place in the customs premises to enable said customs officers to make it, that is, it requires arrastre operations.[[1]]

Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary incident of the primary and governmental function of the Bureau of Customs, so that engaging in the same does not necessarily render said Bureau liable to suit. For otherwise, it could not perform its governmental function without necessarily exposing itself to suit. Sovereign immunity, granted as to the end, should not be denied as to the necessary means to that end.

And herein lies the distinction between the present case and that of National Airports Corporation vs. Teodoro, 91 Phil. 203, on which appellant would rely. For there, the Civil Aeronautics Administration was found have for its prime reason for existence not a governmental but a proprietary function, so that to it the latter was not a mere incidental function:

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concessions rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. . . .

xxx xxx xxx

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the travelling public. . .

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

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

WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against appellant. So ordered.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Zaldivar and Sanchez, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

HIRD DIVISION

G.R. No. 42204January 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.

ROMERO, J.:

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 are-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 $10.15 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:

Sec. 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 contraryto law by means of which such articles was entered through a custom-house 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 consignees 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 itssuppliers 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 Bure