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Republic of the Philippines

SECOND DIVISION

G.R. No. 169304 March 13, 2007

THE DEPARTMENT OF HEALTH, SECRETARY MANUEL M. DAYRIT, USEC. MA. MARGARITA GALON and
USEC. ANTONIO M. LOPEZ, Petitioners,
vs.
PHIL. PHARMAWEALTH, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. SP No. 84457, to wit: a) Decision1
dated May 12, 2005 which affirmed the order issued by Judge Leoncio M. Janolo, Jr. of the Regional Trial Court of
Pasig City, Branch 264 denying petitioners motion to dismiss Civil Case No. 68208; and b) Resolution2 dated
August 9, 2005 which denied petitioners motion for reconsideration.

Phil. Pharmawealth, Inc. (respondent) is a domestic corporation engaged in the business of manufacturing and
supplying pharmaceutical products to government hospitals in the Philippines.

On December 22, 1998, then Secretary of Health Alberto G. Romualdez, Jr. issued Administrative Order (A.O.) No.
27,3 Series of 1998, outlining the guidelines and procedures on the accreditation of government suppliers for
pharmaceutical products.

A.O. No. 27 was later amended by A.O. No. 10,4 Series of 2000, providing for additional guidelines for accreditation
of drug suppliers aimed at ensuring that only qualified bidders can transact business with petitioner Department of
Health (DOH). Part V of A.O. No. 10 reads, in part:

1. Drug Manufacturer, Drug Trader and Drug Importer shall be allowed to apply for accreditation.

2. Accreditation shall be done by the Central Office-Department of Health.

3. A separate accreditation is required for the drug suppliers and for their specific products.

xxxx

12. Only products accredited by the Committee shall be allowed to be procured by the DOH and all other
entities under its jurisdiction.5 (Underscoring supplied)

On May 9, 20006 and May 29, 2000,7 respondent submitted to petitioner DOH a request for the inclusion of
additional items in its list of accredited drug products, including the antibiotic "Penicillin G Benzathine." Based on the
schedule provided by petitioner DOH, it appears that processing of and release of the result of respondents request
were due on September 2000, the last month of the quarter following the date of its filing.8

Sometime in September 2000, petitioner DOH, through petitioner Antonio M. Lopez, chairperson of the pre-
qualifications, bids and awards committee, issued an Invitation for Bids9 for the procurement of 1.2 million units vials
of Penicillin G Benzathine (Penicillin G Benzathine contract).

Despite the lack of response from petitioner DOH regarding respondents request for inclusion of additional items in
its list of accredited products, respondent submitted its bid for the Penicillin G Benzathine contract. When the bids
were opened on October 11, 2000, only two companies participated, with respondent submitting the lower bid at
82.24 per unit, compared to Cathay/YSS Laboratories (YSS) bid of 95.00 per unit. In view, however, of the non-
accreditation of respondents Penicillin G Benzathine product, the contract was awarded to YSS.

Respondent thus filed a complaint10 for injunction, mandamus and damages with prayer for the issuance of a writ of
preliminary injunction and/or temporary restraining order with the Regional Trial Court of Pasig City praying, inter
alia, that the trial court "nullify the award of the Penicillin G Benzathine contract (IFB No. 2000-10-11 [14]) to YSS
Laboratories, Inc. and direct defendant DOH, defendant Romualdez, defendant Galon and defendant Lopez to
declare plaintiff Pharmawealth as

the lowest complying responsible bidder for the Benzathine contract, and that they accordingly award the same to
plaintiff company" and "adjudge defendants Romualdez, Galon and Lopez liable, jointly and severally to plaintiff, for
[the therein specified damages]."11

In their Comment,12 petitioner DOH, Secretary Alberto Romualdez, Jr. who was later succeeded by petitioner
Secretary Manuel M. Dayrit, and individual petitioners Undersecretaries Margarita Galon and Antonio Lopez argued
for the dismissal of the complaint for lack of merit in view of the express reservation made by petitioner DOH to
accept or reject any or all bids without incurring liability to the bidders, they positing that government agencies have
such full discretion.

Petitioners subsequently filed a Manifestation and Motion13 (motion to dismiss) praying for the outright dismissal of
the complaint based on the doctrine of state immunity. Additionally, they alleged that respondents representative
was not duly authorized by its board of directors to file the complaint.

To petitioners motion to dismiss, respondent filed its comment/opposition14 contending, in the main, that the
doctrine of state immunity is not applicable considering that individual petitioners are being sued both in their official
and personal capacities, hence, they, not the state, would be liable for damages.

By Order of December 8, 2003, the trial court15 denied petitioners motion to dismiss.

Their motion for reconsideration having been denied,16 petitioners filed a petition for certiorari17 with the Court of
Appeals, before which they maintained that the suit is against the state.

By the assailed Decision18 of May 12, 2005, the Court of Appeals affirmed the trial courts Order. And by Resolution
of August 9, 2005, it denied petitioners motion for reconsideration.

Hence, the instant petition for review which raises the sole issue of whether the Court of Appeals erred in upholding
the denial of petitioners motion to dismiss.

The petition fails.

The suability of a government official depends on whether the official concerned was acting within his official or
jurisdictional capacity, and whether the acts done in the performance of official functions will result in a charge or
financial liability against the government. In the first case, the Constitution itself assures the availability of judicial
review,19 and it is the official concerned who should be impleaded as the proper party.20

In its complaint, respondent sufficiently imputes grave abuse of discretion against petitioners in their official capacity.
Since judicial review of acts alleged to have been tainted with grave abuse of discretion is guaranteed by the
Constitution, it necessarily follows that it is the official concerned who should be impleaded as defendant or
respondent in an appropriate suit.21

Moreover, part of the reliefs prayed for by respondent is the enjoinment of the implementation, as well as the
nullification of the award to YSS, the grant of which may not be enforced against individual petitioners and their
successors except in their official capacities as officials of the DOH.22

As regards petitioner DOH, the defense of immunity from suit will not avail despite its being an unincorporated
agency of the government, for the only causes of action directed against it are preliminary injunction and
mandamus. Under Section 1, Rule 5823 of the Rules of Court, preliminary injunction may be directed against a party
or a court, agency or a person. Moreover, the defense of state immunity from suit does not apply in causes of action
which do not seek to impose a charge or financial liability against the State.24

As regards individual petitioners suability for damages, the following discussion on the applicability of the defense of
state immunity from suit is relevant.
The rule that a state may not be sued without its consent, now embodied in Section 3, Article XVI of the 1987
Constitution, is one of the generally accepted principles of international law, which we have now adopted as part of
the law of the land.25

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.26 The suit is regarded as one against the state where satisfaction of the judgment against the officials
will require the state itself to perform a positive act, such as the appropriation of the amount necessary to pay the
damages awarded against them.27

The rule, however, is not so all-encompassing as to be applicable under all circumstances. Shauf v. Court of
Appeals28 elucidates:

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.,29 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. (Emphasis and
underscoring supplied) 1avvphi1

Hence, the rule does not apply where the public official is charged in his official capacity for acts that are
unauthorized or unlawful and injurious to the rights of others. Neither does it apply where the public official is clearly
being sued not in his official capacity but in his personal capacity, although the acts complained of may have been
committed while he occupied a public position.30

In the present case, suing individual petitioners in their personal capacities for damages in connection with their
alleged act of "illegal[ly] abus[ing] their official positions to make sure that plaintiff Pharmawealth would not be
awarded the Benzathine contract [which act was] done in bad faith and with full knowledge of the limits and breadth
of their powers given by law"31 is permissible, in consonance with the foregoing principles. For an officer who
exceeds the power conferred on him by law cannot hide behind the plea of sovereign immunity and must bear the
liability personally.32

It bears stressing, however, that the statements in the immediately foregoing paragraph in no way reflect a ruling on
the actual liability of petitioners to respondent. The mere allegation that a government official is being sued in his
personal capacity does not automatically remove the same from the protection of the doctrine of state immunity.
Neither, upon the other hand, does the mere invocation of official character suffice to insulate such official from
suability and liability for an act committed without or in excess of his or her authority.33 These are matters of
evidence which should be presented and proven at the trial.

WHEREFORE, the petition is DENIED. The assailed Decision dated May 12, 2005 and Resolution dated August 9,
2005 issued by the Court of Appeals are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORALES

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO DANTE O. TINGA

PRESBITERO J. VELASCO, JR.

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairpersons Attestation, it is hereby
certified that the conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Court.

REYNATO S. PUNO
Chief Justice

Footnotes

1 CA rollo, pp. 186-197; penned by Associate Justice Monina Arevalo-Zenarosa and concurred in by
Associate Justices Remedios A. Salazar-Fernando and Rosmari D. Carandang.

2 Id. at 224-226.

3 Id. at 37-38.

4 Id. at 45-51.

5 Id. at 46-47.

6 Id. at 41-42.

7 Id. at 43-44.

8 Memorandum No. 125-A, s. 2000; RTC records, p. 33.

9 CA rollo, pp. 57-67.

10 RTC records, pp. 2-15.

11 Id. at 13-14.

12 Id. at 127-137.

13 Id. at 182-187.

14 Id. at 210-213.

15 Id. at 229-234.

16 Through Order dated March 15, 2004; Records, p. 255.

17 CA rollo, pp. 1-15.

18 Id. at 186-197.

19 Section 1, Article VIII of the 1987 Constitution.

21 Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, supra.

22 See Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, supra.

23 Section 1. Preliminary injunction defined; classes. A preliminary injunction is an order granted at any
stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or a
person to refrain from a particular act or acts. It may also require the performance of a particular act or acts,
in which case it shall be know as a preliminary mandatory injunction.

24 Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, supra.

25 Shauf v. Court of Appeals, G.R. No. 90314, November 27, 1990, 191 SCRA 713 cited in United States of
America v. Reyes, G.R. No. 79253, March 1, 1993, 219 SCRA 192.

26 Ibid.

27 Shauf v. Court of Appeals, supra.

28 Id. at 727.

29 G.R. No. L-31135, May 29, 1970, 33 SCRA 368.

30 Lansang v. Court of Appeals, 383 Phil. 141 (2000).

31 RTC records, p. 11.

32 Festejo v. Fernando, 94 Phil. 504 (1954), as cited in Bernas, The Constitution of the Republic of the
Philippines: A Commentary 1275 (2003 ed.); See also Sanders v. Veridiano II, G.R. No. L-46930, June 10,
1988, 162 SCRA 88.

33 Sanders v. Veridiano II, supra.

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