Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-20063             March 31, 1965

PHILIPPINE RESOURCES DEVELOPMENT CORPORATION, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, MACARIO, APOSTOL and EMPIRE INSURANCE COMPANY, respondents.

Vicente L. Santiago for petitioner.
Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

The Bureau of Prisons, in line with its duty to enforce prison discipline effectively, conserve the health of prisoners and train them for a useful trade, launched a project of exploiting our forest resources with the use of prison labor. The undertaking produced large quantities of resin and logs which said bureau sold to private parties.

In 1951, Macario Apostol contracted with the Bureau of Prisons for the purchase by the former from the latter of almaciga and 3,000,000 board feet of lauan logs at P88.00 per thousand board feet. To secure his obligation under the almaciga contract, Macario Apostol posted a performance bond in the sum of P10,000.00, with the Empire Insurance Company as surety.

Accordingly, the Bureau of Prisons delivered almaciga and lauan logs to Apostol. The latter, however, failed to pay in full for said almaciga and logs, and after proper accounting, the Bureau of Prisons found the amount of P34,015.06 1 still due from him. To settle his obligation, Apostol delivered to the Bureau of Prisons 892 pieces of GI sheets, 399 GI pipes and 2,793 pieces of black iron sheets valued at P4,638.40, P4,398.54 and P21,400.00, respectively, or aggregately valued at P30,436.94. For lack of supporting papers, the value of said properties was not credited against Apostol's indebtedness.1äwphï1.ñët

Subsequently, on May 6, 1955, the Republic of the Philippines filed a complaint in the Court of First Instance of Manila against Apostol and the Empire Insurance Company (as surety) for the collection of the aforestated amount of P34,015.06.

Apostol, in his answer to the complaint, alleged payment of the account, as follows:

Per E.P.O. #1077 (892 pieces of GI Sheets) P 4,638.40
Per E.P.O. 1549 (399 GI Pipes) P 4,398.54
Dec. 28, 1953 (2,793 pieces of black iron sheets) P21,400.00
Forest charges advanced in behalf of Bureau of PrisonsP 2,000.00
P32,436.94
==========

and admitted an unpaid balance of P758.12. 2

The Empire Insurance Company filed an answer with cross-claim and third-party complaint against Macario Apostol and Arsenio Afan, Apostol's co-maker in his indemnity agreement with Empire Insurance Company.

Prompted by Apostol's defense that he paid his outstanding account with the Bureau of Prisons in kind, the Philippine Resources Development Corporation, of which Apostol was the president, filed on July 19, 1955 a motion for leave to intervene claiming ownership over the properties delivered by Apostol to the Bureau of Prisons. The motion was denied, on the ground of lack of legal interest in the matter in litigation, and the Philippine Resources Development Corporation filed a petition for certiorari in the Court of Appeals. After hearing the parties, the Court of Appeals set aside the order of the trial court and directed the admission of the complaint in intervention. The judgment of the Court of Appeals was affirmed by this Court in G.R. No. L-10141, promulgated on January 31, 1958.

Accordingly, the complaint in intervention was admitted by the Court of First Instance. The Republic of the Philippines filed an answer thereto interposing for the first time the defense of state immunity from suit. The court, after trial, rendered judgment, thus:

IN VIEW WHEREOF, judgment is rendered:

(1) Condemning defendant Macario Apostol to pay unto plaintiff the sum of P34,095.06 with legal interest from the date of the filing of the complaint;

(2) Absolving the Empire Insurance & Surety Company;

(3) Condemning plaintiff to return unto Intervenor the value of the properties delivered to it by Macario Apostol as outlined in Exhibit "Y" and in default thereof the sum of P31,436.94 with legal interest from the date of the filing of the complaint in intervention. No pronouncement as to costs.

The Republic of the Philippines and Apostol appealed to the Court of Appeals but the latter's appeal was dismissed for abandonment. Thereafter, the Court of Appeals rendered judgment as follows:

WHEREFORE, the decision of the trial court is hereby affirmed insofar as it condemns defendant, Macario Apostol, to pay the plaintiff the sum of P34,095.06, with legal interest from the date of the filing of the plaintiff's complaint, subject, however, to deductions of the value of the properties delivered by him to the Bureau of Prisons which it has credited to his account. In other respects it is hereby reversed by dismissing the complaint in intervention and ordering the Empire Insurance Company to pay jointly and severally with Macario Apostol, to the extent of 10,000.00, whatever balance the latter has not paid to the Bureau of Prisons under the two causes of action of the plaintiff's complaint, after crediting him with the value of the articles he delivered as aforesaid to said bureau.

The Philippine Resources Development Corporation appealed to this Court.

We agree with the proposition that a claim, no matter how meritorious, may not be maintained against the State without its consent. 3 Petitioner's complaint in intervention is, in effect, directed not at plaintiff Republic of the Philippines but against defendant Macario Apostol, who cannot avail himself of the defense of immunity from suit. As to him, the complaint in intervention should not have been dismissed.

The complaint in intervention asserted ownership of the properties that Apostol delivered to the Bureau of Prisons as payment for his outstanding personal account. The Republic of the Philippines, or specifically, the Bureau of Prisons, precisely refused to credit Apostol with the value of said properties and instead filed a complaint against him to collect the very indebtedness he had sought to pay with the properties. Nowhere in the record — be it from the complaint, the answer, the complaint in intervention or the answer to the complaint in intervention — does it appear that the Republic ever asserted any interest to the aforestated properties adverse to that claimed by petitioner in its, intervention. On the other hand, from the answer of defendant Apostol as well as from the complaint in intervention, it is clear that Apostol had adversely asserted ownership over the properties. Apostol, therefore, and not the Republic, is the party against whom petitioner's intervention has, in effect, proceeded.

Per the findings of the trial court, undisturbed by the Court of Appeals, upon petitioner's evidence as well as the subsequent admission of Apostol himself, the 892 pieces of GI sheets, 399 GI pipes and 2,793 pieces of black iron sheets claimed under the complaint in intervention belong to petitioner. The record bears no indication that petitioner conveyed ownership over them to Apostol and, instead, shows that the properties came into Apostol's possession as president of petitioner corporation. Apostol is, therefore, bound to account for and restitute them, 4 and if restitution is no longer possible, to pay petitioner their value.

WHEREFORE, the judgment appealed from is hereby modified. Defendants Macario Apostol and Empire Insurance Company, jointly and severally, are ordered to pay plaintiff the sum of P34,015.06, with legal interest from the date of the filing of plaintiff's complaint, provided that defendant Empire Insurance Company's liability shall not exceed P10,000.00. The dismissal of the complaint intervention is set aside as against defendant Macario Apostol, who is hereby ordered to return to petitioner Philippine Resources Development Corporation the properties therein specified, or in default thereof, to pay petitioner the value of P30,436.94, with legal interest from the date of the filing of the complaint in intervention. No pronouncement as to costs. It is so ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Zaldivar, JJ., concur.
Makalintal, J., took no part.

Footnotes

1P15,187.49 for almaciga and P18,827.57 for lauan logs.

2The correct is P1,578.12.

3Compañia General de Tabacos v. Government of the Philippine Islands, 45 Phil. 663.

4Article 1891, New Civil Code; Dorman v. Crooks State Bank, 225 N.W, 661, W.E. Olsen & Co. v. Olsen, 48 Phil. 238.
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