February 2013 - Philippine Supreme Court Decisions/Resolutions
G.R. No. 182358 - Department of Health, et al. v. Phil Pharmawealth, Inc.
G.R. No. 182358 : February 20, 2013
DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA. MARGARITA M. GALON, Petitioners, v. PHIL PHARMA WEALTH, INC., Respondent.
D E C I S I O N
DEL CASTILLO, J.:
The state may not be sued without its consent. Likewise, public officials may not be sued for acts done in the perfom1ance of their official functions or within the scope of their authority.
This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008 Reso1ution3 denying petitioners' Motion for Reconsideration.4?r?l1
On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was issued by then Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). AO 27 set the guidelines and procedure for accreditation of government suppliers of pharmaceutical products for sale or distribution to the public, such accreditation to be valid for three years but subject to annual review.
On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which amended AO 27. Under Section VII7 of AO 10, the accreditation period for government suppliers of pharmaceutical products was reduced to two years. Moreover, such accreditation may be recalled, suspended or revoked after due deliberation and proper notice by the DOH Accreditation Committee, through its Chairman.
Section VII of AO 10 was later amended by AO 66 series of 2000,8 which provided that the two-year accreditation period may be recalled, suspended or revoked only after due deliberation, hearing and notice by the DOH Accreditation Committee, through its Chairman.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and category of sanctions to be imposed on accredited government suppliers of pharmaceutical products in case of adverse findings regarding their products (e.g. substandard, fake, or misbranded) or violations committed by them during their accreditation.
In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma. Margarita M. Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting representatives of 24 accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000. During the meeting, Undersecretary Galon handed them copies of a document entitled "Report on Violative Products"11 issued by the Bureau of Food and Drugs12 (BFAD), which detailed violations or adverse findings relative to these accredited drug companies products. Specifically, the BFAD found that PPIs products which were being sold to the public were unfit for human consumption.
During the October 27, 2000 meeting, the 24 drug companies were directed to submit within 10 days, or until November 6, 2000, their respective explanations on the adverse findings covering their respective products contained in the Report on Violative Products.
Instead of submitting its written explanation within the 10-day period as required, PPI belatedly sent a letter13 dated November 13, 2000 addressed to Undersecretary Galon, informing her that PPI has referred the Report on Violative Products to its lawyers with instructions to prepare the corresponding reply. However, PPI did not indicate when its reply would be submitted; nor did it seek an extension of the 10-day period, which had previously expired on November 6, 2000, much less offer any explanation for its failure to timely submit its reply. PPIs November 13, 2000 letter states:cralawlibrary
This refers to your directive on 27 October 2000, on the occasion of the meeting with selected accredited suppliers, during which you made known to the attendees of your requirement for them to submit their individual comments on the Report on Violative Products (the "Report") compiled by your office and disseminated on that date.
In this connection, we inform you that we have already instructed our lawyers to prepare on our behalf the appropriate reply to the Report furnished to us. Our lawyers in time shall revert to you and furnish you the said reply.
Please be guided accordingly.
Very truly yours,
ATTY. ALAN A.B. ALAMBRA ???ñr?bl?š ??r†??l l?? l?br?rÿ
Vice-President for Legal and Administrative Affairs14?r?l1
In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable" PPIs November 13, 2000 letter and therein informed PPI that, effective immediately, its accreditation has been suspended for two years pursuant to AO 10 and Memorandum No. 171-C.
In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI through counsel questioned the suspension of its accreditation, saying that the same was made pursuant to Section VII of AO 10 which it claimed was patently illegal and null and void because it arrogated unto the DOH Accreditation Committee powers and functions which were granted to the BFAD under Republic Act (RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added that its accreditation was suspended without the benefit of notice and hearing, in violation of its right to substantive and administrative due process. It thus demanded that the DOH desist from implementing the suspension of its accreditation, under pain of legal redress.
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a Complaint19 seeking to declare null and void certain DOH administrative issuances, with prayer for damages and injunction against the DOH, former Secretary Romualdez and DOH Undersecretary Galon. Docketed as Civil Case No. 68200, the case was raffled to Branch 160. On February 8, 2002, PPI filed an Amended and Supplemental Complaint,20 this time impleading DOH Secretary Manuel Dayrit (Dayrit). PPI claimed that AO 10, Memorandum No. 171-C, Undersecretary Galons suspension order contained in her November 23, 2000 letter, and AO 14 series of 200121 are null and void for being in contravention of Section 26(d) of RA 3720 as amended by EO 175, which states as follows:cralawlibrary
SEC. 26. x x x
(d) When it appears to the Director [of the BFAD] that the report of the Bureau that any article of food or any drug, device, or cosmetic secured pursuant to Section twenty-eight of this Act is adulterated, misbranded, or not registered, he shall cause notice thereof to be given to the person or persons concerned and such person or persons shall be given an opportunity to be heard before the Bureau and to submit evidence impeaching the correctness of the finding or charge in question.
For what it claims was an undue suspension of its accreditation, PPI prayed that AO 10, Memorandum No. 171-C, Undersecretary Galons suspension order contained in her November 23, 2000 letter, and AO 14 be declared null and void, and that it be awarded moral damages of
P5 million, exemplary damages of P1 million, attorneys fees of P1 million, and costs of suit. PPI likewise prayed for the issuance of temporary and permanent injunctive relief.
In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary Dayrit, and Undersecretary Galon sought the dismissal of the Complaint, stressing that PPIs accreditation was suspended because most of the drugs it was importing and distributing/selling to the public were found by the BFAD to be substandard for human consumption. They added that the DOH is primarily responsible for the formulation, planning, implementation, and coordination of policies and programs in the field of health; it is vested with the comprehensive power to make essential health services and goods available to the people, including accreditation of drug suppliers and regulation of importation and distribution of basic medicines for the public.
Petitioners added that, contrary to PPIs claim, it was given the opportunity to present its side within the 10-day period or until November 6, 2000, but it failed to submit the required comment/reply. Instead, it belatedly submitted a November 13, 2000 letter which did not even constitute a reply, as it merely informed petitioners that the matter had been referred by PPI to its lawyer. Petitioners argued that due process was afforded PPI, but because it did not timely avail of the opportunity to explain its side, the DOH had to act immediately by suspending PPIs accreditation to stop the distribution and sale of substandard drug products which posed a serious health risk to the public. By exercising DOHs mandate to promote health, it cannot be said that petitioners committed grave abuse of discretion.
In a January 8, 2001 Order,23 the trial court partially granted PPIs prayer for a temporary restraining order, but only covering PPIs products which were not included in the list of violative products or drugs as found by the BFAD.
In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal of Civil Case No. 68200, claiming that the case was one against the State; that the Complaint was improperly verified; and lack of authority of the corporate officer to commence the suit, as the requisite resolution of PPIs board of directors granting to the commencing officer PPIs Vice President for Legal and Administrative Affairs, Alan Alambra, the authority to file Civil Case No. 68200 was lacking. To this, PPI filed its Comment/Opposition.25?r?l1
Ruling of the Regional Trial Court
In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring the case to be one instituted against the State, in which case the principle of state immunity from suit is applicable.
PPI appealed to the CA.
Ruling of the Court of Appeals
Docketed as CA-G.R. CV No. 85670, PPIs appeal centered on the issue of whether it was proper for the trial court to dismiss Civil Case No. 68200.
The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered the remand of the case for the conduct of further proceedings. The CA concluded that it was premature for the trial court to have dismissed the Complaint. Examining the Complaint, the CA found that a cause of action was sufficiently alleged that due to defendants (petitioners) acts which were beyond the scope of their authority, PPIs accreditation as a government supplier of pharmaceutical products was suspended without the required notice and hearing as required by Section 26(d) of RA 3720 as amended by EO 175. Moreover, the CA held that by filing a motion to dismiss, petitioners were deemed to have hypothetically admitted the allegations in the Complaint which state that petitioners were being sued in their individual and personal capacities thus negating their claim that Civil Case No. 68200 is an unauthorized suit against the State.
The CA further held that instead of dismissing the case, the trial court should have deferred the hearing and resolution of the motion to dismiss and proceeded to trial. It added that it was apparent from the Complaint that petitioners were being sued in their private and personal capacities for acts done beyond the scope of their official functions. Thus, the issue of whether the suit is against the State could best be threshed out during trial on the merits, rather than in proceedings covering a motion to dismiss.
The dispositive portion of the CA Decision reads:cralawlibrary
WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further proceedings.
Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the present Petition.
Petitioners now raise the following lone issue for the Courts resolution:cralawlibrary
Should Civil Case No. 68200 be dismissed for being a suit against the State?31?r?l1
Petitioners submit that because PPIs Complaint prays for the award of damages against the DOH, Civil Case No. 68200 should be considered a suit against the State, for it would require the appropriation of the needed amount to satisfy PPIs claim, should it win the case. Since the State did not give its consent to be sued, Civil Case No. 68200 must be dismissed. They add that in issuing and implementing the questioned issuances, individual petitioners acted officially and within their authority, for which reason they should not be held to account individually.
Apart from echoing the pronouncement of the CA, respondent insists that Civil Case No. 68200 is a suit against the petitioners in their personal capacity for acts committed outside the scope of their authority.
The Petition is granted.
The doctrine of non-suability.
The discussion of this Court in Department of Agriculture v. National Labor Relations Commission32 on the doctrine of non-suability is enlightening.
The basic postulate enshrined in the constitution that (t)he State may not be sued without its consent, reflects nothing less than a recognition of the sovereign character of the State and an express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. It is based on the very essence of sovereignty. x x x [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. True, the doctrine, not too infrequently, is derisively called the royal prerogative of dishonesty because it grants the state the prerogative to defeat any legitimate claim against it by simply invoking its nonsuability. We have had occasion to explain in its defense, however, that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of governmental efficiency and the obstacle to the performance of its multifarious functions would be far greater in severity than the inconvenience that may be caused private parties, if such fundamental principle is to be abandoned and the availability of judicial remedy is not to be accordingly restricted.
The rule, in any case, is not really absolute for it does not say that the state may not be sued under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys, the state may not be sued without its consent; its clear import then is that the State may at times be sued. The States consent may be given either expressly or impliedly. Express consent may be made through a general law or a special law. x x x Implied consent, on the other hand, is conceded when the State itself commences litigation, thus opening itself to a counterclaim or when it enters into a contract. In this situation, the government is deemed to have descended to the level of the other contracting party and to have divested itself of its sovereign immunity. This rule, x x x is not, however, without qualification. Not all contracts entered into by the government operate as a waiver of its non-suability; distinction must still be made between one which is executed in the exercise of its sovereign function and another which is done in its proprietary capacity.33?r?l1
As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly, then it may be the subject of a suit.34 There is express consent when a law, either special or general, so provides. On the other hand, there is implied consent when the state "enters into a contract or it itself commences litigation."35 However, it must be clarified that when a state enters into a contract, it does not automatically mean that it has waived its non-suability. 36 The State "will be deemed to have impliedly waived its non-suability [only] if it has entered into a contract in its proprietary or private capacity. [However,] when the contract involves its sovereign or governmental capacity[,] x x x no such waiver may be implied."37 "Statutory provisions waiving [s]tate immunity are construed in strictissimi juris. For, waiver of immunity is in derogation of sovereignty."38?r?l1
The DOH can validly invoke state immunity.
a) DOH is an unincorporated agency which performs sovereign or governmental functions.
In this case, the DOH, being an "unincorporated agency of the government"39 can validly invoke the defense of immunity from suit because it has not consented, either expressly or impliedly, to be sued. Significantly, the DOH is an unincorporated agency which performs functions of governmental character.
The ruling in Air Transportation Office v. Ramos40 is relevant, viz:cralawlibrary
An unincorporated government agency without any separate juridical personality of its own enjoys immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated. However, the need to distinguish between an unincorporated government agency performing governmental function and one performing proprietary functions has arisen. The immunity has been upheld in favor of the former because its function is governmental or incidental to such function; it has not been upheld in favor of the latter whose function was not in pursuit of a necessary function of government but was essentially a business.41?r?l1
b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other defendants for damages which constitutes a charge or financial liability against the state.
Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against the state,"42 the defense of non-suability may be properly invoked. In this case, PPI specifically prayed, in its Complaint and Amended and Supplemental Complaint, for the DOH, together with Secretaries Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and severally liable for moral damages, exemplary damages, attorneys fees and costs of suit.43 Undoubtedly, in the event that PPI succeeds in its suit, the government or the state through the DOH would become vulnerable to an imposition or financial charge in the form of damages. This would require an appropriation from the national treasury which is precisely the situation which the doctrine of state immunity aims to protect the state from.
The mantle of non-suability extends to complaints filed against public officials for acts done in the performance of their official functions.
As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary Galon, it must be stressed that the doctrine of state immunity extends its protective mantle also to complaints filed against state officials for acts done in the discharge and performance of their duties.44 "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."45 Otherwise stated, "public officials can be held personally accountable for acts claimed to have been performed in connection with official duties where they have acted ultra vires or where there is showing of bad faith."46 Moreover, "[t]he rule is that if the judgment against such officials will require the state itself to perform an affirmative act to satisfy the same, such as the appropriation of the amount needed to pay the damages awarded against them, the suit must be regarded as against the state x x x. In such a situation, the state may move to dismiss the [C]omplaint on the ground that it has been filed without its consent." 47?r?l1
It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as Undersecretary Galon, were done while in the performance and discharge of their official functions or in their official capacities, and not in their personal or individual capacities. Secretaries Romualdez and Dayrit were being charged with the issuance of the assailed orders. On the other hand, Undersecretary Galon was being charged with implementing the assailed issuances. By no stretch of imagination could the same be categorized as ultra vires simply because the said acts are well within the scope of their authority. Section 4 of RA 3720 specifically provides that the BFAD is an office under the Office of the Health Secretary. Also, the Health Secretary is authorized to issue rules and regulations as may be necessary to effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon, she is authorized by law to supervise the offices under the DOHs authority,49 such as the BFAD. Moreover, there was also no showing of bad faith on their part. The assailed issuances were not directed only against PPI. The suspension of PPIs accreditation only came about after it failed to submit its comment as directed by Undersecretary Galon. It is also beyond dispute that if found wanting, a financial charge will be imposed upon them which will require an appropriation from the state of the needed amount. Thus, based on the foregoing considerations, the Complaint against them should likewise be dismissed for being a suit against the state which absolutely did not give its consent to be sued. Based on the foregoing considerations, and regardless of the merits of PPIs case, this case deserves a dismissal. Evidently, the very foundation of Civil Case No. 68200 has crumbled at this initial juncture.
PPI was not denied due process.
However, we cannot end without a discussion of PPIs contention that it was denied due process when its accreditation was suspended "without due notice and hearing." It is undisputed that during the October 27, 2000 meeting, Undersecretary Galon directed representatives of pharmaceutical companies, PPI included, to submit their comment and/or reactions to the Report on Violative Products furnished them within a period of 10 days. PPI, instead of submitting its comment or explanation, wrote a letter addressed to Undersecretary Galon informing her that the matter had already been referred to its lawyer for the drafting of an appropriate reply. Aside from the fact that the said letter was belatedly submitted, it also failed to specifically mention when such reply would be forthcoming. Finding the foregoing explanation to be unmeritorious, Undersecretary Galon ordered the suspension of PPIs accreditation for two years. Clearly these facts show that PPI was not denied due process. It was given the opportunity to explain its side. Prior to the suspension of its accreditation, PPI had the chance to rebut, explain, or comment on the findings contained in the Report on Violative Products that several of PPIs products are not fit for human consumption. However, PPI squandered its opportunity to explain. Instead of complying with the directive of the DOH Undersecretary within the time allotted, it instead haughtily informed Undersecretary Galon that the matter had been referred to its lawyers. Worse, it impliedly told Undersecretary Galon to just wait until its lawyers shall have prepared the appropriate reply. PPI however failed to mention when it will submit its "appropriate reply" or how long Undersecretary Galon should wait. In the meantime, PPIs drugs which are included in the Report on Violative Products are out and being sold in the market. Based on the foregoing, we find PPIs contention of denial of due process totally unfair and absolutely lacking in basis. At this juncture, it would be trite to mention that "[t]he essence of due process in administrative proceedings is the opportunity to explain ones side or seek a reconsideration of the action or ruling complained of. As long as the parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met. What is offensive to due process is the denial of the opportunity to be heard. The Court has repeatedly stressed that parties who chose not to avail themselves of the opportunity to answer charges against them cannot complain of a denial of due process."50?r?l1
Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil Pharmawealth, Inc. 51 respondent filed a Complaint against DOH anchored on the same issuances which it assails in the present case. In the earlier case of Department of Health v. Phil Pharmawealth, Jnc., 52 PPI submitted to the DOH a request for the inclusion of its products in the list of accredited drugs as required by AO 27 series of 1998 which was later amended by AO 10 series of 2000. In the instant case, however, PPI interestingly claims that these issuances are null and void.
WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200 is ordered DISMISSED.
* Per Raffle dated February 4, 2013.
1 Rollo, pp. 27-44.
2 Id. at 7-21; penned by Associate Justice Monina Arevalo-Zenarosa and concurred in by Presiding Justice Conrado M. Vasquez, Jr. and Associate Justice Edgardo F. Sundiam.
3 Id. at 22-23.
4 CA rolla, pp. 156-164.
5 Records, pp. 16-17.
6 Id. at 19-25.
7 Id. at 24.
8 Id. at 26.
9 Id. at 111.
10 Id. at 27.
11 Id. at 28-40.
12 Per Republic Act No. 9711 or the Food and Drug Administration (FDA) Act of 2009 which was signed by the President on August 18, 2009, the Bureau of Food and Drugs (BFAD) was renamed and is now called the Food and Drug Administration (FDA).
13 Records, p. 41.
15 Id. at 42.
16 Id. at 43-44.
17 FOOD, DRUG, AND COSMETIC ACT. June 22, 1963.
18 FURTHER AMENDING REPUBLIC ACT NO 3720, ENTITLED "AN ACT TO ENSURE THE SAFETY AND PURITY OF FOODS, DRUGS, AND COSMETICS BEING MADE AVAILABLE TO THE PUBLIC BY CREATING THE FOOD AND DRUG ADMINISTRATION WHICH SHALL ADMINISTER AND ENFORCE THE LAWS PERTAINING THERETO", AS AMENDED, AND FOR OTHER PURPOSES. May 22, 1987.
19 Records, pp. 2-15.
20 Id. at 400-424.
21 Id. at 454-457. Administrative Order No. 14 was a later issuance by DOH Secretary Dayrit which was subsequently included in PPIs amended and supplemental complaint as one of the issuances sought to be nullified. It provided for new accreditation guidelines and granted the Accreditation Committee the power to suspend or revoke a suppliers accreditation after deliberation and notice, and without need of a hearing.
22 Id. at 489-505.
23 Id. at 124.
24 Id. at 500-513.
25 Id. at 532-541.
26 Id. at 555-561; penned by Judge Amelia A. Fabros.
27 Id. at 562-569.
28 See Order dated April 19, 2005, id. at 593.
29 Rollo, pp. 7-21.
30 Id. at 21. Emphases in the original.
31 Id. at 730.
32 G.R. No. 104269, November 11, 1993, 227 SCRA 693.
33 Id. at 698-699. Citations omitted.
34 United States of America v. Judge Guinto, 261 Phil. 777, 790 (1990).
35 Id. at 792.
36 Id. at 793.
37 Id. at 795.
38 Equitable Insurance and Casualty Co., Inc. v. Smith, Bell & Co. (Phils.), Inc., 127 Phil. 547, 549 (1967).
39 Department of Health v. Phil Pharmawealth, Inc., 547 Phil. 148, 154 (2007).
40 G.R. No. 159402, February 23, 2011, 644 SCRA 36.
41 Id. at 42-43. Citations omitted.
42 Department of Health v. Phil Pharmawealth, Inc., supra at 154.
43 See Complaint, pp. 12-13, records, pp. 13-14; Amended and Supplemental Complaint, p. 13, records, p. 422.
44 United States of America v. Judge Guinto, supra note 34 at 791.
45 Department of Health v. Phil Pharmawealth, Inc., supra note 39 at 153.
46 M. H. Wylie v. Rarang, G.R. No. 74135, May 28, 1992, 209 SCRA 357, 368. Citation omitted. See also United States of America v. Reyes, G.R. No. 79253, March 1, 1993, 219 SCRA 192, 209 where the Court held:cralawlibrary
x x x The doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued in his private and personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of the government is removed the moment they are sued in their individual capacity. This situation usually arises where the public official acts without authority or in excess of the powers vested in him. It is a well-settled principle of law that a public official may be liable in his personal private capacity for whatever damage he may have caused by his act done with malice and in bad faith, or beyond the scope of his authority or jurisdiction. (Citations omitted) ???ñr?bl?š ??r†??l l?? l?br?rÿ
47 United States of America v. Judge Guinto, supra note 34 at 791-792. See also Department of Health v. Phil Pharmawealth, Inc., supra note 39 at 155.
48 See Section 26, Republic Act No. 3720.
49 See Section 12, Chapter 3, Title IX, Book IV, Administrative Code of 1987.
50 Flores v. Montemavor, Ci.R. No. 170146. llll''~ 1' .. 20 i i, 651 SCEA 396, 406-407. Citations omitted