G.R. No.
190837 March 5, 2014 Accordingly, respondents engaged the services of the University of the Philippines’
REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF FOOD
AND DRUGS (now FOOD AND DRUG ADMINISTRATION), Petitioner,
vs.
DRUGMAKER'S LABORATORIES, INC. and TERRAMEDIC,
INC., Respondents.
DECISION
PERLAS-BERNABE, J.:
This is a direct recourse to the Court from the Regional Trial Court of Muntinlupa City,
Branch 256 (RTC), through a petition for review on certiorari,1 raising a pure question
of law. In particular, petitioner Republic of the Philippines, represented by the
Bureau.of Food and Drugs (BFAD), now Food and Drug Administration (FDA),
assails the Order2dated December 18, 2009 of the RTC in Civil Case No. 08-124
which: (a) declared BF AD Circular Nos. 1 and 8, series of 1997 (Circular Nos. 1 and
8, s. 1997) null and void; (b) ordered the issuance of writs of permanent injunction and
prohibition against the FDA in implementing the aforesaid circulars; and ( c) directed
the FDA to issue Certificates of Product Registration (CPR) in favor of respondents
Drugmaker's Laboratories, Inc. and Terrarriedic, Inc. (respondents).
The Facts
The FDA3 was created pursuant to Republic Act No. (RA) 3720,4 otherwise known as
the "Food, Drug, and Cosmetic Act," primarily in order "to establish safety or efficacy
standards and quality measures for foods, drugs and devices, and cosmetic
product[s]."5 On March 15, 1989, the Department of Health (DOH), thru then-
Secretary Alfredo R.A. Bengzon, issued Administrative Order No. (AO) 67, s. 1989,
entitled "Revised Rules and Regulations on Registration of Pharmaceutical Products."
Among others, it required drug manufacturers to register certain drug and medicine
products with the FDA before they may release the same to the market for sale. In this
relation, a satisfactory bioavailability6/bioequivalence7 (BA/BE) test is needed for a
manufacturer to secure a CPR for these products. However, the implementation of the
BA/BE testing requirement was put on hold because there was no local facility capable
of conducting the same. The issuance of Circular No. 1, s. 19978 resumed the FDA’s
implementation of the BA/BE testing requirement with the establishment of BA/BE
testing facilities in the country. Thereafter, the FDA issued Circular No. 8, s.
19979 which provided additional implementation details concerning the BA/BE
testing requirement on drug products.10
Respondents manufacture and trade a "multisource pharmaceutical product"11 with
the generic name of rifampicin12– branded as "Refam 200mg/5mL Suspension"
(Refam) – for the treatment of adults and children suffering from pulmonary and extra-
pulmonary tuberculosis.13 On November 15, 1996, respondents applied for and were
issued a CPR for such drug, valid for five (5) years, or until November 15, 2001.14 At
the time of the CPR’s issuance, Refam did not undergo BA/BE testing since there was
still no facility capable of conducting BA/BE testing. Sometime in 2001, respondents
applied for and were granted numerous yearly renewals of their CPR for Refam, which
lasted until November 15, 2006, albeit with the condition that they submit satisfactory
BA/BE test results for said drug.15
1
The FDA contends that it has the authority to issue Circular Nos. 1 and 8, s. 1997 as it is the
(Manila) Department of Pharmacology and Toxicology, College of Medicine to conduct agency mandated by law to administer and enforce laws, including rules and regulations issued
BA/BE testing on Refam, the results of which were submitted to the FDA.16 In turn, by the DOH, that pertain to the registration of pharmaceutical products.27
the FDA sent a letter dated July 31, 2006 to respondents, stating that Refam is "not For their part, respondents maintain that under RA 3720, the power to make rules to implement
bioequivalent with the reference drug."17 This notwithstanding, the FDA still the law is lodged with the Secretary of Health, not with the FDA.28 They also argue that the
revalidated respondents’ CPR for Refam two (2) more times, effective until November assailed circulars are void for lack of prior hearing, consultation, and publication.29
15, 2008, the second of which came with a warning that no more further revalidations
shall be granted until respondents submit satisfactory BA/BE test results for Refam.18 The Court’s Ruling
Instead of submitting satisfactory BA/BE test results for Refam, respondents filed a The petition is meritorious.
petition for prohibition and annulment of Circular Nos. 1 and 8, s. 1997 before the RTC, Administrative agencies may exercise quasi-legislative or rule-making powers only if there
alleging that it is the DOH, and not the FDA, which was granted the authority to issue exists a law which delegates these powers to them. Accordingly, the rules so promulgated must
and implement rules concerning RA 3720. As such, the issuance of the aforesaid be within the confines of the granting statute and must involve no discretion as to what the law
circulars and the manner of their promulgation contravened the law and the shall be, but merely the authority to fix the details in the execution or enforcement of the policy
Constitution.19 They further averred that that the non-renewal of the CPR due to failure set out in the law itself, so as to conform with the doctrine of separation of powers and, as an
to submit satisfactory BA/BE test results would not only affect Refam, but their other adjunct, the doctrine of non-delegability of legislative power.30
products as well.20 An administrative regulation may be classified as a legislative rule, an interpretative rule, or a
During the pendency of the case, RA 9711,21 otherwise known as the "Food and Drug contingent rule. Legislative rules are in the nature of subordinate legislation and designed to
Administration [FDA] Act of 2009," was enacted into law. implement a primary legislation by providing the details thereof.31 They usually implement
existing law, imposing general, extra-statutory obligations pursuant to authority properly
The RTC Ruling
delegated by Congress32 and effect a change in existing law or policy which affects individual
In an Order22 dated December 18, 2009, the RTC ruled in favor of respondents, and rights and obligations.33 Meanwhile, interpretative rules are intended to interpret, clarify or
thereby declared Circular Nos. 1 and 8, s. 1997 null and void, ordered the issuance of explain existing statutory regulations under which the administrative body operates. Their
writs of permanent injunction and prohibition against the FDA in implementing the purpose or objective is merely to construe the statute being administered and purport to do no
aforesaid circulars, and directed the FDA to issue CPRs in favor of respondents’ more than interpret the statute. Simply, they try to say what the statute means and refer to no
products.
single person or party in particular but concern all those belonging to the same class which
The RTC held that there is nothing in RA 3720 which granted either the FDA the may be covered by the said rules.34 Finally, contingent rules are those issued by an
authority to issue and implement the subject circulars, or the Secretary of Health the administrative authority based on the existence of certain facts or things upon which the
authority to delegate his powers to the FDA. For these reasons, it concluded that the enforcement of the law depends.35
issuance of Circular Nos. 1 and 8, s. In general, an administrative regulation needs to comply with the requirements laid down by
1997 constituted an illegal exercise of legislative and administrative powers and, hence, Executive Order No. 292, s. 1987, otherwise known as the "Administrative Code of 1987," on
must be struck down.23 prior notice, hearing, and publication in order to be valid and binding, except when the same
Accordingly, the RTC issued a Writ of Permanent Injunction24 dated January 19, 2010, is merely an interpretative rule. This is because "[w]hen an administrative rule is merely
enjoining the FDA and all persons acting for and under it from enforcing Circular Nos. interpretative in nature, its applicability needs nothing further than its bare issuance, for it gives
1 and 8, s. 1997 and directing them to approve the renewal and revalidation of no real consequence more than what the law itself has already prescribed. When, on the other
respondents’ products without submitting satisfactory BA/BE test results. hand, the administrative rule goes beyond merely providing for the means that can facilitate or
render least cumbersome the implementation of the law but substantially increases the burden
Aggrieved, the FDA sought direct recourse to the Court through the instant petition with of those governed, it behooves the agency to accord at least to those directly affected a chance
an urgent prayer for the immediate issuance of a temporary restraining order and/or a to be heard, and thereafter to be duly informed, before that new issuance is given the force and
writ of preliminary injunction against the implementation of the RTC’s Order dated effect of law."36
December 18, 2009 and Writ of Permanent Injunction dated January 19, 2010.25 The
Court granted FDA’s application and issued a Temporary Restraining Order26 dated In the case at bar, it is undisputed that RA 3720, as amended by Executive Order No. 175, s.
February 24, 2010, effective immediately and continuing until further orders. 198737 prohibits, inter alia, the manufacture and sale of pharmaceutical products without
obtaining the proper CPR from the FDA.38 In this regard, the FDA has been deputized by the
The Issue Before the Court same law to accept applications for registration of pharmaceuticals and, after due course, grant
The primordial issue in this case is whether or not the FDA may validly issue and or reject such applications.39 To this end, the said law expressly authorized the Secretary of
implement Circular Nos. 1 and 8, s. 1997. In resolving this issue, there is a need to Health, upon the recommendation of the FDA Director, to issue rules and regulations that
determine whether or not the aforesaid circulars partake of administrative rules and pertain to the registration of pharmaceutical products.40
regulations and, as such, must comply with the requirements of the law for its issuance.
In accordance with his rule-making power under RA 3720, the Secretary of Health
issued AO 67, s. 1989 in order to provide a comprehensive set of guidelines covering
the registration of pharmaceutical products. AO 67, s. 1989, required, among others,
that certain pharmaceutical products undergo BA/BE testing prior to the issuance of
CPR, contrary to respondents’ assertion that it was Circular Nos. 1 and 8, s. 1997 that
required such tests.41
Despite the fact that the BA/BE testing requirement was already in place as early as
the date of effectivity of AO 67, s. 1989, its implementation was indefinitely shelved
due to lack of facilities capable of conducting the same. It was only sometime in 1997
when technological advances in the country paved the way for the establishment of
BA/BE testing facilities, thus allowing the rule’s enforcement. Owing to these
developments, the FDA (then, the BFAD) issued Circular No. 1, s. 1997, the full text
of which reads:
In Annex 1 of A.O. 67 s. 1989 which is entitled Requirement for Registration provides
that "Bioavailability/Bioequivalence study for certain drugs as determined by BFAD"
is required for [(i)] Tried and Tested Drug, (ii) Established Drug, and (iii)
Pharmaceutical Innovation of Tried and Tested or Established Drug.
Drugs requiring strict precaution in prescribing and dispensing contained in the List-B
(Prime) were the drugs identified by BFAD in the process of registration that will be
required "Bioavailability/Bioequivalence" studies. However, due to the supervening
factor that there had yet been no bioavailability testing unit in the country when the
A.O. 67 s. 1989 became effective, the Bureau did not strictly enforce the said
requirement.
The supervening factor no longer exist [sic] as of date. As a matter of fact, one of the
registered products tested by the Bioavailability Testing Unit at the University of Sto.
Tomas under the NDP Cooperation Project of the Philippines and Australia failed to
meet the standard of bioavailability. This finding brings forth the fact that there may
be registered products which do not or may no longer meet bioavailability standard.
Wherefore, all drugs manufacturers, traders, distributor-importers of products
contained or identified in the list b’ (prime) provided for by BFAD, a copy of which is
made part of this circular, are advised that all pending initial and renewal registration
of the products aforementioned, as well as all applications for initial and renewal
registration of the same, shall henceforth be required to submit bioavailability test with
satisfactory results on the products sought to be registered or renewed conducted by
any bioavailability testing units here or abroad, duly recognized by the BFAD under
the Dept. of Health.1âwphi1 (Emphases and underscoring supplied)
The FDA then issued Circular No. 8, s. 1997 to supplement Circular No. 1, s. 1997 in
that it reiterates the importance of the BA/BE testing requirement originally provided
for by AO 67, s. 1989.1âwphi1
A careful scrutiny of the foregoing issuances would reveal that AO 67, s. 1989 is
actually the rule that originally introduced the BA/BE testing requirement as a
component of applications for the issuance of CPRs covering certain pharmaceutical
products. As such, it is considered an administrative regulation – a legislative rule to
be exact – issued by the Secretary of Health in consonance with the express authority
granted to him by RA 3720 to implement the statutory mandate that all drugs and
devices should first be registered with the FDA prior to their manufacture and sale.
Considering that neither party contested the validity of its issuance, the Court deems
2
that AO 67, s. 1989 complied with the requirements of prior hearing, notice, and pharmaceutical products for sale or distribution to the public, such accreditation to be valid for
publication pursuant to the presumption of regularity accorded to the government in the three years but subject to annual review.
exercise of its official duties.42 On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which amended AO
On the other hand, Circular Nos. 1 and 8, s. 1997 cannot be considered as administrative 27. Under Section VII7 of AO 10, the accreditation period for government suppliers of
regulations because they do not: (a) implement a primary legislation by providing the pharmaceutical products was reduced to two years. Moreover, such accreditation may be
details thereof; (b) interpret, clarify, or explain existing statutory regulations under recalled, suspended or revoked after due deliberation and proper notice by the DOH
which the FDA operates; and/or (c) ascertain the existence of certain facts or things upon Accreditation Committee, through its Chairman.
which the enforcement of RA 3720 depends. In fact, the only purpose of these circulars Section VII of AO 10 was later amended by AO 66 series of 2000,8 which provided that the
is for the FDA to administer and supervise the implementation of the provisions of AO two-year accreditation period may be recalled, suspended or revoked only after due
67, s. 1989, including those covering the BA/BE testing requirement, consistent with deliberation, hearing and notice by the DOH Accreditation Committee, through its Chairman.
and pursuant to RA 3720.43 Therefore, the FDA has sufficient authority to issue the said
circulars and since they would not affect the substantive rights of the parties that they On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and
seek to govern – as they are not, strictly speaking, administrative regulations in the first category of sanctions to be imposed on accredited government suppliers of pharmaceutical
place – no prior hearing, consultation, and publication are needed for their validity. products in case of adverse findings regarding their products (e.g. substandard, fake, or
misbranded) or violations committed by them during their accreditation.
In sum, the Court holds that Circular Nos. 1 and 8, s. 1997 are valid issuances and
binding to all concerned parties, including the respondents in this case. 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
As a final note, while the proliferation of generic drugs and medicines is indeed a 24 accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a
welcome development as it effectively ensures access to affordable quality drugs and meeting on October 27, 2000. During the meeting, Undersecretary Galon handed them copies
medicines for all through their lower prices, the State, through the FDA, which is the of a document entitled "Report on Violative Products"11 issued by the Bureau of Food and
government instrumentality tasked on this matter, must nevertheless be vigilant in Drugs12 (BFAD), which detailed violations or adverse findings relative to these accredited
ensuring that the generic drugs and medicines released to the market are safe and drug companies’ products. Specifically, the BFAD found that PPI’s products which were being
effective for use. sold to the public were unfit for human consumption.
WHEREFORE, the petition is GRANTED. The Order dated December 18, 2009 and the During the October 27, 2000 meeting, the 24 drug companies were directed to submit within
Writ of Permanent Injunction dated January 19, 2010 of the Regional Trial Court of 10 days, or until November 6, 2000, their respective explanations on the adverse findings
Muntinlupa City, Branch 256 in Civil Case No. 08-124 are hereby SET ASIDE. BFAD covering their respective products contained in the Report on Violative Products.
Circular Nos. 1 and 8, series of 1997 are declared VALID. Accordingly, the Court's
Temporary Restraining Order dated February 24, 2010 is hereby made PERMANENT. 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,
SO ORDERED. informing her that PPI has referred the Report on Violative Products to its lawyers with
G.R. No. 182358 February 20, 2013 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
DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA.
MARGARITA M. GALON, Petitioners, expired on November 6, 2000, much less offer any explanation for its failure to timely submit
its reply. PPI’s November 13, 2000 letter states:
vs.
PHIL PHARMA WEALTH, INC., Respondent. Madam,
DECISION This refers to your directive on 27 October 2000, on the occasion of the meeting with selected
DEL CASTILLO, J.: 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")
The state may not be sued without its consent. Likewise, public officials may not be compiled by your office and disseminated on that date.
sued for acts done in the perfom1ance of their official functions or within the scope of
their authority. 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
This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the to you and furnish you the said reply.
Court of Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008
Reso1ution3 denying petitioners' Motion for Reconsideration.4 Please be guided accordingly.
Very truly yours,
Factual Antecedents
On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was issued (signed)
by then Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). ATTY. ALAN A.B. ALAMBRA
AO 27 set the guidelines and procedure for accreditation of government suppliers of Vice-President for Legal and Administrative Affairs14
In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable"
PPI’s 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 Galon’s 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:
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 Galon’s 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 ₱5 million, exemplary damages of ₱1 million, attorney’s
fees of ₱1 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
PPI’s 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 PPI’s 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
3
required comment/reply. Instead, it belatedly submitted a November 13, 2000 letter The dispositive portion of the CA Decision reads:
which did not even constitute a reply, as it merely informed petitioners that the matter WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the
had been referred by PPI to its lawyer. Petitioners argued that due process was afforded Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-
PPI, but because it did not timely avail of the opportunity to explain its side, the DOH ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further
had to act immediately – by suspending PPI’s accreditation – to stop the distribution and proceedings.
sale of substandard drug products which posed a serious health risk to the public. By
exercising DOH’s mandate to promote health, it cannot be said that petitioners SO ORDERED.30
committed grave abuse of discretion. Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the
In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a present Petition.
temporary restraining order, but only covering PPI’s products which were not included Issue
in the list of violative products or drugs as found by the BFAD. Petitioners now raise the following lone issue for the Court’s resolution:
In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal Should Civil Case No. 68200 be dismissed for being a suit against the State?31
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 Petitioners’ Arguments
commence the suit, as the requisite resolution of PPI’s board of directors granting to the Petitioners submit that because PPI’s Complaint prays for the award of damages against the
commencing officer – PPI’s Vice President for Legal and Administrative Affairs, Alan DOH, Civil Case No. 68200 should be considered a suit against the State, for it would require
Alambra, – the authority to file Civil Case No. 68200 was lacking. To this, PPI filed its the appropriation of the needed amount to satisfy PPI’s claim, should it win the case. Since the
Comment/Opposition.25 State did not give its consent to be sued, Civil Case No. 68200 must be dismissed. They add
Ruling of the Regional Trial Court 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
In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring individually.
the case to be one instituted against the State, in which case the principle of state
immunity from suit is applicable. Respondent’s Arguments
PPI moved for reconsideration,27 but the trial court remained steadfast.28 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
PPI appealed to the CA. of their authority.
Ruling of the Court of Appeals Our Ruling
Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of whether it The Petition is granted.
was proper for the trial court to dismiss Civil Case No. 68200.
The doctrine of non-suability.
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 The discussion of this Court in Department of Agriculture v. National Labor Relations
was premature for the trial court to have dismissed the Complaint. Examining the Commission32 on the doctrine of non-suability is enlightening.
Complaint, the CA found that a cause of action was sufficiently alleged – that due to The basic postulate enshrined in the constitution that ‘(t)he State may not be sued without its
defendants’ (petitioners’) acts which were beyond the scope of their authority, PPI’s consent,’ reflects nothing less than a recognition of the sovereign character of the State and an
accreditation as a government supplier of pharmaceutical products was suspended express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts.
without the required notice and hearing as required by Section 26(d) of RA 3720 as It is based on the very essence of sovereignty. x x x [A] sovereign is exempt from suit, not
amended by EO 175. Moreover, the CA held that by filing a motion to dismiss, because of any formal conception or obsolete theory, but on the logical and practical ground
petitioners were deemed to have hypothetically admitted the allegations in the that there can be no legal right as against the authority that makes the law on which the right
Complaint – which state that petitioners were being sued in their individual and personal depends. True, the doctrine, not too infrequently, is derisively called ‘the royal prerogative of
capacities – thus negating their claim that Civil Case No. 68200 is an unauthorized suit dishonesty’ because it grants the state the prerogative to defeat any legitimate claim against it
against the State. by simply invoking its nonsuability. We have had occasion to explain in its defense, however,
The CA further held that instead of dismissing the case, the trial court should have that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of
deferred the hearing and resolution of the motion to dismiss and proceeded to trial. It governmental efficiency and the obstacle to the performance of its multifarious functions
added that it was apparent from the Complaint that petitioners were being sued in their would be far greater in severity than the inconvenience that may be caused private parties, if
private and personal capacities for acts done beyond the scope of their official functions. such fundamental principle is to be abandoned and the availability of judicial remedy is not to
Thus, the issue of whether the suit is against the State could best be threshed out during be accordingly restricted.
trial on the merits, rather than in proceedings covering a motion to dismiss. 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 State’s 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
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
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:
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
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
4
Undersecretary Galon, to be held jointly and severally liable for moral damages,
exemplary damages, attorney’s 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
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 DOH’s 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 PPI’s 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 PPI’s 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 PPI’s 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 PPI’s
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 PPI’s 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, PPI’s drugs which are included in the Report on Violative Products are
out and being sold in the market. Based on the foregoing, we find PPI’s 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 one’s 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
Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil
Pharmawealth, Inc. 51respondent 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.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
G.R. No. 165622 October 17, 2008
MERCURY DRUG CORPORATION and AURMELA GANZON, petitioners,
vs.
RAUL DE LEON, respondents.
DECISION
REYES, R.T., J.:
IN REALITY, for the druggist, mistake is negligence and care is no defense.1 Sa isang
parmasyutika, ang pagkakamali ay kapabayaan at ang pagkalinga ay hindi angkop
na dipensa.
This is a petition for review on certiorari2 of two Resolutions3 of the Court of Appeals
(CA). The first Resolution granted respondent’s motion to dismiss while the second
denied petitioner’s motion for reconsideration.
The Facts
Respondent Raul T. De Leon was the presiding judge of Branch 258, Regional Trial
Court (RTC) in Parañaque.4 On October 17, 1999, he noticed that his left eye was
reddish. He also had difficulty reading.5 On the same evening, he met a friend for
dinner at the Foohyui Restaurant. The same friend happened to be a doctor, Dr. Charles
Milla, and had just arrived from abroad.6
Aside from exchanging pleasantries, De Leon consulted Dr. Milla about his irritated
left eye.7 The latter prescribed the drugs "Cortisporin Opthalmic" and "Ceftin" to
relieve his eye problems.8 Before heading to work the following morning, De Leon
went to the Betterliving, Parañaque, branch of Mercury Drug Store Corporation to buy
the prescribed medicines.9 He showed his prescription to petitioner Aurmela Ganzon,
a pharmacist assistant.10Subsequently, he paid for and took the medicine handed over
by Ganzon.11
At his chambers, De Leon requested his sheriff to assist him in using the eye
drops.12 As instructed, the sheriff applied 2-3 drops on respondent’s left
eye.13 Instead of relieving his irritation, respondent felt searing pain.14 He
immediately rinsed the affected eye with water, but the pain did not subside.15 Only
then did he discover that he was given the wrong medicine, "Cortisporin Otic
Solution."16
De Leon returned to the same Mercury Drug branch, with his left eye still red and
teary.17 When he confronted Ganzon why he was given ear drops, instead of the
prescribed eye drops,18 she did not apologize and instead brazenly replied that she was
unable to fully read the prescription.19 In fact, it was her supervisor who apologized
and informed De Leon that they do not have stock of the needed Cortisporin
Opthalmic.20
De Leon wrote Mercury Drug, through its president, Ms. Vivian K. Askuna, about the
day’s incident.21 It did not merit any response.22 Instead, two sales persons went to
his office and informed him that their supervisor was busy with other
matters.23 Having been denied his simple desire for a written apology and
explanation,24 De Leon filed a complaint for damages against Mercury Drug.25
Mercury Drug denied that it was negligent and therefore liable for damages.26 It
pointed out that the proximate cause of De Leon’s unfortunate experience was his own
negligence.27 He should have first read and checked to see if he had the right eye
solution before he used any on his eye.28 He could have also requested his sheriff to
do the same before the latter applied the medicine on such a delicate part of his body.29
Also, Mercury Drug explained that there is no available medicine known as
"Cortisporin Opthalmic" in the Philippine market.30 Furthermore, what was written on
the piece of paper De Leon presented to Ganzon was "Cortisporin
5
Solution."31 Accordingly, she gave him the only available "Cortisporin Solution" in the Dissatisfied with the RTC ruling, Mercury Drug and Ganzon elevated the matter to the CA.
market. Accordingly, they filed their respective briefs. Raising technical grounds, De Leon moved for
Moreover, even the piece of paper De Leon presented upon buying the medicine can not the appeal’s dismissal.
be considered as proper prescription.32 It lacked the required information concerning CA Disposition
the attending doctor’s name and license number.33According to Ganzon, she entertained On July 4, 2008, the CA issued a resolution which granted De Leon’s motion and dismissed
De Leon’s purchase request only because he was a regular customer of their branch.34 the appeal. Said the appellate court:
RTC Disposition As pointed out by the plaintiff-appellee, the Statement of Facts, Statement of the Case,
On April 30, 2003, the RTC rendered judgment in favor of respondent, the dispositive Assignment of Errors/issues, Arguments/ Discussions in the Brief make no references to the
portion of which reads: pages of the records. We find this procedural lapse justify the dismissal of the appeal, pursuant
WHEREFORE, the court finds for the plaintiff. to Section 1(f), Rule 50 of the 1997 Rules of Civil Procedure x x x.42
For pecuniary loss suffered, Mercury Drug Store is to pay ONE HUNDRED FIFTY- xxxx
THREE PESOS AND TWENTY-FIVE CENTAVOS (Php 153.25), the value of the "The premise that underlies all appeals is that they are merely rights which arise form a statute;
medicine. therefore, they must be exercised in the manner prescribed by law. It is to this end that rules
As moral damages defendants is (sic) ordered to pay ONE HUNDRED THOUSAND governing pleadings and practice before the appellate court were imposed. These rules were
PESOS (Php 100,000.00). designed to assist the appellate court in the accomplishment of its tasks, and overall, to enhance
the orderly administration of justice."
To serve as a warning to those in the field of dispensing medicinal drugs discretion of
the highest degree is expected of them, Mercury Drug Store and defendant Aurmila (sic) xxxx
Ganzon are ordered to pay plaintiff the amount of THREE HUNDRED THOUSAND x x x If the statement of fact is unaccompanied by a page reference to the record, it may be
PESOS (Php 300,000.00) as exemplary damages. stricken or disregarded all together.43
Due to defendants callous reaction to the mistake done by their employee which forced On October 5, 2004, the CA denied Mercury Drug’s and Ganzon’s joint motion for
plaintiff to litigate, Defendant (sic) Mercury Drug Store is to pay plaintiff attorney’s fees reconsideration. Although mindful that litigation is not a game of technicalities,44 the CA
of ₱50,000.00 plus litigation expenses. found no persuasive reasons to relax procedural rules in favor of Mercury Drug and
SO ORDERED.35 Ganzon.45 The CA opined:
In ruling in favor of De Leon, the RTC ratiocinated: In the case under consideration, We find no faithful compliance on the part of the movants that
will call for the liberal application of the Rules. Section 1(f) of Rule 50 of the 1997 Rules of
The proximate cause of the ill fate of plaintiff was defendant Aurmila (sic) Ganzon’s Civil Procedure explicitly provides that an appeal may be dismissed by the Court of Appeals,
negligent exercise of said discretion. She gave a prescription drug to a customer who on its own motion or on that of the appellee, for want of page references to the records as
did not have the proper form of prescription, she did not take a good look at said required in Section 13 of Rule 44 of the same rules46
prescription, she merely presumed plaintiff was looking for Cortisporin Otic Solution
because it was the only one available in the market and she further presumed that by Issues
merely putting the drug by the counter wherein plaintiff looked at it, paid and took the Petitioner has resorted to the present recourse and assigns to the CA the following errors:
drug without any objection meant he understood what he was buying.36 I
The RTC ruled that although De Leon may have been negligent by failing to read the
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONER’S
medicine’s label or to instruct his sheriff to do so, Mercury Drug was first to be APPEAL BASED ON THE CASES OF DE LIANA VS. CA (370 SCRA 349) AND HEIRS OF
negligent.37 Ganzon dispensed a drug without the requisite prescription.38 Moreover,
PALOMINIQUE VS. CA (134 SCRA 331).
she did so without fully reading what medicine was exactly being bought.39 In fact, she
presumed that since what was available was the drug Cortisporin Otic Solution, it was II
what De Leon was attempting to buy.40 Said the court: THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
When the injury is caused by the negligence of a servant or employee, there instantly DISCRETION IN DISMISSING PETITIONER’S APPEAL DESPITE SUBSTANTIAL
arises a presumption of law that there was negligence on the part of the employer or COMPLIANCE WITH SECTION 1(F), RULE 60 AND SECTION 13, RULE 44 OF THE
employer either in the selection of the servant or employee, or in the supervision over RULES OF COURT.
him after the selection or both. III
xxxx THE HONORABLE COURT OF APPEALS ERRED WHEN IT FAVORED MERE
The theory bases the responsibility of the master ultimately on his own negligence and TECHNICALITY OVER SUBSTANTIAL JUSTICE WHICH WILL CERTAINLY CAUSE
not on that of his servant.41 GRAVE INJUSTICE AND GREAT PREJUDICE TO PETITIONER CONSIDERING THAT
THE ASSAILED DECISION ON APPEAL IS CLUSTERED WITH ERRORS AND
IN CONTRAST with the DECISIONS OF THIS HONORABLE SUPREME
COURT.47 (Underscoring supplied)
Our Ruling
The appeal succeeds in part.
Dismissal of an appeal under Rule 50 is discretionary.
In several cases,48 this Court stressed that the grounds for dismissal of an appeal under
Section 1 of Rule 5049 are discretionary upon the appellate court. The very wording
of the rule uses the word "may" instead of "shall." This indicates that it is only directory
and not mandatory.50 Sound discretion must be exercised in consonance with the
tenets of justice and fair play, keeping in mind the circumstances obtaining in each
case.51
The importance of an appellant’s brief cannot be gainsaid. Its purpose is two-fold: (1)
to present to the court in coherent and concise form the point and questions in
controversy; and (2) to assist the court in arriving at a just and proper conclusion.52 It
is considered a vehicle of counsel to convey to the court the essential facts of a client’s
case, a statement of the questions of law involved, the law to be applied, and the
application one desires of it by the court.53
The absence of page reference to the record is a ground for dismissal. It is a requirement
intended to ultimately aid the appellate court in arriving at a just and proper conclusion
of the case.54 However, as earlier discussed, such dismissal is not mandatory, but
discretionary on the part of the appellate court.
This Court has held that the failure to properly cite reference to the original
records is not a fatal procedural lapse.55 When citations found in the appellant’s
brief enable the court to expeditiously locate the portions of the record referred
to, there is substantial compliance with the requirements of Section 13(c), (d), and
(f) of Rule 44.56
In De Leon v. CA,57 this Court ruled that the citations contained in the appellant’s brief
sufficiently enabled the appellate court to expeditiously locate the portions of the
record referred to. They were in substantial compliance with the rules. The Court said:
Nothing in the records indicate that it was exercised capriciously, whimsically, or with
a view of permitting injury upon a party litigant. For the same reasons, we hold that
the respondent Court of Appeals did not err when it did not dismiss the appeal based
on the allegation that appellant’s brief failed to comply with the internal rules of said
court.58
Similar to the instant case, the appellant’s brief in Yuchengco v. Court of
Appeals59 contained references to Exhibits and Transcript of Stenographic Notes and
attachments. These were found to have substantially complied with the requirements
of Section 13(c) and (d) of Rule 44.
x x x The Appellant’s brief may not have referred to the exact pages of the records,
however, the same is not fatal to their cause since the references they made enabled the
appellate court to expeditiously locate the portions referred to. x x x60
It is true that in De Liano v. Court of Appeals,61 this Court held that a statement of
facts unaccompanied by a page reference to the record may be presumed to be without
6
support in the record and may be stricken or disregarded altogether. However, the instant Smith’s Admrx v. Middelton79 teaches Us that one holding himself out as competent to handle
case is not on all fours with De Liano. drugs, having rightful access to them, and relied upon by those dealing with him to exercise
In De Liano, the appellant’s brief lacked a Subject Index and a Table of Cases and that high degree of caution and care called for by the peculiarly dangerous nature of the
Authorities.62 Moreover, the Statement of the Case, Statements of Facts, and business, cannot be heard to say that his mistake by which he furnishes a customer the most
Statements of Arguments had no page references to the record.63When notified of such deadly of drugs for those comparatively harmless, is not in itself gross negligence.80
defects, defendants-appellants failed to amend their brief to conform to the In our own jurisdiction, United States v. Pineda81 and Mercury Drug Corporation v.
rules.64 Instead, they continued to argue that their errors were harmless.65 All these Baking are illustrative.82 In Pineda, the potassium chlorate demanded by complainant had
omissions and non-compliance justified the dismissal of the appeal by the CA.66 been intended for his race horses. When complainant mixed with water what he thought and
In the case under review, although there were no page references to the records, Mercury believed was potassium chlorate, but which turned out to be the potently deadly barium
Drug and Ganzon referred to the exhibits, TSN, and attachments of the case. Despite its chlorate, his race horses died of poisoning only a few hours after.
deficiencies, the brief is sufficient in form and substance as to apprise the appellate court The wisdom of such a decision is unquestionable. If the victims had been human beings instead
of the essential facts, nature of the case, the issues raised, and the laws necessary for the of horses, the damage and loss would have been irreparable.83
disposition of the same. In the more recent Mercury Drug, involving no less than the same petitioner corporation,
Reliance on Heirs of Palomique v. Court of Appeals67 is likewise misplaced. In Heirs Sebastian Baking went to the Alabang branch of Mercury Drug84 and presented his
of Palomique, the appellant’s brief did not at all contain a separate statement of prescription for Diamicron, which the pharmacist misread as Dormicum.85 Baking was given
facts.68 This critical omission, together with the failure to make page references to the a potent sleeping tablet, instead of medicines to stabilize his blood sugar.86 On the third day
record to support the factual allegations, justified the dismissal of the appeal.69 of taking the wrong medicine, Baking figured in a vehicular accident.87 He fell asleep while
Rules of procedure are intended to promote, not to defeat, substantial justice. They driving.88
should not be applied in a very rigid and technical sense.70 For reasons of justice and This Court held that the proximate cause of the accident was the gross negligence of the
equity, this Court has allowed exceptions to the stringent rules governing appeals.71 It pharmacist who gave the wrong medicine to Baking. The Court said:
has, in the past, refused to sacrifice justice for technicality.72
x x x Considering that a fatal mistake could be a matter of life and death for a buying patient,
However, brushing aside technicalities, petitioners are still liable. Mercury Drug the said employee should have been very cautious in dispensing medicines. She should have
and Ganzon failed to exercise the highest degree of diligence expected of them. verified whether the medicine she gave respondent was indeed the one prescribed by his
Denying that they were negligent, Mercury Drug and Ganzon pointed out that De Leon’s physician. The care required must be commensurate with the danger involved, and the skill
own negligence was the proximate cause of his injury. They argued that any injury employed must correspond with the superior knowledge of the business which the law
would have been averted had De Leon exercised due diligence before applying the demands.89
medicine on his eye. Had he cautiously read the medicine bottle label, he would have This Court once more reiterated that the profession of pharmacy demands great care and skill.
known that he had the wrong medicine. It reminded druggists to exercise the highest degree of care known to practical men.
Mercury Drug and Ganzon can not exculpate themselves from any liability. As active In cases where an injury is caused by the negligence of an employee, there instantly arises
players in the field of dispensing medicines to the public, the highest degree of care and a presumption of law that there has been negligence on the part of the employer, either
diligence is expected of them.73 Likewise, numerous decisions, both here and abroad, in the selection or supervision of one’s employees. This presumption may be rebutted by
have laid salutary rules for the protection of human life and human health.74 In the a clear showing that the employer has exercised the care and diligence of a good father
United States case of Tombari v. Conners,75 it was ruled that the profession of of the family.90 Mercury Drug failed to overcome such presumption.91
pharmacy demands care and skill, and druggists must exercise care of a specially high
Petitioners Mercury Drug and Ganzon have similarly failed to live up to high standard of
degree, the highest degree of care known to practical men. In other words, druggists diligence expected of them as pharmacy professionals. They were grossly negligent in
must exercise the highest practicable degree of prudence and vigilance, and the most dispensing ear drops instead of the prescribed eye drops to De Leon. Worse, they have once
exact and reliable safeguards consistent with the reasonable conduct of the business, so again attempted to shift the blame to their victim by underscoring his own failure to read the
that human life may not constantly be exposed to the danger flowing from the label.
substitution of deadly poisons for harmless medicines.76
As a buyer, De Leon relied on the expertise and experience of Mercury Drug and its employees
In Fleet v. Hollenkemp,77 the US Supreme Court ruled that a druggist that sells to a in dispensing to him the right medicine.92 This Court has ruled that in the purchase and sale
purchaser or sends to a patient one drug for another or even one innocent drug, calculated of drugs, the buyer and seller do not stand at arms length.93 There exists an imperative duty
to produce a certain effect, in place of another sent for and designed to produce a on the seller or the druggist to take precaution to prevent death or injury to any person who
different effect, cannot escape responsibility, upon the alleged pretext that it was an relies on one’s absolute honesty and peculiar learning.94 The Court emphasized:
accidental or innocent mistake. His mistake, under the most favorable aspect for himself,
is negligence. And such mistake cannot be countenanced or tolerated, as it is a mistake x x x The nature of drugs is such that examination would not avail the purchaser anything. It
would be idle mockery for the customer to make an examination of a compound of which he
of the gravest kind and of the most disastrous effect.78
can know nothing. Consequently, it must be that the druggist warrants that he will
deliver the drug called for.95
Mercury Drug and Ganzon’s defense that the latter gave the only available Cortisporin
solution in the market deserves scant consideration. Ganzon could have easily verified
whether the medicine she gave De Leon was, indeed, the prescribed one or, at the very
least, consulted her supervisor. Absent the required certainty in the dispensation of the
medicine, she could have refused De Leon’s purchase of the drug.
The award of damages is proper and shall only be reduced considering the
peculiar facts of the case. Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of defendant’s wrongful act
or omission.96
Moral damages are not intended to impose a penalty to the wrongdoer or to enrich the
claimant at the expense of defendant.97 There is no hard and fast rule in determining
what would be a fair and reasonable amount of moral damages since each case must
be governed by its peculiar circumstances.98 However, the award of damages must be
commensurate to the loss or injury suffered.99
Taking into consideration the attending facts of the case under review, We find the
amount awarded by the trial court to be excessive. Following the precedent case
of Mercury Drug, We reduce the amount from ₱100,000.00 to ₱50,000.00 only.100 In
addition, We also deem it necessary to reduce the award of exemplary damages from
the exorbitant amount of ₱300,000.00 to ₱25,000.00 only.
This Court explained the propriety of awarding exemplary damages in the
earlier Mercury Drug case:
x x x Article 2229 allows the grant of exemplary damages by way of example or
correction for the public good. As mentioned earlier, the drugstore business is affected
by public interest. Petitioner should have exerted utmost diligence in the selection and
supervision of its employees. On the part of the employee concerned, she should have
been extremely cautious in dispensing pharmaceutical products. Due to the
sensitive nature of its business, petitioner must at all times maintain a high level of
meticulousness. Therefore, an award of exemplary damages in the amount of
₱25,000.00 is in order.101 (Emphasis supplied)
It is generally recognized that the drugstore business is imbued with public interest.
This can not be more real for Mercury Drug, the country’s biggest drugstore chain.
This Court can not tolerate any form of negligence which can jeopardize the health and
safety of its loyal patrons. Moreover, this Court will not countenance the cavalier
manner it treated De Leon. Not only does a pharmacy owe a customer the duty of
reasonable care, but it is also duty-bound to accord one with respect.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decisions of the CA
and the RTC in Parañaque City are AFFIRMED WITH MODIFICATION, in that
the award of moral and exemplary damages is reduced to ₱50,000.00 and ₱25,000.00,
respectively.
SO ORDERED.
G.R. No. 164349 January 31, 2006
7
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI),Petitioner, On September 8, 1993, Verchez, along with his daughters Grace and Zenaida and their
vs. respective spouses, filed a complaint against RCPI before the Regional Trial Court (RTC) of
ALFONSO VERCHEZ, GRACE VERCHEZ-INFANTE, MARDONIO Sorsogon for damages. In their complaint, the plaintiffs alleged that, inter alia, the delay in
INFANTE, ZENAIDA VERCHEZ-CATIBOG, AND FORTUNATO delivering the telegram contributed to the early demise of the late Editha to their damage and
CATIBOG, Respondents. prejudice,8 for which they prayed for the award of moral and exemplary damages9 and
DECISION attorney’s fees.10
CARPIO MORALES, J.: After its motion to dismiss the complaint for improper venue11 was denied12 by Branch 5 of
the RTC of Sorsogon, RCPI filed its answer, alleging that except with respect to Grace,13 the
On January 21, 1991, Editha Hebron Verchez (Editha) was confined at the Sorsogon other plaintiffs had no privity of contract with it; any delay in the sending of the telegram was
Provincial Hospital due to an ailment. On even date, her daughter Grace Verchez-Infante
due to force majeure, "specifically, but not limited to, radio noise and interferences which
(Grace) immediately hied to the Sorsogon Branch of the Radio Communications of the adversely affected the transmission and/or reception of the telegraphic message";14 the clause
Philippines, Inc. (RCPI) whose services she engaged to send a telegram to her sister
in the Telegram Transmission Form signed by Grace absolved it from liability for any damage
Zenaida Verchez-Catibog (Zenaida) who was residing at 18 Legal St., GSIS Village, arising from the transmission other than the refund of telegram tolls;15 it observed due
Quezon City1 reading: "Send check money Mommy hospital." For RCPI’s services, diligence in the selection and supervision of its employees; and at all events, any cause of
Grace paid P10.502 for which she was issued a receipt.3 action had been barred by laches.16
As three days after RCPI was engaged to send the telegram to Zenaida no response was The trial court, observing that "although the delayed delivery of the questioned telegram was
received from her, Grace sent a letter to Zenaida, this time thru JRS Delivery Service, not apparently the proximate cause of the death of Editha," ruled out the presence of force
reprimanding her for not sending any financial aid.
majeure. Respecting the clause in the telegram relied upon by RCPI, the trial court held that it
Immediately after she received Grace’s letter, Zenaida, along with her husband partakes of the nature of a contract of adhesion.
Fortunato Catibog, left on January 26, 1991 for Sorsogon. On her arrival at Sorsogon, Finding that the nature of RCPI’s business obligated it to dispatch the telegram to the addressee
she disclaimed having received any telegram.
at the earliest possible time but that it did not in view of the negligence of its employees to
In the meantime, Zenaida and her husband, together with her mother Editha left for repair its radio transmitter and the concomitant delay in delivering the telegram on time, the
Quezon City on January 28, 1991 and brought Editha to the Veterans Memorial Hospital trial court, upon the following provisions of the Civil Code, to wit:
in Quezon City where she was confined from January 30, 1991 to March 21, 1991. Article 2176 – Whoever by act or omission causes damage to another, there being at fault or
The telegram was finally delivered to Zenaida 25 days later or on February 15, negligence, is obliged to pay for the damage done. Such fault or negligence if there is no pre-
1991.4 On inquiry from RCPI why it took that long to deliver it, a messenger of RCPI existing contractual relation between the parties, is called quasi-delict and is governed by the
replied that he had nothing to do with the delivery thereof as it was another messenger provisions of this Chapter.
who previously was assigned to deliver the same but the address could not be located,
Article 1173 defines the fault of (sic) negligence of the obligor as the "omission of the diligence
hence, the telegram was resent on February 2, 1991, and the second messenger finally which is required by the nature of the obligation and corresponds with the circumstances of
found the address on February 15, 1991.
the person, of the time, or the place."
Editha’s husband Alfonso Verchez (Verchez), by letter of March 5, 1991,5 demanded In the instant case, the obligation of the defendant to deliver the telegram to the addressee is
an explanation from the manager of the Service Quality Control Department of the of an urgent nature. Its essence is the early delivery of the telegram to the concerned person.
RCPI, Mrs. Lorna D. Fabian, who replied, by letter of March 13, 1991,6 as follows: Yet, due to the negligence of its employees, the defendant failed to discharge of its obligation
Our investigation on this matter disclosed that subject telegram was duly processed in on time making it liable for damages under Article 2176.
accordance with our standard operating procedure. However, delivery was not The negligence on the part of the employees gives rise to the presumption of negligence on the
immediately effected due to the occurrence of circumstances which were beyond the part of the employer.17 (Underscoring supplied),
control and foresight of RCPI. Among others, during the transmission process, the radio
link connecting the points of communication involved encountered radio noise and rendered judgment against RCPI. Accordingly, it disposed:
interferences such that subject telegram did not initially registered (sic) in the receiving WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered in favor of
teleprinter machine. the plaintiffs and against the defendant, to wit:
Our internal message monitoring led to the discovery of the above. Thus, a repeat Ordering the defendant to pay the plaintiffs the following amount:
transmission was made and subsequent delivery was effected. (Underscoring supplied) 1. The amount of One Hundred Thousand (P100,000.00) Pesos as moral damages;
Verchez’s lawyer thereupon wrote RCPI’s manager Fabian, by letter of July 23, 2. The amount of Twenty Thousand (P20,000.00) Pesos as attorney’s fees; and
1991,7 requesting for a conference on a specified date and time, but no representative
of RCPI showed up at said date and time. 3. To pay the costs.
SO ORDERED.18
On April 17, 1992, Editha died.
On appeal, the Court of Appeals, by Decision of February 27, 2004,19 affirmed the
trial court’s decision.
Hence, RCPI’s present petition for review on certiorari, it raising the following
questions: (1) "Is the award of moral damages proper even if the trial court found that
there was no direct connection between the injury and the alleged negligent
acts?"20 and (2) "Are the stipulations in the ‘Telegram Transmission Form,’ in the
nature "contracts of adhesion" (sic)?21
RCPI insists that respondents failed to prove any causal connection between its delay
in transmitting the telegram and Editha’s death.22
RCPI’s stand fails. It bears noting that its liability is anchored on culpa contractual or
breach of contract with regard to Grace, and on tort with regard to her co-plaintiffs-
herein-co-respondents.
Article 1170 of the Civil Code provides:
Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for
damages. (Underscoring supplied)
Passing on this codal provision, this Court explained:
In culpa contractual x x x the mere proof of the existence of the contract and the failure
of its compliance justify, prima facie, a corresponding right of relief. The law,
recognizing the obligatory force of contracts, will not permit a party to be set free from
liability for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promissee that may include
his "expectation interest," which is his interest in having the benefit of his bargain
by being put in as good a position as he would have been in had the contract been
performed, or his "reliance interest," which is his interest in being reimbursed for
loss caused by reliance on the contract by being put in as good a position as he would
have been in had the contract not been made; or his "restitution interest," which is
his interest in having restored to him any benefit that he has conferred on the other
party. Indeed, agreements can accomplish little, either for their makers or for society,
unless they are made the basis for action. The effect of every infraction is to create a
new duty, that is, to make recompense to the one who has been injured by the failure
of another to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence x x x or of the attendance
of fortuitous event, to excuse him from his ensuing liability.23 (Emphasis and
underscoring supplied)
In the case at bar, RCPI bound itself to deliver the telegram within the shortest possible
time. It took 25 days, however, for RCPI to deliver it.
RCPI invokes force majeure, specifically, the alleged radio noise and interferences
which adversely affected the transmission and/or reception of the telegraphic message.
Additionally, its messenger claimed he could not locate the address of Zenaida and it
was only on the third attempt that he was able to deliver the telegram.
For the defense of force majeure to prosper,
8
x x x it is necessary that one has committed no negligence or misconduct that may have At any rate, any sense of urgency of the situation was met when Grace Verchez was able to
occasioned the loss. An act of God cannot be invoked to protect a person who has failed communicate to Manila via a letter that she sent to the same addressee in Manila thru JRS.29
to take steps to forestall the possible adverse consequences of such a loss. One’s xxxx
negligence may have concurred with an act of God in producing damage and injury to
another; nonetheless, showing that the immediate or proximate cause of the damage or As far as the respondent court’s award for moral damages is concerned, the same has no
basis whatsoever since private respondent Alfonso Verchez did not accompany his late wife
injury was a fortuitous event would not exempt one from liability. When the effect is
found to be partly the result of a person’s participation – whether by active when the latter went to Manila by bus. He stayed behind in Sorsogon for almost 1 week before
he proceeded to Manila. 30
intervention, neglect or failure to act – the whole occurrence is humanized and
removed from the rules applicable to acts of God. When pressed on cross-examination, private respondent Alfonso Verchez could not give any
plausible reason as to the reason why he did not accompany his ailing wife to Manila.31
xxxx
xxxx
Article 1174 of the Civil Code states that no person shall be responsible for a fortuitous
event that could not be foreseen or, though foreseen, was inevitable. In other words, It is also important to consider in resolving private respondents’ claim for moral damages that
there must be an exclusion of human intervention from the cause of injury or private respondent Grace Verchez did not accompany her ailing mother to Manila.32
loss.24 (Emphasis and underscoring supplied) xxxx
Assuming arguendo that fortuitous circumstances prevented RCPI from delivering the It is the common reaction of a husband to be at his ailing wife’s side as much as possible. The
telegram at the soonest possible time, it should have at least informed Grace of the non- fact that private respondent Alfonso Verchez stayed behind in Sorsogon for almost 1 week
transmission and the non-delivery so that she could have taken steps to remedy the convincingly demonstrates that he himself knew that his wife was not in critical condition.33
situation. But it did not. There lies the fault or negligence.
(Emphasis and underscoring supplied)
In an earlier case also involving RCPI, this Court held:
RCPI’s arguments fail. For it is its breach of contract upon which its liability is, it bears
Considering the public utility of RCPI’s business and its contractual obligation to repeating, anchored. Since RCPI breached its contract, the presumption is that it was at fault
transmit messages, it should exercise due diligence to ascertain that messages are or negligent. It, however, failed to rebut this presumption.
delivered to the persons at the given address and should provide a system whereby in
cases of undelivered messages the sender is given notice of non-delivery. Messages sent For breach of contract then, RCPI is liable to Grace for damages.
by cable or wireless means are usually more important and urgent than those which And for quasi-delict, RCPI is liable to Grace’s co-respondents following Article 2176 of the
can wait for the mail.25 Civil Code which provides:
xxxx Whoever by act or omission causes damage to another, there being fault or negligence, is
People depend on telecommunications companies in times of deep emotional stress obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
or pressing financial needs. Knowing that messages about the illnesses or deaths of contractual relation between the parties, is called a quasi-delict and is governed by the
loved ones, births or marriages in a family, important business transactions, and notices provisions of this Chapter. (Underscoring supplied)
of conferences or meetings as in this case, are coursed through the petitioner and similar RCPI’s liability as an employer could of course be avoided if it could prove that it observed
corporations, it is incumbent upon them to exercise a greater amount of care and the diligence of a good father of a family to prevent damage. Article 2180 of the Civil Code so
concern than that shown in this case. Every reasonable effort to inform senders of the provides:
non-delivery of messages should be undertaken.26 The obligation imposed by Article 2176 is demandable not only for one’s own acts or
(Emphasis and underscoring supplied) omissions, but also for those of persons for whom one is responsible.
RCPI argues, however, against the presence of urgency in the delivery of the telegram, xxxx
as well as the basis for the award of moral damages, thus:27 The owners and managers of an establishment or enterprise are likewise responsible for
The request to send check as written in the telegraphic text negates the existence of damages caused by their employees in the service of the branches in which the latter are
urgency that private respondents’ allegations that ‘time was of the essence’ imports. A employed or on the occasion of their functions.
check drawn against a Manila Bank and transmitted to Sorsogon, Sorsogon will have to
Employers shall be liable for the damages caused by their employees and household helpers
be deposited in a bank in Sorsogon and pass thru a minimum clearing period of 5 days
acting within the scope of their assigned tasks, even though the former are not engaged in any
before it may be encashed or withdrawn. If the transmittal of the requested check to business or industry.
Sorsogon took 1 day – private respondents could therefore still wait for 6 days before
the same may be withdrawn. Requesting a check that would take 6 days before it could xxxx
be withdrawn therefore contradicts plaintiff’s claim of urgency or need.28
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage. (Underscoring supplied)
RCPI failed, however, to prove that it observed all the diligence of a good father of a
family to prevent damage.
Respecting the assailed award of moral damages, a determination of the presence of
the following requisites to justify the award is in order:
x x x firstly, evidence of besmirched reputation or physical, mental or psychological
suffering sustained by the claimant; secondly, a culpable act or omission factually
established; thirdly, proof that the wrongful act or omission of the defendant is the
proximate cause of damages sustained by the claimant; and fourthly, that the case is
predicated on any of the instances expressed or envisioned by Article 2219 and Article
2220 of the Civil Code.34
Respecting the first requisite, evidence of suffering by the plaintiffs-herein respondents
was correctly appreciated by the CA in this wise:
The failure of RCPI to deliver the telegram containing the message of appellees on
time, disturbed their filial tranquillity. Family members blamed each other for failing
to respond swiftly to an emergency that involved the life of the late Mrs. Verchez, who
suffered from diabetes.35
As reflected in the foregoing discussions, the second and third requisites are present.
On the fourth requisite, Article 2220 of the Civil Code provides:
Willful injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in
bad faith. (Emphasis and underscoring supplied)
After RCPI’s first attempt to deliver the telegram failed, it did not inform Grace of the
non-delivery thereof and waited for 12 days before trying to deliver it again, knowing
– as it should know – that time is of the essence in the delivery of telegrams. When its
second long-delayed attempt to deliver the telegram again failed, it, again, waited for
another 12 days before making a third attempt. Such nonchalance in performing its
urgent obligation indicates gross negligence amounting to bad faith. The fourth
requisite is thus also present.
In applying the above-quoted Article 2220, this Court has awarded moral damages in
cases of breach of contract where the defendant was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligation.36
As for RCPI’s tort-based liability, Article 2219 of the Civil Code provides:
Moral damages may be recovered in the following and analogous cases:
xxxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
(Emphasis supplied)
Article 26 of the Civil Code, in turn, provides:
Every person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons. The following and similar acts, though they may not
constitute a criminal offense, shall produce a cause of action for damages, prevention, Costs against petitioner.
and other relief: SO ORDERED.
xxxx
(2) Meddling with or disturbing the private life or family relations of another.
(Emphasis supplied)
RCPI’s negligence in not promptly performing its obligation undoubtedly disturbed the
peace of mind not only of Grace but also her co-respondents. As observed by the
appellate court, it disrupted the "filial tranquillity" among them as they blamed each
other "for failing to respond swiftly to an emergency." The tortious acts and/or omissions
complained of in this case are, therefore, analogous to acts mentioned under Article 26
of the Civil Code, which are among the instances of quasi-delict when courts may award
moral damages under Article 2219 of the Civil Code.
In fine, the award to the plaintiffs-herein respondents of moral damages is in order, as is
the award of attorney’s fees, respondents having been compelled to litigate to protect
their rights.
Clutching at straws, RCPI insists that the limited liability clause in the "Telegram
Transmission Form" is not a contract of adhesion. Thus it argues:
Neither can the Telegram Transmission Form be considered a contract of adhesion as
held by the respondent court. The said stipulations were all written in bold letters right
in front of the Telegram Transmission Form. As a matter of fact they were beside the
space where the telegram senders write their telegraphic messages. It would have been
different if the stipulations were written at the back for surely there is no way the sender
will easily notice them. The fact that the stipulations were located in a particular space
where they can easily be seen, is sufficient notice to any sender (like Grace Verchez-
Infante) where she could manifest her disapproval, leave the RCPI station and avail of
the services of the other telegram operators.37 (Underscoring supplied)
RCPI misunderstands the nature of a contract of adhesion. Neither the readability of the
stipulations nor their physical location in the contract determines whether it is one of
adhesion.
A contract of adhesion is defined as one in which one of the parties imposes a ready-
made form of contract, which the other party may accept or reject, but which the latter
cannot modify. One party prepares the stipulation in the contract, while the other party
merely affixes his signature or his "adhesion" thereto, giving no room for negotiation
and depriving the latter of the opportunity to bargain on equal
footing.38 (Emphasis and underscoring supplied)
While a contract of adhesion is not necessarily void and unenforceable, since it is
construed strictly against the party who drafted it or gave rise to any ambiguity therein,
it is stricken down as void and unenforceable or subversive of public policy when the
weaker party is imposed upon in dealing with the dominant bargaining party and is
reduced to the alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing.39
This Court holds that the Court of Appeals’ finding that the parties’ contract is one of
adhesion which is void is, given the facts and circumstances of the case, thus well-taken.
WHEREFORE, the petition is DENIED, and the challenged decision of the Court of
Appeals is AFFIRMED.