This is a petition to review, set aside certain orders and restrain
the respondent judge from trying Civil Case No. 779M of the
defunct Court of First Instance of Rizal.
the United States of America had a naval base in Subic, Zambales.
The base was one of those provided in the Military Bases
Agreement between the Philippines and the United States.
Sometime in May, 1972, the United States invited the submission
of bids for the following projects
1. Repair offender system, Alava Wharf at the U.S. Naval Station
Subic Bay, Philippines.
2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon
damage to shoreline revetment, NAVBASE Subic; and repair to
Leyte Wharf approach, NAVBASE Subic Bay, Philippines.
Eligio de Guzman & Co., Inc. responded to the invitation and
submitted bids. Subsequent thereto, the company received from
the United States two telegrams requesting it to confirm its price
proposals and for the name of its bonding company.
The company complied with the requests. [In its complaint, the
company alleges that the United States had accepted its bids
because "A request to confirm a price proposal confirms the
acceptance of a bid pursuant to defendant United States' bidding
practices." (Rollo, p. 30.) The truth of this allegation has not been
tested because the case has not reached the trial stage.]
In June, 1972, the company received a letter which was signed by
Wilham I. Collins, Director, Contracts Division, Naval Facilities
Engineering Command, Southwest Pacific, Department of the Navy
of the United States, who is one of the petitioners herein.
The letter said that the company did not qualify to receive an
award for the projects because of its previous unsatisfactory
performance rating on a repair contract for the sea wall at the boat
landings of the U.S. Naval Station in Subic Bay. The letter further
said that the projects had been awarded to third parties.
The company sued the United States of America and Messrs. James
E. Galloway, William I. Collins and Robert Gohier all members of the
Engineering Command of the U.S. Navy.
The complaint is to order the defendants to allow the plaintiff to
perform the work on the projects and, in the event that specific
performance was no longer possible, to order the defendants to
pay damages. The company also asked for the issuance of a writ of
preliminary injunction to restrain the defendants from entering
into contracts with third parties for work on the projects.
The defendants (AMERICAN ARMY) entered their special
appearance for the purpose only of questioning the jurisdiction of
this court over the subject matter of the complaint and the
persons of defendants, the subject matter of the complaint being
acts and omissions of the individual defendants as agents of
defendant United States of America, a foreign sovereign which has
not given her consent to this suit or any other suit for the causes
of action asserted in the complaint." (Rollo, p. 50.)
Subsequently the defendants filed a motion to dismiss the
complaint which included an opposition to the issuance of the writ
of preliminary injunction.
The company opposed the motion. The trial court denied the
motion and issued the writ. The defendants moved twice to
reconsider but to no avail. Hence the instant petition which seeks
to restrain perpetually the proceedings in Civil Case No. 779-M for
lack of jurisdiction on the part of the trial court.
CAN THE US ARMY BE SUED?
The petition is highly impressed with merit.
The traditional rule of State immunity exempts a State from being
sued in the courts of another State without its consent or waiver. This
rule is a necessary consequence of the principles of independence and
equality of States.
it has been necessary to distinguish them-between sovereign and
governmental acts (jure imperii) and private, commercial and
proprietary acts (jure gestionis). The result is that State
immunity now extends only to acts jure imperil
The respondent judge recognized the restrictive doctrine of State
immunity when he said in his Order denying the defendants' (now
petitioners) motion: " A distinction should be made between a
strictly governmental function of the sovereign state from its private,
proprietary or non- governmental acts (Rollo, p. 20.) However, the
respondent judge also said: "It is the Court's considered opinion
that entering into a contract for the repair of wharves or
shoreline is certainly not a governmental function altho it may
partake of a public nature or character. As aptly pointed out by
plaintiff's counsel in his reply citing the ruling in the case of Lyons,
Inc., [104 Phil. 594 (1958)], and which this Court quotes with
approval, viz.:
It is however contended that when a sovereign state enters into a
contract with a private person, the state can be sued upon the theory
that it has descended to the level of an individual from which it can be
implied that it has given its consent to be sued under the contract. ...
We agree to the above contention, and considering that the United
States government, through its agency at Subic Bay, entered into a
contract with appellant for stevedoring and miscellaneous labor
services within the Subic Bay Area, a U.S. Naval Reservation, it is
evident that it can bring an action before our courts for any
contractual liability that that political entity may assume under the
contract. The trial court, therefore, has jurisdiction to entertain this
case ... (Rollo, pp. 20-
the respondent judge is misplaced for the following reasons:
In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff
brought suit in the Court of First Instance of Manila to collect several
sums of money on account of a contract between plaintiff and
defendant. The defendant filed a motion to dismiss on the ground that
the court had no jurisdiction over defendant and over the subject
matter of the action. The court granted the motion on the grounds
that: (a) it had no jurisdiction over the defendant who did not give its
consent to the suit; and (b) plaintiff failed to exhaust the
administrative remedies provided in the contract. The order of
dismissal was elevated to this Court for review.
In sustaining the action of the lower court, this Court said:
It appearing in the complaint that appellant has not complied with the
procedure laid down in Article XXI of the contract regarding the
prosecution of its claim against the United States Government, or,
stated differently, it has failed to first exhaust its administrative
remedies against said Government, the lower court acted properly in
dismissing this case.(At p. 598.)
The restrictive application of State immunity is proper only when
the proceedings arise out of commercial transactions of the foreign
sovereign, its commercial activities or economic affairs.
Stated differently, a State may be said to have descended to the level
of an individual and can thus be deemed to have tacitly given its
consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its
sovereign functions. In this case the projects are an integral part
of the naval base which is devoted to the defense of both the
United States and the Philippines, indisputably a function of the
government of the highest order; they are not utilized for nor
dedicated to commercial or business purposes.
In Syquia,the United States concluded contracts with private
individuals but the contracts notwithstanding the States was not
deemed to have given or waived its consent to be sued for the reason
that the contracts were for jure imperii and not for jure gestionis.
WHEREFORE, the petition is granted; the questioned orders of the
respondent judge are set aside and Civil Case No. is dismissed. Costs
against the private respondent