Case Summary (G.R. No. L-2068)
Petitioner / Respondent Roles
Petitioners challenged the jurisdiction of the Philippine trial court and sought review and injunction to restrain further proceedings in Civil Case No. 779‑M. The private respondent (Eligio de Guzman & Co., Inc.) initially sued the United States and individual U.S. naval officers to compel performance or obtain damages and sought a preliminary writ to enjoin contracting with third parties.
Key Dates (Factual Timeline)
May 1972: U.S. invited bids for several Subic Bay repair projects; Eligio de Guzman & Co., Inc. submitted bids and later received telegram requests to confirm prices and bonding company. June 1972: Letter signed by William I. Collins informed the company it did not qualify and that projects were awarded to third parties. (The decision date of the case is not included here per instructions.)
Applicable Law and Constitutional Basis
The court applied principles of State immunity under public international law, distinguishing sovereign/governmental acts (jure imperii) from private/commercial/proprietary acts (jure gestionis). The decision was rendered under the then‑applicable Philippine constitutional framework in effect at the time of decision.
Factual Allegation and Unadjudicated Claim
The private respondent alleged acceptance of its bids (asserting that the U.S. practice of requesting price confirmation amounted to acceptance) and later alleged wrongful disqualification and award to third parties. The truth of the allegation of acceptance was not tested because the case did not reach trial.
Trial Court Proceedings and Relief Sought
Defendants made a special appearance solely to question jurisdiction and filed a motion to dismiss, opposing the writ of preliminary injunction. The trial court denied the motion to dismiss and issued the writ of preliminary injunction; motions for reconsideration were denied by the trial court, prompting the petition for review before the Supreme Court.
Legal Issue Presented
Whether the Philippine courts had jurisdiction to entertain a suit against the United States (and its agents) arising from the procurement/repair projects at a U.S. naval reservation in the Philippines, or whether State immunity barred the suit because the challenged acts constituted sovereign (jure imperii) rather than commercial (jure gestionis) functions.
Majority Court’s Legal Analysis — State Immunity Doctrine
The majority affirmed that the traditional rule of State immunity exempts a State from suit in another State’s courts without consent, but that the doctrine has evolved into a restrictive form distinguishing sovereign acts (jure imperii) from commercial acts (jure gestionis). State immunity now extends only to acts jure imperii. The court observed that the correct test for applicability of immunity is the legal nature of the act, not merely the existence of a contract.
Majority’s Application to the Facts
The majority concluded that the projects were integral parts of the naval base devoted to the defense of both the United States and the Philippines, and thus constituted governmental functions (jure imperii), not commercial activities. Because the acts complained of were sovereign in nature, the Philippine courts lacked jurisdiction to entertain the suit against the United States or its agents.
Majority’s Treatment of Precedent (Lyons and Syquia)
The majority found reliance on Harry Lyons, Inc. v. United States of America misplaced because the relevant statements in Lyons were obiter and the case’s dismissal thereon was based on failure to exhaust administrative remedies. By contrast, Syquia v. Lopez was cited as authority supporting the proposition that the decisive factor is the legal nature of the act (sovereign versus proprietary), not merely that the State entered into a contract.
Holding and Disposition
The petition was granted. The Supreme Court set aside the trial court orders denying the motion to dismiss and issuing the preliminary injunction, and dismissed Civil Case No. 779‑M for lack of jurisdiction. Costs were assessed against the private respondent.
Dissenting Opinion (Justice Makasiar) — Summary of Reasoning
Justice Makasiar would have dismissed the petition and allowed trial to proceed. The dissent argued that by entering into and confirming bids for repair work at Subic Bay, the U.S. (through its naval authorities) impliedly waived immunity and “descended to the level of an
...continue readingCase Syllabus (G.R. No. L-2068)
Title and Nature of Proceeding
- Petition to review, set aside certain orders and to restrain the respondent judge from trying Civil Case No. 779‑M of the (defunct) Court of First Instance of Rizal.
- Petition filed by: United States of America, Capt. James E. Galloway, William I. Collins and Robert Gohier (petitioners).
- Respondents in the petition: Hon. V. M. Ruiz, Presiding Judge of Branch XV, Court of First Instance of Rizal; and Eligio De Guzman & Co., Inc. (private respondent).
- Decision author: Justice Abad Santos; full court (EN BANC) with concurrence and a single dissent (Makasiar, J.).
Factual Background
- At the times material to the case, the United States of America maintained a naval base in Subic, Zambales, pursuant to the Military Bases Agreement between the Philippines and the United States.
- In or about May 1972 the United States invited bids for the following projects:
- Repair fender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.
- 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. submitted bids in response to the invitation.
- The company received two telegrams from the United States requesting confirmation of its price proposals and the name of its bonding company; the company complied.
- The company alleges in its complaint that "A request to confirm a price proposal confirms the acceptance of a bid pursuant to defendant United States' bidding practices." The truth of that allegation remains untested because the case never reached trial.
- In June 1972, the company received a letter signed by William I. Collins, Director, Contracts Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the Navy (one of the petitioners), stating:
- The company did not qualify to receive an award for the projects because of a 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 projects had been awarded to third parties.
Complaint, Relief Sought, and Trial Court Action
- Civil Case No. 779‑M: Eligio De Guzman & Co., Inc. sued the United States of America and Capt. James E. Galloway, William I. Collins, and Robert Gohier (members of the U.S. Navy Engineering Command).
- Relief sought by the plaintiff:
- Order requiring the defendants to allow the plaintiff to perform the work on the projects.
- In the alternative, if specific performance is no longer possible, damages.
- Issuance of a writ of preliminary injunction restraining defendants from entering into contracts with third parties for work on the projects.
- Defendants' procedural posture:
- Entered a 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," asserting that acts and omissions alleged were of individual defendants as agents of the United States, a foreign sovereign that had not consented to suit on the asserted causes of action (Rollo, p. 50).
- Filed a motion to dismiss which included opposition to issuance of the writ of preliminary injunction.
- Trial court ruling:
- Denied the defendants' motion to dismiss.
- Issued the writ of preliminary injunction sought by the plaintiff.
- Defendants moved twice for reconsideration; both motions were denied.
Grounds and Relief Sought by Petitioners in This Proceeding
- Petitioners seek a perpetual restraint on proceedings in Civil Case No. 779‑M for lack of jurisdiction on the part of the trial court.
- Primary ground: state (sovereign) immunity — the United States as foreign sovereign has not consented to suit in Philippine courts for the causes of action asserted.
Legal Principles and Doctrinal Discussion (as addressed by the Court)
- Traditional rule of State immunity:
- A State is exempt from being sued in the courts of another State without its consent or waiver.
- This rule arises from principles of independence and equality of States.
- Evolution to restrictive doctrine:
- International law distinguishes between sovereign/governmental acts (jure imperii) and private/commercial/proprietary acts (jure gestionis).
- Restrictive application of State immunity confines immunity to acts jure imperii and exposes acts jure gestionis to suit.
- The restrictive doctrine is noted to be the rule in the United States, United Kingdom, and other Western European states (citing Coquia and Defensor‑Santiago, Public International Law, pp. 207‑209 [1984]).
- Respondent trial judge's recognition:
- The trial judge acknowledged the need to distinguish governmental functions from private/proprietary acts and stated that entering into a contract for repair of wharves or shoreline "is certainly not a governmental function altho it may partake of a public nature or character." (Rollo, p. 20).
Majority’s Analysis of Precedent (Lyons and Syquia)
- Lyons, Inc. v. United States (104 Phil. 594 [1958]):
- Trial court granted motion to dismiss for lack of jurisdiction and failure to exhaust administrative remedies under Article XXI of the contract.
- This Court sustained dismissal because appellant had not complied with the contract procedure a