Case Summary (G.R. No. L-35645)
Proceedings Below
Civil Case No. 779-M was filed by Eligio de Guzman against the United States and U.S. Navy officials, seeking specific performance or damages, and a preliminary injunction against contracts with third parties. The U.S. defendants appeared specially to contest jurisdiction, moved to dismiss for lack of consent to suit, and opposed the injunction. The trial court denied the motion and issued the writ. Reconsideration motions were denied.
Issues
Whether Philippine courts have jurisdiction to entertain a suit against a foreign sovereign and its officials for contracts related to naval base operations, in the absence of express consent.
Rationale on State Immunity
Under traditional international law, a foreign State is immune from suit without consent. Modern doctrine distinguishes sovereign acts (jure imperii) from commercial or proprietary acts (jure gestionis), extending immunity only to the former. The restrictive doctrine is followed in the U.S., U.K., and Western Europe.
Trial Court’s Misapplication of Lyons
The trial court relied on an obiter remark in Harry Lyons, Inc. v. United States (104 Phil. 594), stating that a sovereign “descends to the level of an individual” when contracting. The Supreme Court held that remark was gratuitous and addressed exhaustion of administrative remedies, not waiver of immunity.
Distinction of Sovereign Versus Commercial Acts
A State may implicitly waive immunity when engaging in purely commercial transactions. Contracts integral to defense operations remain governmental (jure imperii) and retain immunity. The true test is the nature of the act, not merely the existence of a contract.
Application to Subic Bay Projects
Repair and maintenance of naval base installations are sovereig
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Facts
- The United States of America maintained a naval base at Subic Bay, Zambales, under the Philippines–U.S. Military Bases Agreement.
- In May 1972, the U.S. Naval Facilities Engineering Command invited bids for:
• Repair of the fender system at Alava Wharf
• Repair of typhoon damage to Cubi Point shoreline revetment and Leyte Wharf approach - Eligio De Guzman & Co., Inc. submitted bids, confirmed price proposals, and named its bonding company upon U.S. request.
- In June 1972, a letter signed by petitioner William I. Collins notified the company that it “did not qualify” due to prior unsatisfactory performance and that projects had been awarded to third parties.
Procedural History
- Civil Case No. 779-M was filed by De Guzman & Co., Inc. against the U.S. Government and its officers (Galloway, Collins, Gohier), seeking specific performance or damages and a preliminary injunction.
- Defendants made a special appearance to challenge in personam and subject-matter jurisdiction, then moved to dismiss and opposed the injunction.
- The trial court denied the motion to dismiss, granted the injunction, and twice denied motions for reconsideration.
- Petitioners sought certiorari relief from the Supreme Court to restrain further proceedings for lack of jurisdiction.
Issue
- Whether Philippine courts have jurisdiction to entertain a suit against the United States and its agents for contract-related acts performed in relation to a military base.
- Whether the doctrine of State immunity bars such a suit when the contract concerns sovereign functions of national defense.
Petitioners’ Contentions
- A foreign sovereign cannot be sued in domestic courts without its conse