USA V Ruiz Case Brief

When the State enters into a Business Contract. 3.
3. The Company’s complaint is to order the petitioners herein to allow the

The Company to perform the work on the projects and, in the event that
USA V RUIZ specific performance was no longer possible, to order the petitioners herein
G.R. No. L-35645 to pay damages. The Company also asked for the issuance of a writ of
May 22, 1985 preliminary injunction to restrain the petitioners herein from entering into
contracts with third parties for work on the projects.
UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, 4. Petitoners herein entered their special appearance for the purpose only
WILLIAM I. COLLINS and ROBERT GOHIER, petitioners, of questioning the jurisdiction of this court over the subject matter of the
vs. complaint and the persons of The Company, the subject matter of the
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First complaint being acts and omissions of the individual petitioners as agents of
Instance of Rizal and ELIGIO DE GUZMAN & CO., INC., respondents. USA, 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.
Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners. 5. Petitioners filed a motion to dismiss The Company’s complaint which
included an opposition to the issuance of the writ of preliminary injunction.
Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents. 6. The company opposed the motion.
7. The trial court denied the motion and issued the writ.
PONENTE: ASSOCIATE JUSTICE VICENTE ABAD SANTOS 8. Petitoners moved twice to reconsider but to no avail. Hence the instant
petition which seeks to restrain perpetually the proceedings in Civil Case
FACTS No. 779-M for lack of jurisdiction on the part of the trial court.
1. This is a petition to review, set aside certain orders and restrain the 9. The petition is highly impressed with merit.
respondent judge from trying Civil Case No. 779M of the defunct Court of
First Instance of Rizal. ISSUE/S
Facts of Civil Case No. 779M 1. Whether or not the US Naval Base in bidding for said contracts exercise
1. The United States of America had a naval base in Subic, governmental functions to be able to invoke state immunity.
Zambales. The base was one of those provided in the Military Bases 2. Does the court have jurisdiction over the case?
Agreement between the Philippines and the United States.
2. May 1972 - The United States invited the submission of bids for HOLDINGS/RULINGS
some repair projects. 1. Yes. The Supreme Court held that the contract relates to the exercise of
3. Eligio de Guzman & Co., Inc. (“The Company”) responded to the its sovereign functions. The restrictive application of State immunity is
invitation and submitted bids. proper only when the proceedings arise out of commercial transactions of
4. The Company received from the United States two telegrams the foreign sovereign. In this case, the projects are an integral part of the
requesting it to confirm its price proposals and for the name of its Naval Base which is devoted to the national defense of both the United
bonding company. The Company construed this as an acceptance of States and the Philippines, indisputably a function of the government of the
its offer, so they complied with the requests. highest order, they are not utilized for nor dedicated to commercial or
5. June 1972 - The Company received a letter which was signed by business purposes.
William I. Collins, Department of the Navy of the United States, also 2. No. By virtue of state immunity, the courts of the Philippines have no
one of the petitioners herein informing that the company did not jurisdiction over the case for the US Government has not given consent to
qualify to receive an award for the projects because of its previous the filing of this suit.
unsatisfactory performance rating in repairs, and that the projects
were awarded to third parties.
2. The Company sued USA and all petitioners herein, who are all members
of the Engineering Command of the U.S. Navy.
APPLICATION/S
1. The Supreme Court distinguished between contracts entered into by the
State in jure imperii (sovereign acts) and in jure gestionis (commercial or
proprietary acts).
2. Under the restrictive application, immunity is only available in respect of
acts resulting from the exercise of a sovereign power. As such, states may
not claim immunity in respect of commercial activities or over commercial
assets.
3. Where the contract is in pursuit of a sovereign activity, there is no waiver
of immunity, and no implied consent may be derived therefrom.
CONCLUSION/S
1. The petition is GRANTED.
2. The questioned orders of the respondent judge are set aside and Civil
Case No. 779M is DISMISSED.
3. Costs against the the private respondent.
DISSENTING OPINION
PONENTE: CHIEF JUSTICE FELIX VALENCIA MAKASIAR
1. The petition should be DISMISSED.
2. The proceedings in Civil Case No. 779M in the defunct CFI (now RTC) of
Rizal be allowed to continue therein.
- When the U.S. Government, through its agency at Subic Bay,
confirmed the acceptance of a bid of a private company for the repair of
wharves or shoreline in the Subic Bay area, it is deemed to have
entered into a contract and thus waived the mantle of sovereign
immunity from suit and descended to the level of the ordinary citizen. Its
consent to be sued, therefore, is implied from its act of entering into a
contract (Santos vs. Santos, 92 Phil. 281, 284).

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When the State enters into a Business Contract. 3.

3. The Company’s complaint is to order the petitioners herein to allow the

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