[G.R. No. L-11786. September 26, 1958.]
, 312 where an action was
HARRY LYONS, INC., Plaintiff-Appellant, v. THE
UNITED STATES OF AMERICA (651 United
States Naval Supply Depot, U.S. Navy,
Philippines), Defendant-Appellee.
1. SOVEREIGN STATE; WHEN STATE MAY BE
SUED WITHOUT ITS CONSENT. — As a rule, a
sovereign state cannot be sued in its own
courts, or in any other, without its consent.
However, where, as in the instant case, a
sovereign state entered in to 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.
DECISION
BAUTISTA ANGELO, J.:
Plaintiff brought this action before the Court of
First Instance of Manila to collect several sums
of money arising from a contract entered into
between plaintiff and defendant.
Defendant filed a motion to dismiss on the
ground that the court has no jurisdiction over
defendant and over the subject matter of the
action. The court sustained this motion on the
grounds that (a) the courts lacks jurisdiction over
defendant, it being a sovereign state which
cannot be sued without its consent; and (b)
plaintiff failed to exhaust the administrative
remedies provided for in Article XXI of the
contract. Plaintiff took the case on appeal
directly to this Court.
It appears that plaintiff and defendant entered
into a contract for stevedoring service at the
U.S. Naval Base, Subic Bay, Philippines, the
contract to terminate on June 30, 1956. This
contract was entered into pursuant to the
provisions of Section 2 (c) (1) of the Armed
Services Procurement Act of 1947 of the United
States of America (Public Law 413, 80th
Congress). It is undisputed that the contract was
entered into between plaintiff and the
Government of the United States of America.
"It is an established principle of jurisprudence in
all civilized nations, resting on reasons of public
policy, because of the inconvenience and danger
which would follow from any different rule, that
the sovereign cannot be sued in its own courts,
or in any other, without its consent and
permission. Accordingly, other than those
instances in which the United States has
consented to be sued, the United States is
immune from suit upon claims against it or debts
due by it. . . . When consent to suit is not
forthcoming, the only remedy of the party injured
by an act of the United States is by an appeal to
Congress" (54 Am. Jur., Section 127, pp. 633-
635).
"In the case of Syquia v. Lopez, Et Al., 47 Off.
Gaz., 665; 84 Phil.
brought against U.S. Army Officers not only for
the recovery of possession of certain apartments
occupied boy military personnel under a contract
of lease, but also to collect back rents and rents
at increased rates including damages, we held: .
. . It is therefore, evident that the claim and
judgment will be a charge against and a financial
liability to the U. S. Government because the
defendants had undoubtedly acted in their
official capacities as agents of said Government,
. . . . Consequently, the present suit should be
regarded as an action against the United States
Government. . . . Therefore, the suit cannot be
entertained by the trial court for lack of
jurisdiction." (Johnson v. General Turner, Et Al.,
94 Phil., 807).
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. Thus,
appellant cites the case of Santas v. Santos, 92
Phil. 281; 48 Off. Gaz., 4815, wherein this Court
made the following
pronouncement:jgc:chanrobles.com.ph
". . . If, where and when the state or its
government enters into a contract, through its
officers or agents, in furtherance of a legitimate
aim and purpose and pursuant to constitutional
legislative authority, whereby mutual or
reciprocal benefits accrue and rights and
obligations arise therefrom, and if the law
granting the authority to enter into such contract
does not provide for or name the officer against
whom action may be brought in the event of a
breach thereof, the state itself may be sued
even without its consent, because by entering
into a contract the sovereign state has
descended to the level of the citizen and
consent to be sued is implied from the very act
entering into such contract. If the dignity of the
state, the sacredness of the institution, the
respect for the government are to be preserved
and the dragging of its name in a suit to be
prevented, the legislative department should
name the officer or agent against whom the
action may be brought in the event of breach of
the contract entered into under its name and
authority. And the omission or failure of the
legislative department to do so is no obstacle or
impediment for an individual or citizen, who is
aggrieved by the breach of the contract, to bring
an action against the state itself for the reasons
already adverted to, to wit: the descent of the
sovereign state to the level of the individual or
citizen with whom it entered into a contract and
its consent to be sued implied from the act of
entering into such contract."cralaw virtua1aw
library
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. Navy Reservation, it is evident
that it can bring an action before our courts for
any contractual liability that political entity may
assume under the contract. The trial court,
therefore, has jurisdiction to entertain this case
in so far as appellee is concerned.
But assuming that the trial court has jurisdiction
to entertain this case, as set out above, did said
court err in dismissing the complaint on the
ground that plaintiff has failed to comply with the
condition prescribed in the contract before an
action could be taken in court against the U. S.
Government? Article XXI of the contract
provides:jgc:chanrobles.com.ph
"ARTICLE XXI. Disputes.
Except as otherwise provided in this contract,
any dispute concerning a question of fact arising
under this contract which is not disposed of by
agreement shall be decided by the Contracting
Officer, who shall reduce his decision to writing
and mail or otherwise furnish a copy thereof to
the Contractor. Within 30 days from the date of
receipt of such copy, the Contractor may appeal
by mailing or otherwise furnishing to the
Contracting Officer a written appeal addressed
to the Secretary, and the decision of the
Secretary or his duly authorized representative
for the hearing of such appeals, shall, unless
determined by a court of competent jurisdiction
to have been fraudulent, arbitrary, capricious, or
so grossly erroneous as necessary to imply bad
faith, be final and conclusive, provided that, if no
such appeal is taken, the decision of the
Contracting Officer shall be final and conclusive.
In connection with any appeal proceeding under
this clause, the Contractor shall be afforded an
opportunity to be heard and to offer evidence in
support of its appeal. Pending final decision of a
dispute hereunder, the Contractor shall proceed
diligently with the performance of the contract
and in accordance with the Contracting Officer’s
decision."cralaw virtua1aw library
The foregoing lays down the procedure to be
followed by plaintiff should it desire to obtain a
remedy under the contract. Its remedy is to file
its claim, not with the court, but With the
Contracting Officer who is empowered to act and
render a decision. If dissatisfied with his
decision, plaintiff may appeal to the Secretary of
the Navy where he would be "afforded an
opportunity to be heard and to offer evidence in
support of its appeal", and the decision of the
Secretary shall be final and conclusive "unless
determined by a court of competent jurisdiction
to have been fraudulent, arbitrary, capricious, or
so grossly erroneous as necessary to imply bad
faith." Hence, it is only after the claim has been
decided on appeal by the Secretary that plaintiff
can resort to a court of competent jurisdiction.
"As this Court well said: ‘If plaintiffs were
aggrieved by the action or decision of the
Director of Lands, their remedy was to appeal to
the Secretary of Agriculture and Commerce. But
it does not appear that they have done so. It
does not even appear that they have pursued
their protest to its conclusion in the Bureau of
Lands itself. Having failed to exhaust their
remedy in the administrative branch of the
government, plaintiffs cannot now seek relief in
the courts of justice.’ (Eloy Miguel, Et. Al. v.
Anacleta M. Vda. de Reyes, Et Al., 93 Phil.,
642)." (Heirs of Gregorio Lachica, Et Al., v.
Fermin Ducusin, Et Al., 102 Phil., 551).
"In order to maintain a suit against the United
States, plaintiff must show that the United States
has consented to suit and must bring himself
within the terms of the consent, and it is also
generally held that he must first exhaust his
administrative remedies." (91 C.J.S., p. 421)
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.
Wherefore, the order appealed from is affirmed,
with costs.
USA VS RUIZ
G.R. No. L-35645 136 scra 487 May 22,
1985
UNITED STATES OF AMERICA, CAPT. JAMES
E. GALLOWAY, WILLIAM I. COLLINS and
ROBERT GOHIER, petitioners,
vs.
HON. V. M. RUIZ, Presiding Judge of Branch
XV, Court of First Instance of Rizal and ELIGIO
DE GUZMAN & CO., INC., respondents.
Facts:
This is a petition to review, set aside certain
orders and restrain perpetually the proceedings
done by Hon. Ruiz for lack of jurisdiction on the
part of the trial court.
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 a couple of
repair projects. Eligio de Guzman land Co., Inc.
responded to the invitation and submitted bids.
Subsequent thereto, the company received from
the US two telegrams requesting it to confirm its
price proposals and for the name of its bonding
company. The company construed this as an
acceptance of its offer so they complied with the
requests. The company received a letter which
was signed by William I. Collins of Department
of the Navy of the United States, also one of the
petitioners herein informing that the company
did not qualify to receive an award for the
projects because of its previous unsatisfactory
performance rating in repairs, and that the
projects were awarded to third parties. For this
reason, a suit for specific performance was filed
by him against the US.
Issues:
Whether or not the US naval base in bidding for
said contracts exercise governmental functions
to be able to invoke state immunity.
Discussions:
The traditional role of the state immunity
exempts a state from being sued in the courts of
another state without its consent or waiver. This
rule is necessary consequence of the principle
of independence and equality of states.
However, the rules of international law are not
petrified; they are continually and evolving and
because the activities of states have multiplied.
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 restrictive application of State immunity is
now the rule in the United States, the United
Kingdom and other states in western Europe.
Rulings:
Yes. The Supreme Court held that 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.
The restrictive application of state immunity is
proper only when the proceedings arise out of
commercial transactions of the foreign
sovereign. Its commercial activities of economic
affairs. A state may be 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.
M.H. Wylie v RarangG.R. No. 74135, May 28,
1992
FACTS:
Petitioner M.H. Wylie was the assistant administ
rativeofficer while petitioner Capt. James William
s was thecommanding officer of the US Naval
Base in Subic Bay, Olongapo City. Private
Respondent (PR) Aurora Rarang was assigned
as merchandise control guard in the Office of the
Provost Marshal M.H. Wylie, in his capacity as
asst. admin. Officer, supervised the publication
of the so-called “Plan of the Day” (POD)
published daily by the US Naval Base Station.
The POD featured important announcements,
necessary precautions and general matters of
interest to military personnel. One of the regular
features of the POD was the“ action line inquiry”
(NAVSTA ACTION LINEINQUIRY), a telephone
answering device in the Office of the Admin Asst
intended to provide personnel access to the
Commanding Officer on matters they feel should
be brought to his attention for correction or
investigation. On February 3, 1978, the POD
under the (NAVSTA) action line inquiry,
published and mentioned a certain “AURING” as
“…a disgrace to her division and to the Office of
the Provost Marshal. The same article explicitly
implied that Auring was consuming
and appropriating for herself confiscated items
like cigarettes and foodstuffs. The PR was the
only one who was named “Auring” in the Office
of the Provost Marshal. As a result thereof, she
was investigated by her superior. The PR
commenced an ACTION FOR DAMAGES in the
CFI of Zambales against M.H. Wylie, Capt.
James Williams and the US Naval Base
alleging that the article
constituted false, injurious, and malicious defam
ation and libel tending to impeach her honesty, v
irtue and reputation exposing her to public
hatred, contempt and ridicule. The TC ruled in
favour of the PR and dismissed the suit against
the US Naval Base. The IAC (now,CA) affirmed
the judgment of the TC with modifications as to
the amount of damages awarded.
ISSUE:
Whether or not the American naval officers (such
as Wylie and Capt. Williams) who commit a
crime or tortious act while discharging official
functions still covered by the principle of state
immunity from suit. Does
thegrant of rights, power, and authority to the US
under the RPUS Bases Treaty cover immunity
of its officers from crimes and torts?
HELD:
The general rule is that 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 (Chavezv.
Sandiganbayan).It may be argued, as a general
rule, that Capt. Williams as commanding officer
of the naval base was far removed in the chain
of command from the offensive publication and it
would be asking too much to hold
him responsible for everything which goes
wrong on the base. However, in this particular
case, the records show that the offensive
publication was sent to the commanding officer
for approval and that he approved it. ART.
2176, CC prescribes a civil liability for damages
caused by a person’s act or omission
constituting fault or negligence, stating that,
“Whoever by act or omission, causes damage to
another, there being fault or negligence, is
obliged to pay for the damage done. Such fault
or negligence,..” Moreover, ART. 2219(7),
Civil Code provides that moral damages may be
recovered in case of libel, slander or any other
form of defamation.”Indeed, the imputation
of theft contained in the POD was defamation
against the character and
reputation of the PR. Petitioner Wylie himself ad
mitted that the Office of the Provost Marshal exp
licitly recommended the deletion of the name
“Auring” if the article will be published. The
petitioners, however, were NEGLIGENT
because under their direction, they issued the
publication without deleting the said name. Such
act or
omission was ULTRA VIRES and CANNOT be d
eemed part of official duty. It was a TORTIOUS
ACT whichridiculed the PR. As a result of
petitioner’s act, PR suffered besmirched
reputation, serious anxiety, wounded feelings
and social humiliation, especially so, since the
article was baseless and false. The petitioners,
alone, in their personal capacities, are liable
for the damages they caused the Private
Respondent.
US v. Reyes 219 SCRA 192 (1993)
Petition for Certiorari to Annul & Set Aside RTC
Cavite Branch 22 Resolution, 1993
FACTS:
• Respondent Nelia Montoya, an American
Citizen, worked as an ID checker at the US
Navy Exchange (NEX) at the US Military
Assistance Group (JUSMAG) headquarters in
Quezon City. She’s married to Edgardo
Montoya, a Filipino-American serviceman
employed by the US Navy & stationed in San
Francisco.
• Petitioner Maxine is an American Citizen
employed at the JUSMAG headquarters as the
activity exchange manager.
• Jan. 22, 1987 – Montoya bought some items
from the retail store Bradford managed, where
she had purchasing privileges. After shopping &
while she was already at the parking lot, Mrs.
Yong Kennedy, a fellow ID checker approached
her & told her that she needed to search her
bags upon Bradford’s instruction. Montoya
approached Bradford to protest the search but
she was told that it was to be made on all
JUSMAG employees on that day. Mrs. Kennedy
then performed the search on her person, bags
& car in front of Bradford & other curious
onlookers. Nothing irregular was found thus she
was allowed to leave afterwards.
• Montoya learned that she was the only person
subjected to such search that day & she was
informed by NEX Security Manager Roynon that
NEX JUSMAG employees are not searched
outside the store unless there is a strong
evidence of a wrong-doing. Montoya can’t recall
any circumstance that would trigger suspicion of
a wrong-doing on her part. She is aware of
Bradford’s propensity to suspect Filipinos for
theft and/or shoplifting.
• Montoya filed a formal protest w/Mr. Roynon
but no action was taken.
• Montoya filed a suit against Bradford for
damages due to the oppressive & discriminatory
acts committed by petitioner in excess of her
authority as store manager. She claims that she
has been exposed to contempt & ridicule
causing her undue embarrassment & indignity.
She further claims that the act was not
motivated by any other reason aside from racial
discrimination in our own land w/c is a blow to
our national pride & dignity. She seeks for moral
damages of P500k and exemplary damages of
P100k.
• May 13, 1987 – Summons & complaint were
served on Bradford but instead of filing an
answer, she along with USA government filed a
motion to dismiss on grounds that: (1) this is a
suit against US w/c is a foreign sovereign
immune from suit w/o its consent and (2)
Bradford is immune from suit for acts done in the
performance of her official functions under Phil-
US Military Assistance Agreement of 1947 &
Military Bases Agreement of 1947. They claim
that US has rights, power & authority w/in the
bases, necessary for the establishment, use &
operation & defense thereof. It will also use
facilities & areas w/in bases & will have effective
command over the facilities, US personnel,
employees, equipment & material. They further
claim that checking of purchases at NEX is a
routine procedure observed at base retail outlets
to protect & safeguard merchandise, cash &
equipment pursuant to par. 2 & 4(b) of
NAVRESALEACT SUBIC INST. 5500.1.
• July 6, 1987 – Montoya filed a motion for
preliminary attachment claiming that Bradford
was about to leave the country & was removing
& disposing her properties w/intent to defraud
her creditors. Motion granted by RTC.
• July 14, 1987 – Montoya opposed Bradford’s
motion to dismiss. She claims that: (1) search
was outside NEX JUSMAG store thus it’s
improper, unlawful & highly-discriminatory and
beyond Bradford’s authority; (2) due to excess in
authority and since her liability is personal,
Bradford can’t rely on sovereign immunity; (3)
Bradford’s act was committed outside the
military base thus under the jurisdiction of
Philippine courts; (4) the Court can inquire into
the factual circumstances of case to determine
WON Bradford acted w/in or outside her
authority.
• RTC granted Montoya’s motion for the
issuance of a writ of preliminary attachment and
later on issued writ of attachment opposed by
Bradford. Montoya allowed to present evidence
& Bradford declared in default for failure to file
an answer. RTC ruled in favor of Montoya
claiming that search was unreasonable,
reckless, oppressive & against Montoya’s liberty
guaranteed by Consti. She was awarded P300k
for moral damages, P100k for exemplary
damages & P50k for actual expenses. Bradford
filed a Petition for Restraining Order. SC granted
TRO enjoining RTC from enforcing decision.
• Montoya claims that Bradford was acting as a
civilian employee thus not performing
governmental functions. Even if she were
performing governmental acts, she would still
not be covered by the immunity since she was
acting outside the scope of her authority. She
claims that criminal acts of a public
officer/employee are his private acts & he alone
is liable for such acts. She believes that this
case is under RP courts’ jurisdiction because act
was done outside the territorial control of the US
Military Bases, it does not fall under offenses
where US has been given right to exercise its
jurisdiction and Bradford does not possess
diplomatic immunity. She further claims that RP
courts can inquire into the factual circumstances
& determine WON Bradford is immune.
3. WON case at bar is a suit against the State. -
NO
Doctrine of state immunity is expressed in Art.
XVI, Sec. 3 of the 1987 Constitution. This
immunity also applies to complaints filed against
officials of the state for acts allegedly performed
by them in discharge of their duties since it will
require the state to perform an affirmative act
such as appropriation of amount to pay
damages. This will be regarded as a case
against the state even if it has not be formally
impleaded. But this is not all encompassing. It’s
a different matter where the public official is
made to account in his capacity as such for acts
contrary to law & injurious to rights of plaintiff.
State authorizes only legal acts by its officers.
Action against officials by one whose rights have
been violated by such acts is not a suit against
the State w/in the rule of immunity of the State
from suit. The doctrine of state immunity cannot
be used as an instrument for perpetrating an
injustice. It will not apply & may not be invoked
where the public official is being sued in his
private & personal capacity as an ordinary
citizen. This usually arises where the public
official acts w/o authority or in excess of the
powers vested in him. A public official is liable if
he acted w/malice & in bad faith or beyond the
scope of his authority or jurisdiction. (Shauf vs.
CA) Also, USA vs. Guinto declared that USA is
not conferred with blanket immunity for all acts
done by it or its agents in the Philippines merely
because they have acted as agents of the US in
the discharge of their official functions. In this
case, Bradford was sued in her private/personal
capacity for acts done beyond the scope & place
of her official function, thus, it falls w/in the
exception to the doctrine of state immunity.

4. WON Bradford enjoys diplomatic immunity. -

NO

First of all, she is not among those granted

diplomatic immunity under Art. 16(b) of the 1953
Military Assistance Agreement creating the
JUSMAG. Second, even diplomatic agents who
enjoy immunity are liable if they perform acts
outside their official functions (Art. 31, Vienna
Convention on Diplomatic Relations).