PHILIPPINE NATIONAL RAILWAYS and HONORIO CABARDO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT, INC., respondents.
G.R. No. 70547
January 22, 1993
By: Alice

Topic: Liability of GOCCs

Doctrine:
The point is that when the government enters into a commercial business it abandons its sovereign capacity and is to
be treated like any other private. By engaging in a particular business through the instrumentality of a corporation,
the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the
rules of law governing private corporations.

When the State acts in its proprietary capacity, it is amenable to all the rules of law which bind private individuals.
There is not one law for the sovereign and another for the subject, but when the sovereign engages in business and
the conduct of business enterprises, and contracts with individuals, whenever the contract in any form comes before
the courts, the rights and obligation of the contracting parties must be adjusted upon the same principles as if both
contracting parties were private persons.

Facts:
On 10 September 1972, at about 9:00 p.m., Winifredo Tupang, husband of Rosario Tupang, boarded Train
516 of the Philippine National Railways at Libmanan, Camarines Sur, as a paying passenger bound for
Manila. Due to some mechanical defect, the train stopped at Sipocot, Camarines Sur, for repairs, taking
some two hours before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell off the train resulting
in his death. The train did not stop despite the alarm raised by the other passengers that somebody fell from
the train. Instead, the train conductor, Perfecto Abrazado, called the station agent at Candelaria, Quezon,
and requested for verification of the information. Police authorities of Lucena City were dispatched to the
Iyam Bridge where they found the lifeless body of Winifredo Tupang. As shown by the autopsy report,
Winifredo Tupang died of cardio-respiratory failure due to massive cerebral hemorrhage due to traumatic
injury. Tupang was later buried in the public cemetery of Lucena City by the local police authorities.
Upon complaint filed by the deceaseds widow, Rosario Tupang, the then CFI Rizal, after trial, held the
PNR liable for damages for breach of contract of carriage and ordered it to pay Rosario Tupang the sum of
P12,000.00 for the death of Winifredo Tupang, plus P20,000.00 for loss of his earning capacity, and the
further sum of P10,000.00 as moral damages, and P2,000.00 as attorneys fees, and cost.
On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise the
utmost diligence required by law of a common carrier. It further increased the amount adjudicated by the
trial court by ordering PNR to pay the Rosario Tupang an additional sum of P5,000,00 as exemplary
damages.
Moving for reconsideration of the above decision, the PNR raised for the first time, as a defense, the
doctrine of state immunity from suit. The motion was denied. Hence the petition for review.

Issue: WON PNR, as a gocc, is immuned from suits. NO.

Held:

Note: let it be established that PNR is negligent.

The bone of contention for exculpation is premised on the familiar maxim in political law that the State, by virtue of
its sovereign nature and as reaffirmed by constitutional precept, is insulated from suits without its consent (Article
16, Section 3, 1987 Constitution). However, equally conceded is the legal proposition that the acquiescence of the
State to be sued can be manifested expressly through a general or special law, or indicated implicitly, as when the
State commences litigation for the purpose of asserting an affirmative relief or when it enters into a contract.
The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not immune from suit under its
charter.
The PNR Charter, Republic Act No. 4156, as amended by Republic Act No. 6366 and Presidential Decree No. 741,
provides that the PNR is a government instrumentality under government ownership during its 50-year term, 1964 to
2014.
A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and
practical ground that there can be no legal right as against the authority that makes the law on which the right
depends.
The public service would be hindered, and public safety endangered, if the supreme authority could be subjected to
suit at the instance of every citizen and, consequently, controlled in the use and disposition of the means required for
the proper administration of the Government.

In this case, the State divested itself of its sovereign capacity when it organized the PNR which is no different from
its predecessor, the Manila Railroad Company. The PNR did not become immune from suit. It did not remove itself
from the operation of Articles 1732 to 1766 of the Civil Code on common carriers.

The correct rule is that "not all government entities, whether corporate or noncorporate, are immune from suits.
Immunity from suit is determined by the character of the objects for which the entity was organized."

Suits against State agencies with respect to matters in which they have assumed to act in a private or
nongovernmental capacity are not suits against the State. Suits against State agencies with relation to matters in
which they have assumed to act in a private or nongovernmental capacity, and various suits against certain
corporations created by the State for public purposes, but to engage in matters partaking more of the nature of
ordinary business rather than functions of a governmental or political character, are not regarded as suits against the
State.

The point is that when the government enters into a commercial business it abandons its sovereign capacity and is to
be treated like any other private. By engaging in a particular business through the instrumentality of a corporation,
the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the
rules of law governing private corporations.

When the State acts in its proprietary capacity, it is amenable to all the rules of law which bind private individuals.
There is not one law for the sovereign and another for the subject, but when the sovereign engages in business and
the conduct of business enterprises, and contracts with individuals, whenever the contract in any form comes before
the courts, the rights and obligation of the contracting parties must be adjusted upon the same principles as if both
contracting parties were private persons.

It would be unjust if the heirs of the victim of an alleged negligence of the PNR employees could not sue the PNR
for damages. Like any private common carrier, the PNR is subject to the obligations of persons engaged in that
private enterprise. It is not performing any governmental function.

Contributory negligence of Tupang

PNR has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in
doing so. Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in
the performance of its obligation under the contract of carriage. PNR failed to overthrow such presumption of
negligence with clear and convincing evidence, inasmuch as PNR does not deny, (1) that the train boarded by the
deceased Winifredo Tupang was so overcrowded that he and many other passengers had no choice but to sit on the
open platforms between the coaches of the train, (2) that the train did not even slow down when it approached the
Iyam Bridge which was under repair at the time, and (3) that neither did the train stop, despite the alarm raised by
other passengers that a person had fallen off the train at Iyam Bridge.

While PNR failed to exercise extraordinary diligence as required by law, it appears that the deceased was chargeable
with contributory negligence. Since he opted to sit on the open platform between the coaches of the train, he should
have held tightly and tenaciously on the upright metal bar found at the side of said platform to avoid falling off from
the speeding train. Such contributory negligence, while not exempting the PNR from liability, nevertheless justified
the deletion of the amount adjudicated as moral damages.