United States of America v.

Ruiz, 136 SCRA 487 (1985)

State Immunity from Suits Extends to contracts Relating to Sovereign Functions.

F: In 5/72, the US advertised for bid projects involving the repair of wharves and certain
works on the shorelines at its naval base in Subic, Zambales. Eligio de Guzman & Co., Inc. (EG
& Co.) submitted proposals in connection w/ w/c it received 2 telegrams from the US govt
asking it to confirm its price proposals and the name of its bonding co. However, in 6/82, EG &
Co. was informed that its proposals had been rejected and the projects had been awarded to 3rd
parties. EG & Co. brought suit in the CFI to compel the US govt to allow it to perform the work
on the projects. It also asked for a writ of prel. inj. to restrain the US govt from entering into
contract w/ 3rd parties for work on the projects. The US govt moved to dismiss the complaint,
but its motion was denied. Hence the petition for review.

HELD: It has been necessary to distinguish bet. 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 imperii. However, the resp. Judge held that by entering into a
contract for the repair of wharves or shorelines the State did not act in its governmental capacity.
A state may be said to have 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.
The rule does not apply where the contract relates to the exercise of its sovereign functions.
In this case the projects are an integral part of the naval base w/c is devoted to the defense
of both the US and the Phils., indisputably a function of the govt of the highest order; they are
not utilized for, nor dedicated to, commercial or business purpose. VV.

Implied consent:

(1) When the government enters into business contracts

When the government is in the performance of governmental function (jure imperii),

even if it enters into a contract with private persons, it cannot be sued without its consent.
Thus in United States v Ruiz, 136 SCRA 487 (1985). a contract for the repair of wharves
and piers at the naval base in Subic was held to be in line with the governmental function of the
US Government and so the immunity existed.
But when the government enters into commercial contracts and descends to the status of
ordinary persons (jure gestioni), it can be sued like any other person.