PNR Vs IAC

55.
PNR vs IAC 1993

Section 3. The State may not be sued without its consent.
Facts:
The case arose from a collision of a passenger express train of defendant Philippine
National Railways, (PNR) coming from San Fernando, La Union and bound for Manila
and a passenger bus of Baliwag Transit, Inc. which was on its way to Hagonoy,
Bulacan, from Manila, but upon reaching the railroad crossing at Barrio Balungao,
Calumpit, Bulacan at about 1:30 in the afternoon of August 10, 1974, got stalled and
was hit by defendant's express train causing damages to plaintiff's bus and its
passengers, eighteen (18) of whom died and fifty-three (53) others suffered physical
injuries. Plaintiff alleging that the proximate cause of the collision was the negligence
and imprudence of defendant PNR. The defendants, in their Answer traversed the
material allegation of the Complaint and as affirmative defense alleged that the
collision was caused by the negligence, imprudence and lack of foresight of plaintiff's
bus driver.
Issue:
WON PNR has an immunity from suit considering that PNR is a GOCC?
Ruling:
NO. PNR has no immunity from suit. Thus, respondent court utilized the doctrine of
implied powers announced in National Airports Corporation vs. Teodoro, Sr. and
Philippine Airlines, Inc. (91 Phil. 203 [1952]), to the effect that the power to sue and
be sued is implicit from the faculty to transact private business. At any rate,
respondent court characterized the railroad company as a private entity created not to
discharge a governmental function but, among other things, to operate a transport
service which is essentially a business concern, and thus barred from invoking
immunity from suit.
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
(Cruz,Philippine Political Law, 1991 edition, page 33; Sinco, Philippine Political Law,
Eleventh Edition, 1962, page 34). When the State participates in a covenant, it is
deemed to have descended from its superior position to the level of an ordinary
citizen and thus virtually opens itself to judicial process. Of course, We realize that
this Court qualified this form of consent only to those contracts concluded in a
proprietary capacity and therefore immunity will attach for those contracts entered into
in a governmental capacity, following the ruling in the 1985 case of United States of
America vs. Ruiz (136 SCRA 487 [1985]; cited by Cruz, supra at pages 36-37). But
the restrictive interpretation laid down therein is of no practical worth nor can it give
rise to herein petitioner PNR's exoneration since the case ofMalong vs. Philippine
National Railways (138 SCRA 63, [1985]); 3 Padilla, 1987 Constitution with
Comments and Cases, 1991 edition, page 644), decided three months after Ruiz was
promulgated, was categorical enough to specify that the Philippine National Railways
"is not performing any governmental function"
Section 36 of the Corporation Code provides that every corporation has the power to
sue and be sued in its corporate name. Section 13(2) of the Corporation Law provides
that every corporation has the power to sue and be sued in any court.
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 (Justice
Holmes in Kawananakoa vs. Polyblank, 205 U.S. 353, 51 L. 3d 834).
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
To the pivotal issue of whether the State acted in a sovereign capacity when it
organized the PNR for the purpose of engaging in transportation, Malong continued to
hold that:
. . . in the instant 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." (Nat. Airports Corp.
vs. Teodoro and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs. Santos, 92 Phil.
281, 285; Harry Lyons, Inc. vs. USA, 104 Phil. 593).
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 (81
C.J.S. 1319).
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.

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55.

PNR vs IAC 1993

functions of a governmental or political character, are not regarded as suits

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