UNITED STATES OF AMERICA, FREDERICK M.

SMOUSE AND YVONNE REEVES, petitioners,

vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles City,
ROBERTO T. VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR,
respondents.
G.R. No. 76607 February 26, 1990

Application: Juridical Persons (Article 44)

Facts: On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S.
Air Force, solicited bids for such contracts through its contracting officer, James F. Shaw. Among
those who submitted their bids were private respondents Roberto T. Valencia, Emerenciana C.
Tanglao, and Pablo C. del Pilar.

The bidding was won by Ramon Dizon but objected by the private respondents, who claimed that he
had made a bid for four facilities, including the Civil Engineering Area, which was not included in the
invitation to bid.

On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX and
the individual petitioners to cancel the award to defendant Dizon and to conduct a rebidding for the
barbershop concessions and to allow the private respondents by a writ of preliminary injunction to
continue operating the concessions pending litigation.

Upon the filing of the complaint, the respondent court issued an ex parte order directing the individual
petitioners to maintain the status quo.

On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for
preliminary injunction on the ground that the action was in effect a suit against the United States of
America, which had not waived its non-suability. The individual defendants, as official employees of
the U.S. Air Force, were also immune from suit and also denying the application for a writ of
preliminary injunction.

Issue: Whether or not the petitioners can use State Immunity (Art. XVI, Sec. 3, 1987 Constitution) as
defense.

Ruling:

No. Under Art. XVI, Sec. 3, 1987 Constitution, “The State may not be sued without its consent.”
However, this does not mean that at all times, the State may not be sued. There needs to be a
consideration on if they were indeed acting within the capacity of their duties, or if they enter into a
contract with a private party.

The barbershops, subject of the bidding awarded were commercial enterprises, operated by private
persons, therefore they are not agencies of the US Armed Forces nor part of their facilities. Although
the barbershops provide service to the military, they were for a fee. State Immunity cannot be invoked
by the petitioners for the fact that they entered into a contract with a private party, commercial in
nature. Hence, the US waiving its suability because of acting in its proprietary capacity.

This being the case, the petitioners cannot plead any immunity from the complaint filed by the private
respondents in the court below.

The petition is DISMISSED and the respondent judge is directed to proceed with the hearing and
decision of Civil Case No. 4772. The temporary restraining order dated December 11, 1986, is
LIFTED.
 R. F. SUGAY and CO., INC., Petitioner, vs. PABLO C. REYES, CESAR CURATA,
PACIFIC PRODUCTS, INC., and WORKMEN'S COMPENSATION COMMISSION,
Respondents.
G.R. No. L-20451 December 28, 1964

Application: Distinct Personality and Exceptions (Articlee 44)

Facts: In the evening of January 13, 1961, respondents Pablo Reyes and Cesar Curata
suffered burns of various degrees, while painting the building of the Pacific Products, Inc.,
caused by a fire of accidental origin, resulting in their temporary disability from work.For
said injuries they filed claims for disability and medical expenses against the R. F. Sugay &
Co., Inc., Romulo F. Sugay and the Pacific Products, Inc.

The R. F. Sugay & Co., Inc., answered the claim, alleging that the corporation was not the
employer of the claimants but it was the Pacific Products, Inc., which had an administration
and supervision job contract with Romulo F. Sugay. Romulo F. Sugay did not file an Answer,
but voluntarily appeared during the hearing and disclaimed liability.

The Answer of Pacific Products, Inc., contained the customary admissions and denials, and
averred that its business was mainly in the manufacture and sale of lacquer and other painting
materials.

The Hearing Officer dismissed the case with respect, to R. F. Sugay & Co., Inc., and Romulo
F. Sugay "for want of employer-employee relationship with the claimants, either directly or
through an independent contractor" and adjudging Pacific Producsts, Inc. to pay the claims of
the offended party.

Pacific Products, Inc., appealed the above decision from the Workmen's Compensation
Commission.

Issue: Whether or not Pacific Products, Inc is liable for the disability compensation of the
three claimants.

Ruling: No. The claimants were hired by one Rodolfo Babatid, an intermediary, pursuant to
the instruction received by the latter from Romulo Sugay and were paid under the payroll of
R. F. Sugay & Co., So they have control of these persons during the time they were painting
the office of Pacific Products, Inc.

There was a faint attempt by the petitioning corporation, to evade liability, by advancing the
theory that Romulo P. Sugay, its President, was the one who entered into a contract of
administration and supervision for the painting of the factory of the Pacific Products, Inc.,
and making it appear that said Romulo F. Sugay acted as an agent of the Pacific Products,
Inc., and as such, the latter should be made answerable to the compensation due to the
claimants, however, the dual roles of Romulo F. Sugay should not be allowed to confuse the
facts relating to employer-employee relationship. It is a legal truism that when the veil of
corporate fiction is made as a shield to perpetrate a fraud and/or confuse legitimate issues
(here, the relation of employer-employee), the same should be pierced. Verily the R. F. Sugay
& Co., Inc. is a business conduit of R. F. Sugay.

Under this set of facts it may be said that R. F. Sugay & Co., is now estopped from denying
any relationship with the claimants . Thus, on August 24, 1962, Commissioner Jose Sanchez
of En Banc Commission, rendered judgment affirming the compensability of the injuries and
the amounts due them, but modified the decision of the Hearing Officer, by finding that R. F.
Sugay & Co., Inc., was the statutory employer of the claimants and should be liable to them.
Pacific Products, Inc., was absolved from all responsibility.

Prepared by : Queenie