TRADERS ROYAL BANK vs. INTERMEDIATE APPELLATE COURT

TRADERS ROYAL BANK , petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and HON.
GREGORIO
S. CENDAÑA, in his capacity as DIRECTOR OF THE NATIONAL MEDIA PRODUCTION CENTER (NMPC),
respondents.
Facts:
On April 9, 1981, Traders, a banking institution operating under Philippine laws, entered into a loan
agreement with the NMPC, a government instrumentality tasked with the function of disseminating
government information, programs and policies, represented by Director Gregorio S. Cendaña, and the
PSI, a corporation duly organized and existing under Philippine laws, represented by its president, Romeo
G. Jalosjos.
Among the conditions imposed were that NMPC and PSI would deposit with Traders all collections
obtained from the sponsoring companies and that during the term of said letter of credit they would
maintain in their current account with the bank a balance of at least P500,000 or 20% of the face value of
the letter of credit.
As of July 27, 1981, the PBA had actually drawn against said letter of credit the total amount of P340,000.
Inasmuch as NMPC and PSI did not make any payments on their obligation nor did they comply with the
conditions aforecited, Traders filed in the Court of First Instance of Rizal at Pasay City a complaint against
NMPC and PSI to collect the whole amount of P2,520,000 (Civil Case No. 9303-P). Alleging therein that the
defendants were selling or disposing of substantial portions of their assets.
Before the trial, NMPC, through private counsel, filed another motion to dismiss reiterating the stand of
the Office of the Solicitor General on NMPC's immunity from suit. Traders opposed the motion asserting
that the lower court has jurisdiction over the subject or nature of the case and that the complaint states
facts sufficient to constitute a cause of action.
Issue:
WON NMPC is suable?
Rule:
The doctrine of state immunity from suits is constitutionally recognized and is germane to the concept of
sovereignty. As such, the doctrine may be waived by general or special law. Immunity from suit may also
be waived by an implied consent to be sued as when, through its officers and agents, the state enters into
a contract in furtherance of a legitimate aim and purpose. By doing so, the state descends to the level of
the citizen and its consent to be sued is implied from the very act of entering into such contract. A problem
usually arises when a government entity, though unincorporated and therefore not possessed of a distinct
juridical personality, enters into a contract which, by its nature, is proprietary in character. Should this
transpire, the test of the state's suability is this: "If said non-governmental function is undertaken as an
incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit
extended to such government entity." In others words, if the transaction, contract or operation
undertaken by the government entity is a necessary incident of its prime governmental function, said
entity is immune from suit.
Applicability:
According to the Solicitor General, the NMPC was created on July 1, 1953 as a joint venture of the
Philippine Council for U.S. Aid (PHILCUSA) and the Foreign Operations Agency of the government. It was
principally engaged "in the public dissemination of government information to assist in the hastening of
the slow economic development of the country."
We find, however, that the available allegations and evidence on the nature of its functions and the
purpose of the contract it entered into are sufficient to warrant a ruling that the NMPC was engaged in
an undertaking which was not incidental to disseminating governmental information. llcd
The general and bare allegation of the NMPC on its non-suability is weak even in the face of its own
admission that it was "in truth and in fact merely acting as guarantor" for PSI.
There is, however, no explanation as to what liabilities the NMPC had as such "guarantor." A reading of
the loan agreement, in fact, reveals that there is no distinction as to the nature of the liability of the PSI
and the NMPC. In the contract, both are referred to collectively as the "clients" and "accountees." Hence,
it can safely be assumed that by the terms of the contract, the NMPC was engaged in a business
undertaking which was certainly beyond its function of disseminating governmental information.

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TRADERS ROYAL BANK vs. INTERMEDIATE APPELLATE COURT

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TRADERS ROYAL BANK , petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and HON.

WON NMPC is suable?

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