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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 108813 December 15, 1994
JUSMAG PH!PPNES, petitioner,
vs.
THE NATONA! !A"OR RE!ATONS COMMSSON #Seco$% D&'&(&o$) *$%
+!ORENCO SACRAMENTO, U$&o$ Pre(&%e$,, JP+CEA, respondents.
Juan, Luces, Luna and Associates for petitioner.
Galutera & Aguilar Law Offices for private respondent.

PUNO, J.:
he i!!unit" fro! suit of the #oint $nited States Militar" %ssistance &roup to the
Republic of the Philippines '#$SM%&(Philippines) is the pivotal issue in the case at
bench.
#$SM%& assails the January 29, 1993 esolution of t!e "A#$O"AL LA%O
&LA#$O"' (O))$''$O" 'public respondent), in N*RC NCR C%SE NO. ++(+,(
+-+.-(.-, reversin/ the July 3*, 1991 Order of t!e La+or Ar+iter, and orderin/ the
latter to assu!e 0urisdiction over the co!plaint for ille/al dis!issal filed b"
1*ORENCIO S%CR%MENO 'private respondent) a/ainst petitioner.
1irst, the undisputed facts.
Private respondent 2as one of the sevent"(four '34) security assistance support
personnel 'S%SP) 2or5in/ at #$SM%&(Philippines.
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6e had been 2ith #$SM%& fro!
Dece!ber 78, 7.9., until his dis!issal on %pril -3, 7..-. :hen dis!issed, he held the
position of Illustrator - and 2as the incu!bent President of #$SM%& P6I*IPPINES(
1I*IPINO CIVI*I%N EMP*O;EES %SSOCI%ION '#P1CE%), a labor or/ani<ation dul"
re/istered 2ith the Depart!ent of *abor and E!plo"!ent. 6is services 2ere
ter!inated alle/edl" due to the abolition of his position.
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6e 2as also advised that he
2as under ad!inistrative leave until %pril -3, 7..-, althou/h the sa!e 2as not char/ed
a/ainst his leave.
On March ,7, 7..-, private respondent filed a co!plaint 2ith the Depart!ent of *abor
and E!plo"!ent on the /round that he 2as ille/all" suspended and dis!issed fro!
service b" #$SM%&.
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6e as5ed for his reinstate!ent.
#$SM%& then filed a Motion to Dis!iss invo5in/ its i,,unity fro, suit as an a/enc" of
the $nited States. It further alle/ed lac5 of e!plo"er(e!plo"ee relationship and that it
has no 0uridical personalit" to sue and be sued.
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In an Order dated #ul" ,+, 7..7, *abor %rbiter Daniel C. Cueto dis!issed the sub0ect
co!plaint = for want of -urisdiction.=
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Private respondent appealed
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to the National
*abor Relations Co!!ission 'public respondent), assailin/ the rulin/ that petitioner is
i!!une fro! suit for alle/ed violation of our labor la2s. #$SM%& filed its
Opposition,
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reiteratin/ its i!!unit" fro! suit for its non(contractual, /overn!ental
and>or public acts.
In a Resolution, dated #anuar" -., 7..,, the N*RC
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reversed the rulin/ of the *abor
%rbiter as it held that petitioner had lost its ri/ht not to be sued. he resolution 2as
predicated on t2o /rounds? '7) the principle of estoppel . that #$SM%& failed to refute
the e@istence of e!plo"er(e!plo"ee relationship under the =control test=A and '-)
#$SM%& has 2aived its ri/ht to i!!unit" fro! suit 2hen it hired the services of private
respondent on Dece!ber 78, 7.9..
he N*RC relied on the case of /arry Lyons vs. 0nited 'tates of A,erica,
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2here the
=$nited States &overn!ent '2as considered to have) 2aived its i!!unit" fro! suit b"
enterin/ into 'a) contract of stevedorin/ services, and thus, it sub!itted itself to the
0urisdiction of the local courts.=
%ccordin/l", the case 2as re!anded to the labor arbiter for reception of evidence as to
the issue on ille/al dis!issal.
6ence, this petition, #$SM%& contends?
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6E P$B*IC RESPONDEN COMMIED &R%VE %B$SE O1
DISCREION %MO$NIN& O *%CC %ND>OR EDCESS O1
#$RISDICION E
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%. IN REVERSIN& 6E DECISION O1 6E
*%BOR %RBIER %ND IN NO %11IRMIN& 6E
DISMISS%* O1 6E COMP*%IN I BEIN& %
S$I %&%INS 6E $NIED S%ES O1
%MERIC% :6IC6 6%D NO &IVEN IS
CONSEN O BE S$EDA %ND
B. IN 1INDIN& :%IVER B; #$SM%& O1
IMM$NI; 1ROM S$IA
II
6E P$B*IC RESPONDEN COMMIED &R%VE %B$SE O1
DISCREION %MO$NIN& O *%CC %ND>OR EDCESS O1
#$RISDICION E
%. :6EN I 1O$ND %N EMP*O;ER(EMP*O;EE
RE*%IONS6IP BE:EEN #$SM%& %ND
PRIV%E RESPONDENA %ND
B. :6EN I CONSIDERED #$SM%& ESOPPED
1ROM DEN;IN& 6% PRIV%E RESPONDEN
IS IS EMP*O;EE 1OR 1%I*$RE O PRESEN
PROO1 O 6E CONR%R;.
:e find the petition i!pressed 2ith !erit.
It is !eet to discuss the historical bac5/round of the #$SM%& to deter!ine its
i!!unit" fro! suit.
#$SM%& 2as created pursuant to the Militar" %ssistance %/ree!ent
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dated March
-7, 7.43, bet2een the &overn!ent of the Republic of the Philippines and the
&overn!ent of the $nited States of %!erica. %s a/reed upon, #$SM%& shall consist of
%ir, Naval and %r!" /roup, and its pri!ar" tas5 2as to advise and assist the
Philippines, on air force, ar!" and naval !atters.
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%rticle 74 of the 7.43 %/ree!ent provides, inter alia, that =the cost of all services
reFuired b" the &roup, includin/ co!pensation of locally e,ployed interpreters, cler1s,
la+orers, and ot!er personnel, e@cept personal servants, shall be borne b" the
Republic of the Philippines.=
his set(up 2as to chan/e in 7..7. In Note No --, addressed to the Depart!ent of
1orei/n %ffairs 'D1%) of the Philippines, dated #anuar" -,, 7..7, the $nited States
&overn!ent, thru its E!bass", !anifested its preparedness =to provide funds to cover
t!e salaries of security assistance support personnel= and securit" /uards, the rent of
#$SM%& occupied buildin/s and housin/, and the cost of utilities.
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his offer 2as
accepted b" our &overn!ent, thru the D1%, in Note No. .773-G, dated %pril 78, 7..7.
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ConseFuentl", a )e,orandu, of Agree,ent
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2as for/ed bet2een the %r!ed 1orces
of the Philippines and #$SM%&(Philippines, thru &eneral *isandro C. %badia and $.S.
Bri/adier &eneral Robert &. Sausser. he %/ree!ent delineated the ter!s of the
assistance(in(5ind of #$SM%& for 7..7, the relevant parts of 2hich read?
a. he ter! salaries as used in this a/ree!ent include those for the
securit" /uards currentl" contracted bet2een #$SM%& and %H Pri!e
Securit" Services Inc., and the 'ecurity Assistance 'upport
2ersonnel 'S%SP). . . . .
b. he ter! Securit" %ssistance Support Personnel 'S%SP)
does not include active dut" unifor!ed !e!bers of the %r!ed
1orces of the Philippines perfor!in/ dut" at #$SM%&.
c. $t is understood t!at 'A'2 are e,ployees of t!e Ar,ed 3orces of
t!e 2!ilippines 'A32). herefore,t!e A32 agrees to appoint, for
service wit! J0')AG, no ,ore t!an 45 personnel to desi/nated
positions 2ith #$SM%&.
d. 'A'2 are under t!e total operational control of t!e (!ief,
J0')AG62!ilippines. he ter! =Operational Control= includes, but is
not li!ited to, all personnel ad!inistrative actions, such as? hirin/
reco!!endationsA firin/ reco!!endationsA position classificationA
disciplineA no!ination and approval of incentive a2ardsA and pa"roll
co!putation. Personnel ad!inistration 2ill be /uided b" %nne@ E of
#$SM%&(Philippines Me!o 7+(-. 3or t!e period of ti,e t!at t!ere is
an e7ceptional funding agree,ent +etween t!e govern,ent of t!e
2!ilippines and t!e 0nited 'tates Govern,ent 80'G9, J0')AG will
pay t!e total payroll costs for t!e 'A'2 e,ployees. Pa"roll costs
include onl" re/ular salar"A approved overti!e, costs of livin/
allo2anceA !edical insuranceA re/ular contributions to the Philippine
Social Securit" S"ste!, P%&(IBI& 1und and Personnel Econo!ic
Relief %llo2ance 'PER%)A and the thirteenth(!onth bonus. Pa"roll
costs do not include /ifts or other bonus pa"!ents in addition to
those previousl" defined above. Entitle!ents not considered pa"roll
costs under this a/ree!ent 2ill be funded and paid b" the %1P.
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e. %ll S%SP e!plo"ed as of July 1, 199* will continue t!eir service
wit! J0')AG at t!eir current rate of pay and +enefits up to 3* June
1991, wit! an annual renewal of e,ploy,ent t!ereafter sub0ect to
rene2al of their appoint!ent 2ith the %1P 'e!plo"ees and rates of
pa" are indicated at Enclosure ,). No pro!otion or transfer internal to
#$SM%& of the listed personnel 2ill result in the reduction of their
pa" and benefits.
f. %ll S%SP 2ill, after proper classification, be paid salaries and
benefits at established %1P civilian rates. Rules for co!putation of
pa" and allo2ances 2ill be !ade available to the Co!ptroller,
#$SM%&, b" the Co!ptroller, &6I, %1P. %dditionall", an" le/all"
!andated chan/es in salar" levels or !ethods of co!putation shall
be trans!itted 2ithin 48 hours of receipt b" Co!ptroller, &6I to
Co!ptroller, #$SM%&.
/. he %1P a/rees not to ter!inate S%SP 2ithout 9+ da"s prior
2ritten notice to Chief, #$SM%&(Philippines. %n" ter!ination of
these personnel thou/ht to be necessar" because of bud/etar"
restrictions or !anpo2er ceilin/ 2ill be sub0ect to consultations
bet2een %1P and #$SM%& to ensure that #$SM%&Hs !ission of
dedicated support to the %1P 2ill not be de/raded or har!ed in an"
2a".
h. #!e A32 agrees to assu,e t!e severance pay:retire,ent pay
lia+ility for all appointed 'A'2. 'Enclosure , lists the severance pa"
liabilit" date for current S%SP). %n" ter!ination of services, other
than voluntar" resi/nations or ter!ination for cause, 2ill result in
i!!ediate pa"!ents of %1P of all ter!ination pa" to the entitled
e!plo"ee. Vouchers for severance>retire!ent pa" and accrued
bonuses and annual leave 2ill be presented to the Co!ptroller,
&6I, %1P, not later than 74 calendar da"s prior to reFuired date of
pa"!ent.
i. %ll S%SP listed in Enclosure , 2ill continue to participate in the
Philippine Social Securit" S"ste!.
% "ear later, or in 7..-, the $nited States E!bass" sent another note of si!ilar i!port
to the Depart!ent of 1orei/n %ffairs 'No. --3, dated %pril 8, 7..-), e@tendin/ the
fundin/ a/ree!ent for the salaries of S%SP and securit" /uards until Dece!ber ,7,
7..-.
1ro! the fore/oin/, it is apparent that 2hen #$SM%& too5 the services of private
respondent, it 2as perfor!in/ a /overn!ental function on behalf of the $nited States
pursuant to the Militar" %ssistance %/ree!ent dated March -7, 7.43. 6ence, 2e a/ree
2ith petitioner that the suit is, in effect, one a/ainst the $nited States &overn!ent,
albeit it 2as not i!pleaded in the co!plaint. Considerin/ that the $nited States has not
2aived or consented to the suit, the co!plaint a/ainst #$SM%& cannot not prosper.
In this 0urisdiction, 2e reco/ni<e and adopt the /enerall" accepted principles of
international la2 as part of the la2 of the land.
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$,,unity of 'tate fro, suit is one of
these universall" reco/ni<ed principles. In international la2, =i!!unit"= is co!!onl"
understood as an e@e!ption of the state and its or/ans fro! the 0udicial 0urisdiction of
another state.
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his is anchored on the principle of the soverei/n eFualit" of states
under 2hich one state cannot assert 0urisdiction over another in violation of the
!a@i! par in pare, non !a+et i,periu, 'an eFual has no po2er over an eFual).
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$nder the traditional rule of 'tate i,,unity, a state cannot be sued in the courts of
another State, 2ithout its consent or 2aiver. 6o2ever, in 'antos, et al., vs. 'antos, et
al.,
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2e reco/ni<ed an e@ception to the doctrine of i!!unit" fro! suit b" a state, thus?
. . . . Nevertheless, if, 2here and 2hen the state or its /overn!ent
enters into a contract, throu/h its officers or a/ents, in furtherance of
a le/iti!ate ai! and purpose and pursuant to constitutional
le/islative authorit", 2hereb" !utual or reciprocal benefits accrue
and ri/hts and obli/ations arise therefro!, and if the la2 /rantin/ the
authorit" to enter into such contract does not provide for or na!e the
officer a/ainst 2ho! action !a" be brou/ht in the event of a breach
thereof, t!e state itself ,ay +e sued, even wit!out its consent,
+ecause +y entering into a contract, t!e sovereign state !as
descended to t!e level of t!e citi;en and its consent to +e sued is
i,plied fro, t!e very act of entering into suc! contract. . . . .
'e!phasis ours)
It 2as in this li/ht that the state i!!unit" issue in /arry Lyons, $nc., vs. 0nited 'tates
of A,erica
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2as decided.
In the case of /arry Lyons, $nc., the petitioner entered into a contract 2ith the $nited
States &overn!ent for stevedorin/ services at the $.S. Naval Base, Subic Ba",
Philippines. It then sou/ht to collect fro! the $S /overn!ent su!s of !one" arisin/
fro! the contract. One of the issues posed in the case 2as 2hether or not the defunct
Court of 1irst Instance had 0urisdiction over the defendant $nited States, a soverei/n
state 2hich cannot be sued 2ithout its consent. his Court upheld the contention of
6arr" *"ons, Inc., that =2hen a soverei/n state enters into a contract 2ith a private
person, the state can be sued upon the theor" that it has descended to the level of an
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individual fro! 2hich it can be i!plied that it has /iven its consent to be sued under the
contract.=
he doctrine of state i!!unit" fro! suit has under/one further !eta!orphosis. he
vie2 evolved that the e@istence of a contract does not, per se, !ean that soverei/n
states !a", at all ti!es, be sued in local courts. he co!ple@it" of relationships
bet2een soverei/n states, brou/ht about b" their increasin/ co!!ercial activities,
!othered a !orerestrictive application of the doctrine.
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hus, in 0nited 'tates of
A,erica vs. ui;,
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2e clarified that our pronounce!ent in /arry Lyons, supra, 2ith
respect to the 2aiver of State i!!unit", 2as o+iter and =has no value as an i!perative
authorit".=
%s it stands no2, the application of the doctrine of i!!unit" fro! suit has
been restricted to sovereign orgovern,ental activities ' -ure i,perii).
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he !antle of
state i!!unit" cannot be e@tended to co,,ercial, private and proprietary acts ' -ure
gestionis). %s aptl" stated b" this Court '&n +anc) in 0' vs. ui;, supra?
he restrictive application of State i!!unit" is proper 2hen the
proceedin/s arise out of co!!ercial transactions of the forei/n
soverei/n, its co!!ercial activities or econo!ic affairs. Stated
differentl", a State !a" be said to have descended to the level of an
individual and thus can be dee!ed to have tacitl" /iven its consent to
be used only 2hen it enters into +usiness contracts. It does not appl"
2here the contract relates to the e@ercise of its sovereign functions.
'e!phasis ours)
:e held further, that the application of the doctrine of state i!!unit" depends on
the legal nature of the act. &rgo, since a govern,ental function 2as involved E the
transaction dealt 2ith the i!prove!ent of the 2harves in the naval installation at Subic
Ba" E it 2as held that the $nited States 2as not dee!ed to have 2aived its i!!unit"
fro! suit.
hen ca!e the case of 0nited 'tates vs. /on. odrigo, et al.
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In said case, &enove
2as e!plo"ed as a coo5 in the Main Club located at $.S. %ir 1orce Recreation Center,
#ohn 6a" %ir Station. 6e 2as dis!issed fro! service after he 2as found to have
polluted the stoc5 of soup 2ith urine. &enove countered 2ith a co!plaint for da!a/es.
%pparentl", the restaurant services offered at the #ohn 6a" %ir Station parta5e of the
nature of a business enterprise underta5en b" the $nited States /overn!ent in
its proprietary capacity. he Court then noted that the restaurant is 2ell 5no2n and
available to the /eneral public, thus, the services are operated for profit, as a
co!!ercial and not a /overn!ental activit". Spea5in/ throu/h %ssociate #ustice
Isa/ani Cru<, the Court '&n %anc) said?
he conseFuence of this findin/ is that the petitioners cannot invo5e
the doctrine of state i!!unit" to 0ustif" the dis!issal of the da!a/e
suit a/ainst the! b" &enove. Such defense 2ill not prosper even if it
be established that the" 2ere actin/ as a/ents of the $nited States
2hen the" investi/ated and later dis!issed &enove. 1or the !atter,
not even the $nited States /overn!ent itself can clai! such
i!!unit". he reason is that b" enterin/ into the e!plo"!ent
contract 2ith &enove in t!e disc!arge of its proprietary functions, it
i!pliedl" divested itself of its soverei/n i!!unit" fro! suit.
'e!phasis ours)
Conversel", if the contract 2as entered into in the dischar/e of its govern,ental
functions, the soverei/n state cannot be dee!ed to have 2aived its i!!unit" fro!
suit.
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Such is the case at bench. Prescindin/ fro! this pre!ise, 2e need not
deter!ine 2hether #$SM%& controls the e!plo"!ent conditions of the private
respondent.
:e also hold that there appears to be no basis for public respondent to rule that
#$SM%& is stopped fro! den"in/ the e@istence of e!plo"er(e!plo"ee relationship
2ith private respondent. On the contrar", in its Opposition before the public respondent,
#$SM%& consistentl" contended that the '34) S%SP, includin/ private respondent,
2or5in/ in #$SM%&, are e!plo"ees of the %r!ed 1orces of the Philippines. his can
be /leaned fro!? '7) the Militar" %ssistance %/ree!ent, supra, '-) the e@chan/e of
notes bet2een our &overn!ent, thru Depart!ent of 1orei/n %ffairs, and the $nited
States, thru the $S E!bass" to the Philippines, and ',) the %/ree!ent on Ma" -7,
7..7,supra bet2een the %r!ed 1orces of the Philippines and #$SM%&.
:e s"!phati<e 2ith the pli/ht of private respondent 2ho had served #$SM%& for !ore
than t2ent" '-+) "ears. Considerin/ his len/th of service 2ith #$SM%&, he deserves a
!ore co!passionate treat!ent. $nfortunatel", #$SM%& is be"ond the 0urisdiction of
this Court. Nonetheless, the E@ecutive branch, throu/h the Depart!ent of 1orei/n
%ffairs and the %r!ed 1orces of the Philippines, can ta5e the cud/el for private
respondent and the other S%SP 2or5in/ for #$SM%&, pursuant to the aforestated
Militar" %ssistance %/ree!ent.
IN VIE: O1 6E 1ORE&OIN&, the petition for certiorari is &R%NED. %ccordin/l",
the i!pu/ned Resolution dated #anuar" -., 7.., of the National *abor Relations
Co!!ission is REVERSED and SE %SIDE. No costs.
SO ORDERED.
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