Background

E.A. Ramirez, a construction company, entered into a contract with PTRI for the rehabilitation of electrical facilities. Shortly after work began, E.A. Ramirez alleged that PTRI's consultant demanded a bribe, which E.A. Ramirez refused. Subsequently, E.A. Ramirez claimed to encounter various difficulties in completing the project, including frequent changes in instructions and rejection of their work. When E.A. Ramirez requested an extension, PTRI instead terminated the contract. E.A. Ramirez then filed a lawsuit against PTRI for breach of contract. PTRI sought to dismiss the case, citing state immunity and lack of jurisdiction. The case made its way through the court system, ultimately reaching the Supreme Court.

Facts

• 1. In 2012, E.A. Ramirez entered into a Contract of Works with PTRI for the rehabilitation of electrical facilities in PTRI's main building and three pilot plants.
• 2. On February 28, 2012, PTRI issued a notice to proceed to E.A. Ramirez.
• 3. On March 13, 2012, Diaz, the project consultant, allegedly demanded P500,000 from E.A. Ramirez as a standard amount "for the boys."
• 4. E.A. Ramirez refused to comply with the demand.
• 5. E.A. Ramirez claimed it encountered difficulties in completing the project due to numerous changes ordered by Diaz.
• 6. After a month, E.A. Ramirez requested a First Progress Billing, which PTRI refused to act on.
• 7. On May 8, 2012, Diaz disapproved the test results and other submittals made by E.A. Ramirez.
• 8. E.A. Ramirez requested an extension of the project deadline.
• 9. On May 29, 2012, PTRI sent E.A. Ramirez a Notice of Termination.

Arguments of the Petitioners

• 1. PTRI et al. argued that they are immune from suit as PTRI is an agency of the Department of Science and Technology.
• 2. They contended that the RTC did not have jurisdiction over the subject matter, asserting that the Construction Industry Arbitration Commission (CIAC) has original and exclusive jurisdiction over construction disputes.
• 3. PTRI et al. maintained that referral of the dispute to CIAC had been stipulated in the contract under Article I, Section 1.2.

Arguments of the Respondents

• 1. E.A. Ramirez argued that there was no agreement to submit contract disputes for arbitration proceedings before the CIAC.
• 2. They pointed to Article VI, Section 6.3 of the contract, which stated that the parties agreed to settle any legal action arising from the contract before the proper court of Taguig City.
• 3. E.A. Ramirez contended that PTRI acted in bad faith in terminating the contract.

Issues

• 1. Whether PTRI et al. are immune from suit.
• 2. Whether the RTC has jurisdiction to hear E.A. Ramirez's Complaint.

Ruling

• 1. The Supreme Court ruled that PTRI et al. are not immune from suit -- Rationale: a. While PTRI is an unincorporated government agency, the rule on State immunity from suit is not absolute. b. The State's consent to be sued may be given expressly or impliedly. c. PTRI entered into a contract, which falls under the general law waiving immunity for money claims arising from contracts. d. By entering into the contract, PTRI descended to the level of a contracting party and divested itself of sovereign immunity. e. The contract itself contemplated legal action arising from its execution, manifesting consent to be subjected to suit.
• 2. The Supreme Court ruled that the RTC lacks jurisdiction to hear E.A. Ramirez's Complaint -- Rationale: a. The dispute arises from a construction contract, which falls under the original and exclusive jurisdiction of the CIAC. b. The parties incorporated an arbitration clause in their contract by agreeing to be governed by R.A. 9184 and its revised IRR, which mandates referral of disputes to CIAC. c. The General Conditions of Contract, which form an integral part of the agreement, explicitly require disputes to be referred to CIAC. d. While the contract mentions settling disputes in Taguig courts, this does not override CIAC's exclusive jurisdiction as established by law.

Rationale

• 1. State Immunity from Suit: The doctrine that the State may not be sued without its consent. However, this immunity is not absolute and can be waived expressly or impliedly.
• 2. Waiver of State Immunity in Contracts: When the State enters into a contract, it is deemed to have descended to the level of a private party and waived its immunity from suit with respect to that contract.
• 3. CIAC's Exclusive Jurisdiction: The Construction Industry Arbitration Commission has original and exclusive jurisdiction over construction disputes when parties agree to submit to voluntary arbitration.
• 4. Incorporation of Laws into Contracts: Relevant laws (such as E.O. 1008 and R.A. 9285) are deemed incorporated into contracts covered by them, even if not explicitly mentioned.

Doctrines

• 1. State Immunity from Suit: The doctrine that the State may not be sued without its consent. However, this immunity is not absolute and can be waived expressly or impliedly.
• 2. Waiver of State Immunity in Contracts: When the State enters into a contract, it is deemed to have descended to the level of a private party and waived its immunity from suit with respect to that contract.
• 3. CIAC's Exclusive Jurisdiction: The Construction Industry Arbitration Commission has original and exclusive jurisdiction over construction disputes when parties agree to submit to voluntary arbitration.
• 4. Incorporation of Laws into Contracts: Relevant laws (such as E.O. 1008 and R.A. 9285) are deemed incorporated into contracts covered by them, even if not explicitly mentioned.

Key Excerpts

• 1. "The general rule that it cannot be sued without its consent finds application. Its immunity from suit insulates it from the complaint filed by [E.A. Ramirez] in the [RTC]."
• 2. "The bare fact that the parties incorporated an arbitration clause in their contract is sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between the parties."
• 3. "As long as the parties agree to submit to voluntary arbitration, regardless of what forum they may choose, their agreement will fall within the jurisdiction of the CIAC."

Precedents Cited

• 1. Providence Washington Insurance Co. v. Republic (1969): Used to explain the rationale behind state immunity from suit.
• 2. Department of Agriculture v. National Labor Relations Commission (1993): Cited to explain how the State's consent to be sued may be given expressly through general or special laws.
• 3. National Irrigation Administration v. Court of Appeals (1999): Used to establish that agreements to submit to voluntary arbitration fall within CIAC's jurisdiction, regardless of the specific forum chosen by the parties.

Statutory and Constitutional Provisions

• 1. Article XVI, Section 3 of the 1987 Constitution: "The State may not be sued without its consent."