G.R. No. 223319 & G.R. No. 247736, October 09, 2019
Philippine Textile Research Institute, Dr. Carlos Tomboc, Fedelito A. Rufin, Engr. May S. Rico, et al., Petitioners, v. Court of Appeals and E.A. Ramirez Construction, Inc. rep. by its President Engr. Eduardo A. Ramirez, Respondents.

E.A. Ramirez Construction, Inc., rep. by its President, Engr. Eduardo A. Ramirez, Petitioner, v. Philippine Textile Research Institute, Dr. Carlos Tomboc, et al., Respondents.

FACTS

E.A. Ramirez Construction, Inc. (E.A. Ramirez) filed a Complaint for Breach of Contract with Damages before the Regional Trial Court (RTC) of Taguig City against the Philippine Textile Research Institute (PTRI) and several of its employees. E.A. Ramirez alleged that it entered into a Contract of Works for the Rehabilitation of Electrical Facilities with PTRI in 2012. It claimed that during the project, a PTRI consultant demanded a bribe of P500,000.00, which it refused. Subsequently, E.A. Ramirez encountered difficulties, including numerous changes ordered by PTRI, refusal of its first progress billing, and eventual termination of the contract by PTRI via a Notice of Termination dated May 29, 2012. E.A. Ramirez sought actual, moral, and exemplary damages, plus attorney’s fees.
PTRI and its employees, through the Office of the Solicitor General, filed a Motion to Dismiss on two grounds: (1) state immunity from suit, arguing PTRI is an agency of the Department of Science and Technology (DOST) and thus cannot be sued without state consent, and this immunity extends to its employees performing official functions; and (2) lack of jurisdiction of the RTC, asserting that under Republic Act No. 9285 , the Construction Industry Arbitration Commission (CIAC) has original and exclusive jurisdiction over construction disputes, especially since the contract incorporated RA 9285 and its Implementing Rules and Regulations by reference.
The RTC denied the Motion to Dismiss, ruling that there was no agreement to submit disputes to arbitration, as the contract’s Article VI, Section 6.3 stipulated settlement before the proper court in Taguig City. The RTC also denied PTRI’s Motion for Reconsideration.
PTRI filed a Petition for Certiorari and Prohibition with the Court of Appeals (CA), which initially denied PTRI’s prayer for a temporary restraining order or preliminary injunction. PTRI then filed a Rule 65 Petition ( G.R. No. 223319 ) before the Supreme Court assailing the CA’s denial of injunctive relief. Subsequently, the CA granted PTRI’s Petition and ordered the dismissal of the civil case, upholding both state immunity and lack of RTC jurisdiction. E.A. Ramirez filed a Motion for Reconsideration, which was denied, prompting it to file a Rule 45 Petition (G.R. No. 247736) before the Supreme Court.

ISSUE

1. Whether PTRI and its employees are immune from suit.
2. Whether the RTC has jurisdiction to hear E.A. Ramirez’s Complaint.

RULING

1. On State Immunity from Suit: The Supreme Court held that PTRI and its employees are not immune from suit in this case. While PTRI is an unincorporated government agency under the DOST exercising governmental functions and generally enjoys state immunity, the State implicitly consents to be sued when it enters into a contract. By engaging in a proprietary or business activity—such as entering into a construction contract—the State descends to the level of a private individual and waives its immunity. The employees of PTRI, being sued for acts allegedly done in connection with the contract, are likewise not immune. The doctrine of state immunity does not apply to suits arising from contracts where the State has acted in a proprietary capacity.
2. On Jurisdiction of the RTC: The Supreme Court held that the RTC lacks jurisdiction over the Complaint. The dispute is a construction dispute falling under the original and exclusive jurisdiction of the CIAC. The contract between the parties expressly incorporated by reference the provisions of RA 9285 and its revised Implementing Rules and Regulations, which govern construction arbitration. This incorporation constitutes a valid arbitration agreement. Although the contract also contained a venue stipulation (Article VI, Section 6.3) specifying settlement before the proper court in Taguig City, this stipulation is merely permissive and relates to venue, not jurisdiction. It does not negate the arbitration agreement. Jurisdiction over construction disputes is vested by law in the CIAC, and the parties’ adoption of RA 9285’s provisions binds them to arbitration. Therefore, the Complaint should have been filed with the CIAC, not the RTC.
DISPOSITIVE PORTION:
The Petition in G.R. No. 247736 was DENIED. The Court of Appeals’ Decision and Resolution were AFFIRMED with respect to the RTC’s lack of jurisdiction. Consequently, the resolution of G.R. No. 223319 was rendered MOOT AND ACADEMIC.