ISSUE: Whether the United States Naval Base in bidding for said contracts exercise governmental functions to be able to invoke state immunity.
FACTS: The United States of America had a naval base in Subic, Zambales. The base was one of those provided in the Military Bases Agreement between the Philippines and the United States. Sometime in May, 1972, the United States invited the submission of bids for a couple of repair projects. Eligio de Guzman land Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the company received from the US two telegrams requesting it to confirm its price proposals and for the name of its bonding company. The company construed this as an acceptance of its offer so they complied with the requests. The company received a letter which was signed by William I. Collins of Department of the Navy of the United States, also one of the petitioners herein informing that the company did not qualify to receive an award for the projects because of its previous unsatisfactory performance rating in repairs, and that the projects were awarded to third parties. For this reason, a suit for specific performance was filed by him against the US.
DECISION: Yes. The Supreme Court held that the contract relates to the exercise of its sovereign functions
RATIO DECIDENDI: The Supreme Court held that the contract relates to the exercise of its sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the defense of both the United States and the Philippines, indisputably a function of the government of the highest order, they are not utilized for nor dedicated to commercial or business purposes.