CONSTANCIA V. MENDOZA YOUNG, CRISTINA V.

MENDOZA FIGUEROA,
DIOSDADO V. MENDOZA, JR., JOSEPHINE V. MENDOZA JASA, and RIZALINA V.
MENDOZA PUSO, Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and the DPWH SECRETARY,
Respondents.

G.R. No. 203834 July 9, 2014

Facts:
Superior Builders, led by Mendoza, was the winning bidder for the construction of two
road projects (Package VI and Package IX) in Benguet. He claimed that the Package VI
project had no road right of way during the preconstruction survey. He also claimed that
the respondents conspired to make it appear that Superior Builders had a negative
slippage of 29% and recommended that the contracts for Package VI and Package IX
be forfeited. DPWH blacklisted Superior Builders from participating in any bidding or
entering into any contract with DPWH for one year.  Petitioners contend that DPWH
forfeited its immunity from suing by entering into the contract.

Issue:

Whether or not the contract was made in the exercise of its governmental function and
is immune from suit.

Held:

Yes, contract was made in the exercise of its governmental function and is immune from
suit.
The contracts that the DPWH entered with Mendoza for the construction of Packages VI
and IX of the HADP were done in the exercise of its governmental functions. Hence,
petitioners cannot claim that there was an implied waiver by the DPWH simply by
entering into a contract.
The general rule is that a state may not be sued, but it may be the subject of a suit if it
consents to be sued, either expressly or impliedly.33 There is express consent when a
law so provides, while there is implied consent when the State enters into a contract or
it itself commences litigation.34 This Court explained that in order to determine implied
waiver when the State or its agency entered into a contract, there is a need to
distinguish whether the contract was entered into in its governmental or proprietary
capacity, thus: x x x. However, it must be clarified that when a state enters into a
contract, it does not automatically mean that it has waived its nonsuability. The State
"will be deemedto have impliedly waived its nonsuability [only] if it has entered into a
contract in its proprietary or private capacity. [However,] when the contract involves its
sovereign or governmental capacity[,] x x x no suchwaiver may be implied."