View full case

TRADERS ROYAL BANK v. IAC

FACTS:

Traders Royal Bank (Traders) entered into a loan agreement with the National Media Production Center (NMPC) and the Production Specialists, Inc. (PSI) to guarantee payment for the coverage or broadcast rights for the 1981 season of the Philippine Basketball Association (PBA). The loan agreement required NMPC and PSI to deposit all collections obtained from sponsoring companies and maintain a minimum balance in their current account with Traders. However, NMPC and PSI failed to make payments or comply with the conditions. As a result, Traders filed a complaint to collect the whole amount of the loan. The court issued a writ of preliminary attachment, and a significant amount was collected from PSI. NMPC filed a motion to dismiss the case, arguing that as a government entity, it cannot be sued without its consent. The lower court denied the motion to dismiss, stating that the state may be sued if it entered into a contract with a private person. NMPC filed a petition with the Intermediate Appellate Court, which granted the petition and ruled that NMPC cannot be sued without its consent due to its lack of separate juridical personality. Traders filed a petition for review on certiorari before the Supreme Court.

ISSUES:

  1. Whether the Traders Royal Bank (Traders) can sue the National Media Production Center (NMPC) without its consent.

  2. Whether the lower court has jurisdiction over the case filed by Traders against NMPC.

RULING:

  1. The Supreme Court ruled that NMPC, being an instrumentality of the government under the supervision of the Office of the President, cannot be sued without its consent. The act of NMPC entering into a contract does not constitute a voluntary waiver of its immunity from suit.

  2. The lower court erred in denying the motion to dismiss filed by NMPC. The case should have been dismissed for lack of jurisdiction.

PRINCIPLES:

  • An instrumentality of the government, such as NMPC, cannot be sued without its consent.

  • The lower court lacks jurisdiction when a case involves an instrumentality of the government that has not been duly incorporated and does not have a separate juridical personality.