"By engaging in a particular business through the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations." "When the State acts in its proprietary capacity, it is amenable to all the rules of law which bind private individuals".

The point is that when the government enters into a commercial business it abandons its sovereign capacity and is to be treated like any other private corporation (Bank of the U. S. vs. Planters' Bank, 9 Wheat. 904, 6 L. ed. 244, cited in Manila Hotel Employees Association vs. Manila Hotel Company; et al., 73 Phil. 374, 388). The Manila Hotel case also relied on the following rulings:

"By engaging in a particular business through the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations."

"When the State acts in its proprietary capacity, it is amenable to all the rules of law which bind private individuals".

"There is not one law for the sovereign and another for the subject, but when the sovereign engages in business and the conduct of business enterprises, and contracts with individuals, whenever the contract in any form comes before the courts, the rights and obligation of the contracting parties must be adjusted upon the same principles as if both contracting parties were private persons. Both stand upon equality before the law, and the sovereign is merged in the dealer, contractor and suitor" (People vs. Stephens, 71 N. Y. 549).

It should be noted that in Philippine National Railways vs. Union de Maquinistas, etc., L-31948, July 25, 1978, 84 SCRA 223, it was held that the PNR funds could be garnished at the instance of a labor union.

It would be unjust if the heirs of the victim of an alleged negligence of the PNR employees could not sue the PNR for damages. Like any private common carriers the PNR is subject to the obligations of persons engaged in that private enterprise. It is not performing any governmental function.

Thus, the National Development Company is not immune from suit. It does not exercise sovereign func­tions. It is an agency for the performance of purely corporate, proprietary or business functions (National Development Company vs. Tobias, 117 Phil. 703, 705 and cases cited therein; National Development Company vs. NDC Employees and Workers' Union, L-32387, August 19, 1975, 66 SCRA 181, 184).

Other government agencies not enjoying immunity from suit are the Social Security System (Social Security System vs. Court of Appeals, L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank (Republic vs. Philippine National Bank, 121 Phil. 26).