5/26/2017 G.R.No.

159402

RepublicofthePhilippines
SupremeCourt
Manila

THIRDDIVISION


AIRTRANSPORTATION G.R.No.159402
OFFICE,
Petitioner, Present:



BRION,ActingChairperson,**
versus BERSAMIN,
ABAD,***
VILLARAMA,JR.,and

SERENO,JJ.
SPOUSESDAVID*and
ELISEARAMOS, Promulgated:
Respondents. February23,2011
xx

RESOLUTION

BERSAMIN,J.:

TheStatesimmunityfromsuitdoesnotextendtothepetitionerbecauseitisanagencyofthe
StateengagedinanenterprisethatisfarfrombeingtheStatesexclusiveprerogative.

[1]
UnderchallengeisthedecisionpromulgatedonMay14,2003, bywhichtheCourtof
Appeals (CA) affirmed with modification the decision rendered on February 21, 2001 by the
[2]
RegionalTrialCourt,Branch61(RTC),inBaguioCityinfavoroftherespondents.
Antecedents

SpousesDavidandEliseaRamos(respondents)discoveredthataportionoftheirlandregistered
underTransferCertificateofTitleNo.T58894oftheBaguioCitylandrecordswithanareaof
985squaremeters,moreorless,wasbeingusedaspartoftherunwayandrunningshoulderof
the Loakan Airport being operated by petitioner Air Transportation Office (ATO). On August
11, 1995, the respondents agreed after negotiations to convey the affected portion by deed of

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saletotheATOinconsiderationoftheamountofP778,150.00.However,theATOfailedtopay
despiterepeatedverbalandwrittendemands.

Thus, on April 29, 1998, the respondents filed an action for collection against the ATO
andsomeofitsofficialsintheRTC(docketedasCivilCaseNo.4017RandentitledSpouses
David and Elisea Ramos v. Air Transportation Office, Capt. Panfilo Villaruel, Gen. Carlos
Tanega,andMr.CesardeJesus).

In their answer, the ATO and its codefendants invoked as an affirmative defense the
issuanceofProclamationNo.1358,wherebyPresidentMarcoshadreservedcertainparcelsof
landthatincludedtherespondentsaffectedportionforuseoftheLoakanAirport.Theyasserted
thattheRTChadnojurisdictiontoentertaintheactionwithouttheStatesconsentconsidering
thatthedeedofsalehadbeenenteredintointheperformanceofgovernmentalfunctions.
OnNovember10,1998,theRTCdeniedtheATOsmotionforapreliminaryhearingofthe
affirmativedefense.

After the RTC likewise denied the ATOs motion for reconsideration on December 10,
1998, the ATO commenced a special civil action for certiorari in the CA to assail the RTCs
orders.TheCAdismissedthepetitionforcertiorari,however,uponitsfindingthattheassailed
[3]
orderswerenottaintedwithgraveabuseofdiscretion.

[4]
Subsequently,February21,2001,theRTCrendereditsdecisiononthemerits, disposing:

WHEREFORE,thejudgmentisrenderedORDERINGthedefendantAirTransportationOfficeto
paytheplaintiffsDAVIDandELISEARAMOSthefollowing:(1)TheamountofP778,150.00
beingthevalueoftheparceloflandappropriatedbythedefendantATOasembodiedintheDeed
ofSale,plusanannualinterestof12%fromAugust11,1995,thedateoftheDeedofSaleuntil
fully paid (2) The amount of P150,000.00 by way of moral damages and P150,000.00 as
exemplary damages (3) the amount of P50,000.00 by way of attorneys fees plus P15,000.00
representing the 10, more or less, court appearances of plaintiffs counsel (4) The costs of this
suit.

SOORDERED.

In due course, the ATO appealed to the CA, which affirmed the RTCs decision on May 14,
[5]
2003, viz:

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INVIEWOFALLTHEFOREGOING,theappealeddecisionisherebyAFFIRMED,with
MODIFICATION that the awarded cost therein is deleted, while that of moral and exemplary
damagesisreducedtoP30,000.00each,andattorneysfeesisloweredtoP10,000.00.
Nocost.
SOORDERED.

Hence,thisappealbypetitionforreviewoncertiorari.

Issue

The only issue presented for resolution is whether the ATO could be sued without the States
consent.


Ruling

Thepetitionforreviewhasnomerit.

TheimmunityoftheStatefromsuit,knownalsoasthedoctrineofsovereignimmunityornon
suabilityoftheState,isexpresslyprovidedinArticleXVIofthe1987Constitution,viz:

Section3.TheStatemaynotbesuedwithoutitsconsent.

TheimmunityfromsuitisbasedonthepoliticaltruismthattheState,asasovereign,can
[6]
donowrong.Moreover,astheeminentJusticeHolmessaidinKawananakoav.Polyblank:

Theterritory[ofHawaii],ofcourse,couldwaiveitsexemption(Smithv.Reeves,178US436,44
Led1140,20Sup.Ct.Rep.919),andittooknoobjectiontotheproceedingsinthecasescitedif
itcouldhavedoneso.xxxButinthecaseatbaritdidobject,andthequestionraisediswhether
the plaintiffs were bound to yield. Some doubts have been expressed as to the source of the
immunity of a sovereign power from suit without its own permission, but the answer has been
publicpropertysincebeforethedaysofHobbes.Leviathan,chap.26,2.Asovereignisexempt
fromsuit,notbecauseofanyformalconceptionorobsoletetheory,butonthelogicaland
practicalgroundthattherecanbenolegalrightasagainsttheauthoritythatmakesthelaw
onwhichtherightdepends.Caronpeutbienrecevoirloyd'autruy,maisilestimpossiblepar
naturedesedonnerloy.Bodin,Republique,1,chap.8,ed.1629,p.132SirJohnEliot,DeJure
Maiestatis,chap.3.Nemosuostatutoligaturnecessitative.Baldus,DeLeg.etConst.DignaVox,
[7]
2.ed.1496,fol.51b,ed.1539,fol.61.

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Practicalconsiderationsdictatetheestablishmentofanimmunityfromsuitinfavorofthe
State.Otherwise,andtheStateissuableattheinstanceofeveryotherindividual,government
servicemaybeseverelyobstructedandpublicsafetyendangeredbecauseofthenumberofsuits
[8]
that the State has to defend against. Several justifications have been offered to support the
adoptionofthedoctrineinthePhilippines,butthatofferedinProvidenceWashingtonInsurance
[9]
Co. v. Republic of the Philippines is the most acceptable explanation, according to Father
[10]
Bernas,arecognizedcommentatoronConstitutionalLaw, towit:

[A]continuedadherencetothedoctrineofnonsuabilityisnottobedeploredforasagainst
theinconveniencethatmaybecausedprivateparties,thelossofgovernmentalefficiencyandthe
obstacle to the performance of its multifarious functions are far greater if such a fundamental
principlewereabandonedandtheavailabilityofjudicialremedywerenotthusrestricted.With
thewellknownpropensityonthepartofourpeopletogotocourt,attheleastprovocation,the
loss of time and energy required to defend against law suits, in the absence of such a basic
principlethatconstitutessuchaneffectiveobstacle,couldverywellbeimagined.

An unincorporated government agency without any separate juridical personality of its
own enjoys immunity from suit because it is invested with an inherent power of sovereignty.
Accordingly,aclaimfordamagesagainsttheagencycannotprosperotherwise,thedoctrineof
[11]
sovereignimmunityisviolated. However,theneedtodistinguishbetweenanunincorporated
governmentagencyperforminggovernmentalfunctionandoneperformingproprietaryfunctions
has arisen. The immunity has been upheld in favor of the former because its function is
[12]
governmental or incidental to such function it has not been upheld in favor of the latter
whosefunctionwasnotinpursuitofanecessaryfunctionofgovernmentbutwasessentiallya
[13]
business.

ShouldthedoctrineofsovereigntyimmunityornonsuabilityoftheStatebeextendedto
theATO?

[14]
Initschallengeddecision, theCAansweredinthenegative,holding:

Onthefirstassignmentoferror,appellantsseektoimpressuponUsthatthesubjectcontract
ofsalepartookofagovernmentalcharacter.Apropos,thelowercourterredinapplyingtheHigh
CourtsrulinginNationalAirportsCorporationvs.Teodoro(91Phil.203[1952]),arguingthatin
Teodoro, the matter involved the collection of landing and parking fees which is a proprietary
function, while the case at bar involves the maintenance and operation of aircraft and air
navigationalfacilitiesandserviceswhicharegovernmentalfunctions.
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Wearenotpersuaded.

Contrarytoappellantsconclusions,itwasnotmerelythecollectionoflandingandparking
feeswhichwasdeclaredasproprietaryinnaturebytheHighCourtinTeodoro,butmanagement
andmaintenanceofairportoperationsasawhole,aswell.Thus,inthemuchlatercaseofCivil
Aeronautics Administration vs. Court of Appeals (167 SCRA 28 [1988]), the Supreme Court,
reiterating the pronouncements laid down in Teodoro, declared that the CAA (predecessor of
ATO) is an agency not immune from suit, it being engaged in functions pertaining to a private
entity.Itwentontoexplaininthiswise:

xxx

TheCivilAeronauticsAdministrationcomesunderthecategoryofaprivate
entity. Although not a body corporate it was created, like the National Airports
Corporation,nottomaintainanecessaryfunctionofgovernment,buttorunwhatis
essentially a business, even if revenues be not its prime objective but rather the
promotionoftravelandtheconvenienceofthetravellingpublic.Itisengagedinan
enterprisewhich,farfrombeingtheexclusiveprerogativeofstate,may,morethan
the construction of public roads, be undertaken by private concerns. [National
AirportsCorp.v.Teodoro,supra,p.207.]

xxx

True,thelawprevailingin1952whentheTeodorocasewaspromulgatedwas
Exec. Order 365 (Reorganizing the Civil Aeronautics Administration and
Abolishing the National Airports Corporation). Republic Act No. 776 (Civil
AeronauticsActofthePhilippines),subsequentlyenactedonJune20,1952,didnot
alter the character of the CAAs objectives under Exec. Order 365. The pertinent
provisionscitedintheTeodorocase,particularlySecs.3and4ofExec.Order365,
whichledtheCourt to consider the CAA in the category of a private entity were
retainedsubstantiallyinRepublicAct776,Sec.32(24)and(25).SaidActprovides:

Sec.32.PowersandDutiesoftheAdministrator.Subjecttothegeneralcontrol
andsupervisionoftheDepartmentHead,theAdministratorshallhaveamongothers,
thefollowingpowersandduties:

xxx
(24)Toadminister,operate,manage,control,maintainanddeveloptheManila
InternationalAirportandallgovernmentownedaerodromesexceptthosecontrolled
oroperatedbytheArmedForcesofthePhilippinesincludingsuchpowersandduties
as:(a)toplan,design,construct,equip,expand,improve,repairoralteraerodromes
or such structures, improvement or air navigation facilities (b) to enter into, make
and execute contracts of any kind with any person, firm, or public or private
corporationorentity

(25)Todetermine,fix,impose,collectandreceivelandingfees,parkingspace
fees,royaltiesonsalesordeliveries,directorindirect,toanyaircraftforitsuseof
aviation gasoline, oil and lubricants, spare parts, accessories and supplies, tools,
other royalties, fees or rentals for the use of any of the property under its
managementandcontrol.

xxx

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Fromtheforegoing,itcanbeseenthattheCAAistaskedwithprivateornon
governmentalfunctionswhichoperatetoremoveitfromthepurviewoftheruleon
Stateimmunityfromsuit.ForthecorrectruleassetforthintheTeodorocasestates:

xxx

Notallgovernmententities,whethercorporateornoncorporate,areimmune
from suits. Immunity from suits is determined by the character of the objects for
whichtheentitywasorganized.TheruleisthusstatedinCorpusJuris:

SuitsagainstStateagencieswithrelationtomattersinwhichthey
have assumed to act in private or nongovernmental capacity, and
varioussuitsagainstcertaincorporationscreatedbythestateforpublic
purposes, but to engage in matters partaking more of the nature of
ordinary business rather than functions of a governmental or political
character,arenotregardedassuitsagainstthestate.Thelatteristrue,
althoughthestatemayownstockorpropertyofsuchacorporationfor
by engaging in business operations through a corporation, the state
divests itself so far of its sovereign character, and by implication
consents to suits against the corporation. (59 C.J., 313) [National
AirportsCorporationv.Teodoro,supra,pp.206207Italicssupplied.]

This doctrine has been reaffirmed in the recent case of Malong v. Philippine
National Railways [G.R. No. L49930,August 7, 1985, 138 SCRA 63], where it
was held that the Philippine National Railways, although owned and operated by
the government, was not immune from suit as it does not exercise sovereign but
purelyproprietaryandbusinessfunctions.Accordingly,astheCAAwascreatedto
undertake the management of airport operations which primarily involve
proprietary functions, it cannot avail of the immunity from suit accorded to
[15]
governmentagenciesperformingstrictlygovernmentalfunctions.

Inourview,theCAtherebycorrectlyappreciatedthejuridicalcharacteroftheATOasan
agencyoftheGovernmentnotperformingapurelygovernmentalorsovereignfunction,butwas
insteadinvolvedinthemanagementandmaintenanceoftheLoakanAirport,anactivitythatwas
nottheexclusiveprerogativeoftheStateinitssovereigncapacity.Hence,theATOhadnoclaim
totheStatesimmunityfromsuit.WeupholdtheCAsaforequotedholding.

Wefurtherobservethedoctrineofsovereignimmunitycannotbesuccessfullyinvokedto
defeat a valid claim for compensation arising from the taking without just compensation and
[16]
withouttheproperexpropriationproceedingsbeingfirstresortedtooftheplaintiffsproperty.
[17]
Thus,inDe los Santos v. Intermediate Appellate Court, the trial courts dismissal based on
thedoctrineofnonsuabilityoftheStateoftwocases(oneofwhichwasfordamages)filedby
ownersofpropertywherearoad9meterswideand128.70meterslongoccupyingatotalareaof
1,165squaremetersandanartificialcreek23.20meterswideand128.69meterslongoccupying
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anareaof2,906squaremetershadbeenconstructedbytheprovincialengineerofRizalanda
private contractor without the owners knowledge and consent was reversed and the cases
remanded for trial on the merits. The Supreme Court ruled that the doctrine of sovereign
immunity was not an instrument for perpetrating any injustice on a citizen. In exercising the
rightofeminentdomain,theCourtexplained,theStateexerciseditsjusimperii,asdistinguished
from its proprietary rights, or jus gestionis yet, even in that area, where private property had
beentakeninexpropriationwithoutjustcompensationbeingpaid,thedefenseofimmunityfrom
suitcouldnotbesetupbytheStateagainstanactionforpaymentbytheowners.

Lastly,theissueofwhetherornottheATOcouldbesuedwithouttheStatesconsenthas
been rendered moot by the passage of Republic Act No. 9497, otherwise known as the Civil
AviationAuthorityActof2008.

R.A.No.9497abolishedtheATO,towit:

Section 4. Creation of the Authority. There is hereby created an independent regulatory
body with quasijudicial and quasilegislative powers and possessing corporate attributes to be
knownastheCivilAviationAuthorityofthePhilippines(CAAP),hereinafterreferredtoasthe
Authority attached to the Department of Transportation and Communications (DOTC) for the
purpose of policy coordination. For this purpose, the existing Air transportation Office
createdundertheprovisionsofRepublicActNo.776,asamendedisherebyabolished.
xxx

Under its Transitory Provisions, R.A. No. 9497 established in place of the ATO the Civil
AviationAuthorityofthePhilippines(CAAP),whichtherebyassumedalloftheATOspowers,
dutiesandrights,assets,realandpersonalproperties,funds,andrevenues,viz:

CHAPTERXII
TRANSITORTYPROVISIONS
Section85.AbolitionoftheAirTransportationOffice.TheAirTransportationOffice(ATO)
created under Republic Act No. 776, a sectoral office of the Department of Transportation and
Communications(DOTC),isherebyabolished.

All powers, duties and rights vested by law and exercised by the ATO is hereby
transferredtotheAuthority.


Allassets,realandpersonalproperties,fundsandrevenuesownedbyorvestedinthe
different offices of the ATO are transferred to the Authority. All contracts, records and
documentsrelatingtotheoperationsoftheabolishedagencyanditsofficesandbranchesare
likewisetransferredtotheAuthority.Anyrealpropertyownedbythenationalgovernment
orgovernmentownedcorporationorauthoritywhichisbeingusedandutilizedasofficeor
facilitybytheATOshallbetransferredandtitledinfavoroftheAuthority.
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Section 23 of R.A. No. 9497 enumerates the corporate powers vested in the CAAP,
including the power to sue and be sued, to enter into contracts of every class, kind and
description, to construct, acquire, own, hold, operate, maintain, administer and lease personal
andrealproperties,andtosettle,undersuchtermsandconditionsmostadvantageoustoit,any
[18]
claimbyoragainstit.

WiththeCAAPhavinglegallysucceededtheATOpursuanttoR.A.No.9497,theobligations
thattheATOhadincurredbyvirtueofthedeedofsalewiththeRamosspousesmightnowbe
enforcedagainsttheCAAP.

WHEREFORE,theCourtdeniesthepetitionforreviewoncertiorari,andaffirmsthedecision
promulgatedbytheCourtofAppeals.

Nopronouncementoncostsofsuit.

SOORDERED.



LUCASP.BERSAMIN
AssociateJustice



WECONCUR:

ARTUROD.BRION
AssociateJustice
ActingChairperson




ROBERTOA.ABADMARTINS.VILLARAMA,JR.
AssociateJusticeAssociateJustice

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MARIALOURDESP.A.SERENO
AssociateJustice


ATTESTATION

IattestthattheconclusionsintheaboveResolutionhadbeenreachedinconsultationbeforethe
casewasassignedtothewriteroftheopinionoftheCourtsDivision.


ARTUROD.BRION
AssociateJustice
ActingChairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, I certify that the conclusions in the above Resolution had been reached in
consultationbeforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.



RENATOC.CORONA
ChiefJustice

*DavidRamosdiedonOctober14,2001,beforetheassaileddecisionwaspromulgated.HewassubstitutedbyhischildrenCherry
Ramos,JosephDavidRamosandElsieGraceR.DizonpursuanttoaresolutionoftheCApromulgatedonApril23,2003(seerollo,
p.136).
**ActingChairpersoninlieuofJusticeConchitaCarpioMoraleswhoisonleaveperSpecialOrderNo.925datedJanuary24,2011.
***AdditionalmemberperSpecialOrderNo.926datedJanuary24,2011.
[1]
Rollo,pp.2535pennedbyAssociateJusticeConradoM.Vasquez(laterPresidingJustice,nowretired),andconcurredinby
AssociateJusticeMercedesGozoDadole(retired)andAssociateJusticeRosmariD.Carandang,
[2]
Id.,pp.8087pennedbyJudgeAntonioC.Reyes.
[3]
Id.
[4]
Id.
[5]
Id.,pp.2535.
[6]
205US349,353(1907).
[7]
Boldemphasissupplied.
[8]
Veterans Manpower and Protective Services, Inc. v. Court of Appeals, G.R. No. 91359, Sept. 25, 1992, 214SCRA 286, 294
Republicv.Purisima,No.L36084,Aug.31,1977,78SCRA470,473.
[9]
L26386,Sept.30,1969,29SCRA598,601602.
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[10]
Bernas,The1987ConstitutionoftheRepublicofthePhilippines:ACommentary,2003Edition,p.1269.
[11]
MetropolitanTransportationServicev.Paredes,79Phil.819(1948).
[12]
E.g.,AngatRiverIrrigationSystem,et.al.v.AngatRiverWorkersUnion,et.al.,102Phil.789(1957).
[13]
E.g.,NationalAirportsCorporationv.Teodoro,Sr.andPhil.AirlinesInc.,91Phil.203(1952).
[14]
Rollo,pp.2535.
[15]
Id.,pp.2932.
[16]
Republicv.Sandiganbayan,G.R.No.90478,Nov.2,1991,204SCRA212,231Ministeriov.CourtofFirstInstanceofCebu,
No.L31635,Aug.31,1971,40SCRA464Santiagov.Republic,No.L48214,Dec.19,1978,87SCRA294.
[17]
G.R.Nos.7199899,June2,1993,223SCRA11.
[18]
Section23.CorporatePowers.TheAuthority,actingthroughtheBoard,shallhavethefollowingcorporatepowers:

(a)Tosucceedinitscorporatename,tosueandbesuedinsuchcorporatenamexxx.
xxx
(c) To enter into, make, perform and carry out contracts of every class, kind and description, which are necessary or
incidental to the realization of its purposes, with any person, domestic or foreign private firm, or corporation, local or national
governmentoffice,agencyandwithinternationalinstitutionsorforeigngovernment
xxx
(e)Toconstruct,acquire,own,hold,operate,maintain,administerandleasepersonalandrealproperties,includingbuildings,
machinery,equipment,otherinfrastructure,agriculturalland,anditsimprovements,propertyrights,andinterestthereinxxx
xxx
(i)Tosettle,undersuchtermsandconditionsmostadvantageoustoit,anyclaimbyoragainstit
xxx

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