The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the State, is expressly provided in Article XVI of the 1987 Constitution, viz:
Section 3. The State may not be sued without its consent.
The immunity from suit is based on the political truism that the State, as a sovereign, can do no wrong. Moreover, as the eminent Justice Holmes said in Kawananakoa v. Polyblank:
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178 US436, 44 L ed 1140, 20 Sup. Ct. Rep. 919), and it took no objection to the proceedings in the cases cited if it could have done so. xxx But in the case at bar it did object, and the question raised is whether 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 public property since before the days of Hobbes. Leviathan, chap. 26, 2. A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends. “Car on peut bien recevoir loy d’autruy, mais il est impossible par nature de se donner loy.” Bodin, Republique, 1, chap. 8, ed. 1629, p. 132; Sir John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur necessitative. Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol. 61.
Practical considerations dictate the establishment of an immunity from suit in favor of the State. Otherwise, and the State is suable at the instance of every other individual, government service may be severely obstructed and public safety endangered because of the number of suits that the State has to defend against. Several justifications have been offered to support the adoption of the doctrine in the Philippines, but that offered in Providence Washington Insurance Co. v. Republic of the Philippines is “the most acceptable explanation,” according to Father Bernas, a recognized commentator on Constitutional Law, to wit:
[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused private parties, the loss of governmental efficiency and the obstacle to the performance of its multifarious functions are far greater if such a fundamental principle were abandoned and the availability of judicial remedy were not thus restricted. With the well-known propensity on the part of our people to go to court, at the least provocation, the loss of time and energy required to defend against law suits, in the absence of such a basic principle that constitutes such an effective obstacle, could very well be imagined.
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, a claim for damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated. However, the need to distinguish between an unincorporated government agency performing governmental function and one performing proprietary functions has arisen. The immunity has been upheld in favor of the former because its function is governmental or incidental to such function; it has not been upheld in favor of the latter whose function was not in pursuit of a necessary function of government but was essentially a business.
Should the doctrine of sovereignty immunity or non-suability of the State be extended to the ATO?
In its challenged decision, the CA answered in the negative, holding:
On the first assignment of error, appellants seek to impress upon Us that the subject contract of sale partook of a governmental character. Apropos, the lower court erred in applying the High Court’s ruling in National Airports Corporation vs. Teodoro (91 Phil. 203 ), arguing that in 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 navigational facilities and services which are governmental functions.
We are not persuaded.
Contrary to appellants’ conclusions, it was not merely the collection of landing and parking fees which was declared as proprietary in nature by the High Court in Teodoro, but management and maintenance of airport operations as a whole, as well. Thus, in the much later case of Civil Aeronautics Administration vs. Court of Appeals (167 SCRA 28 ), 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. It went on to explain in this wise:
x x x
The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the travelling public. It is engaged in an enterprise which, far from being the exclusive prerogative of state, may, more than the construction of public roads, be undertaken by private concerns. [National Airports Corp. v. Teodoro, supra, p. 207.]
x x x
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec. Order 365 (Reorganizing the Civil Aeronautics Administration and Abolishing the National Airports Corporation). Republic Act No. 776 (Civil Aeronautics Act of the Philippines), subsequently enacted on June 20, 1952, did not alter the character of the CAA’s objectives under Exec. Order 365. The pertinent provisions cited in the Teodoro case, particularly Secs. 3 and 4 of Exec. Order 365, which led the Court to consider the CAA in the category of a private entity were retained substantially in Republic Act 776, Sec. 32(24) and (25). Said Act provides:
Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and supervision of the Department Head, the Administrator shall have among others, the following powers and duties:
x x x
(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and all government-owned aerodromes except those controlled or operated by the Armed Forces of the Philippines including such powers and duties as: (a) to plan, design, construct, equip, expand, improve, repair or alter aerodromes 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 corporation or entity; …
(25) To determine, fix, impose, collect and receive landing fees, parking space fees, royalties on sales or deliveries, direct or indirect, to any aircraft for its use of 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 management and control.
x x x
From the foregoing, it can be seen that the CAA is tasked with private or non-governmental functions which operate to remove it from the purview of the rule on State immunity from suit. For the correct rule as set forth in the Teodoro case states:
x x x
Not all government entities, whether corporate or non-corporate, are immune from suits. Immunity from suits is determined by the character of the objects for which the entity was organized. The rule is thus stated in Corpus Juris:
Suits against State agencies with relation to matters in which they have assumed to act in private or non-governmental capacity, and various suits against certain corporations created by the state for public purposes, but to engage in matters partaking more of the nature of ordinary business rather than functions of a governmental or political character, are not regarded as suits against the state. The latter is true, although the state may own stock or property of such a corporation for 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 Airports Corporation v. Teodoro, supra, pp. 206-207; Italics supplied.]
This doctrine has been reaffirmed in the recent case of Malong v. Philippine National Railways [G.R. No. L-49930, 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 purely proprietary and business functions. Accordingly, as the CAA was created to undertake the management of airport operations which primarily involve proprietary functions, it cannot avail of the immunity from suit accorded to government agencies performing strictly governmental functions.
In our view, the CA thereby correctly appreciated the juridical character of the ATO as an agency of the Government not performing a purely governmental or sovereign function, but was instead involved in the management and maintenance of theLoakanAirport, an activity that was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO had no claim to the State’s immunity from suit. We uphold the CA’s aforequoted holding.