DOCTRINE OF STATE IMMUNITY

The City of Bacolod v. Phuture Vision Co., Inc., G.R. No. 190289, January 17, 2018

THE CITY OF BACOLOD, HON. MAYOR EVELIO R. LEONARDIA, ATTY. ALLAN L. ZAMORA AND
ARCH. LEMUEL D. REYNALDO, IN THEIR PERSONAL CAPACITIES AND IN THEIR CAPACITIES
AS OFFICIALS OF THE CITY OF BACOLOD, PETITIONERS, -versus- PHUTURE VISIONS CO., INC.,
RESPONDENT.
G.R. No. 190289, THIRD DIVISION, January 17, 2018, VELASCO JR., J.
No consent to be sued and be liable for damages can thus be implied from the mere conferment and
exercise of the power to issue business permits and licences. Accordingly, there is merit in petitioners'
argument that they cannot be sued by respondent since the City's consent had not been secured for this
purpose.
Injury alone does not give respondent the right to recover damages, but it must also have a right of
action for the legal wrong inflicted by petitioners. In order that the law will give redress for an act
causing damage, there must be damnum et injuria that act must be not only hurtful, but
wrongful. Considering that respondent had no legal right to operate the bingo operations at the outset,
then it is not entitled to the damages which it is demanding from petitioners.
FACTS:
The instant case stems from the Petition for Mandamus and Damages filed by respondent Phuture
Visions Co., Inc. (Phuture) on March 5, 2007 against petitioners City of Bacolod, Hon. Mayor Evelio R.
Leonardia, Atty. Allan L. Zamora (now deceased) and Arch. Lemuel D. Reynaldo.
On January 10, 2007, Phuture applied for the renewal of its mayor's permit with "professional
services, band/entertainment services" as its declared line of business, providing the address of the
business as "RH Building, 26 Lacson Street, Barangay 5" instead of SM Bacolod where respondent's
bingo operations was located.
Upon submission of the requirements on February 19,2007 and while the application was being
processed, Phuture was issued a "claim slip" for it to claim the actual mayor's permit on March 16,
2007 if the requirements were found to be in order.However, petitioners found discrepancies in
Phuture's submitted requirements, wherein the application form was notarized earlier than the
amendment of its Articles of Incorporation (AOI) to reflect the company's primary purpose for bingo
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operations. Aside from this, respondent failed to pay the necessary permit fee/assessment fee under
the applicable tax ordinances of the City of Bacolod.
Without waiting for the release of the mayor's permit, respondent started the operation of its bingo
outlet at SM Bacolod. This prompted the former City Legal Officer, Atty. Allan Zamora, to issue a
Closure Order dated March 2, 2007, pursuant to City Tax Ordinance No. 93-001, Series of 1993, which
declares unlawful for any person to operate any business in the City of Bacolod without first
obtaining a permit therefor from the City Mayor and paying the necessary permit fee and other
charges to the City Treasurer.
The Closure Order was presented by petitioners' representative to respondent's lawyers to negotiate
a possible peaceful solution before its implementation. However, respondent simply ignored the
information relayed to them and thus, at around 6:00 a.m. on March 3, 2007, the Composite
Enforcement Unit under the Office of the City Legal Officer implemented the Closure Order.
In a Decision dated March 20, 2007, the RTC denied the prayer for the issuance of a temporary
mandatory order and dismissed the case for lack of merit. On appeal, the CA partially granted the
appeal by affirming the trial court's denial of the application for a temporary mandatory order but
reversing the dismissal of the suit for damages and ordering the case to be reinstated and remanded
to the court of origin for further proceedings. Hence, the instant petition.
Petitioners’ argued that hearing the action for damages effectively violates the City's immunity from
suit since respondent had not yet obtained the consent of the City Government of Bacolod to be
included in the claim for damages. They also argue that the other petitioners, the City Mayor and
other officials impleaded, are similarly immune from suit since the acts they performed were within
their lawful duty and functions. Moreover, petitioners maintain that they were merely performing
governmental or sovereign acts and exercised their legal rights and duties to implement the
provisions of the City Ordinance. Finally, petitioners contend that the assailed Decision contained
inconsistencies such that the CA declared mandamus to be an inappropriate remedy, yet allowed the
case for damages to prosper.
In its Comment, respondent Phuture argues that the grounds raised by petitioners should not be
considered since these were only invoked for the first time on appeal. Aside from this, respondent
asserts that the case for damages should proceed since petitioners allegedly caused the illegal closure
of its bingo outlet without proper notice and hearing and with obvious discrimination.
ISSUES:
1. Whether petitioners have given their consent to be sued. (NO)
2. Whether petitioners can be made liable to pay respondent damages. (NO)
RULING:
1. Petitioners have not given their consent to be sued
The principle of immunity from suit is embodied in Section 3, Article XVI of the 1987 Philippine
Constitution which states that "[t]he State cannot be sued without its consent." The purpose behind
this principle is to prevent the loss of governmental efficiency as a result of the time and energy it
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would require to defend itself against lawsuits.The State and its political subdivisions are open to suit
only when they consent to it.
Consent may be express or implied, such as when the government exercises its proprietary functions,
or where such is embodied in a general or special law. In the present case, respondent sued
petitioners for the latter's refusal to issue a mayor's permit for bingo operations and for closing its
business on account of the lack of such permit. However, while the authority of city mayors to issue
or grant licenses and business permits is granted by the Local Government Code (LGC), which also
vests local government units with corporate powers, one of which is the power to sue and be sued,
this Court has held that the power to issue or grant licenses and business permits is not an exercise
of the government's proprietary function. Instead, it is in an exercise of the police power of the State,
ergo a governmental act.
No consent to be sued and be liable for damages can thus be implied from the mere conferment and
exercise of the power to issue business permits and licences. Accordingly, there is merit in
petitioners' argument that they cannot be sued by respondent since the City's consent had not been
secured for this purpose. This is notwithstanding petitioners' failure to raise this exculpatory defense
at the first instance before the trial court or even before the appellate court.
As this Court has repeatedly held, waiver of immunity from suit, being in derogation of sovereignty,
will not be lightly inferred.[33] Moreover, it deserves mentioning that the City of Bacolod as a
government agency or instrumentality cannot be estopped by the omission, mistake or error of its
officials or agents.[34] Estoppel does not also lie against the government or any of its agencies arising
from unauthorized or illegal acts of public officers.[35] Hence, we cannot hold petitioners estopped
from invoking their immunity from suit on account of having raised it only for the first time on appeal.
2. Petitioners are not liable for damages
Based on the observations made by the trial court, it appears that respondent had no clear and
unmistakable legal right to operate its bingo operations at the onset. Respondent failed to establish
that it had duly applied for the proper permit for bingo operations with the Office of the Mayor and,
instead, merely relied on the questionable claim stub to support its claim. The trial court also found
that the application form submitted by respondent pertained to a renewal of respondent's business
for "Professional Services, Band/Entertainment Services" located at "RH Bldg., 26th Lacson St." and
not at SM Bacolod. These factual findings by the trial court belie respondent's claim that it had the
right to operate its bingo operations at SM Bacolod.
Certainly, respondent's claim that it had applied for a license for bingo operations is questionable
since, as it had admitted in its Petition for Mandamus and Damages, the primary purpose in its AOI
was only amended to reflect bingo operations on February 14, 2007 or more than a month after it
had supposedly applied for a license for bingo operations with the Office of the Mayor. It is settled
that a judicial admission is binding on the person who makes it, and absent any showing that it was
made through palpable mistake, no amount of rationalization can offset such admission.[40] This
admission clearly casts doubt on respondent's so-called right to operate its business of bingo
operations.
Petitioners, in ordering the closure of respondent's bingo operations, were exercising their duty to
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implement laws and ordinances which include the local government's authority to issue licenses and
permits for business operations in the city. This authority is granted to them as a delegated exercise
of the police power of the State. It must be emphasized that the nature of bingo operations is a form
of gambling; thus, its operation is a mere privilege which could not only be regulated, but may also
very well be revoked or closed down when public interests so require.
In this jurisdiction, we adhere to the principle that injury alone does not give respondent the right to
recover damages, but it must also have a right of action for the legal wrong inflicted by petitioners.
In order that the law will give redress for an act causing damage, there must be damnum et
injuria that act must be not only hurtful, but wrongful.
Considering that respondent had no legal right to operate the bingo operations at the outset, then it
is not entitled to the damages which it is demanding from petitioners.