City of Bacolod v. Phuture Visions Co.
REITERATIONFacts
1. The Antecedents: Respondent Phuture Visions Co., Inc. (Phuture) sought to operate bingo games at SM Bacolod. Phuture amended its Articles of Incorporation to include lotto betting and other gaming outlets as secondary purposes, and later as its primary purpose. It obtained a provisional Grant of Authority from PAGCOR and an Award Notice from SM Prime. Phuture applied for a Mayor's Permit with the City of Bacolod, paid the required fees, and commenced bingo operations on March 2, 2007, prior to the actual issuance of the permit. However, on March 3, 2007, its bingo outlet was padlocked by city officials, who issued a Closure Order dated March 2, 2007. 2. Procedural History: Phuture filed a Petition for Mandamus and Damages with the Regional Trial Court (RTC) of Bacolod City, Branch 49, seeking to compel the City of Bacolod and its officials to allow its bingo operations and to recover damages. The RTC denied Phuture's prayer for a temporary mandatory order and dismissed the case for lack of merit. Phuture's motion for reconsideration was also denied. Phuture appealed to the Court of Appeals (CA). The CA affirmed the RTC's denial of the temporary mandatory order but reversed the dismissal of the suit for damages, reinstating the case and remanding it to the RTC for further proceedings to determine damages. The petitioners then filed a Petition for Review on Certiorari with the Supreme Court. 3. The Petition: Petitioners, the City of Bacolod and its officials, filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CA's decision to remand the case for trial on damages. They argue that the City is immune from suit, that the impleaded officials acted within their lawful duties, and that their actions were governmental or sovereign acts. Petitioners also contend that the CA's decision was inconsistent by denying mandamus while allowing the damages case to proceed. Respondent Phuture argues that the immunity defense was raised for the first time on appeal and that damages are warranted due to the illegal closure without due process. The Supreme Court's sole issue is whether petitioners can be held liable for damages.
Issue(s)
Whether petitioners are liable to respondent for damages, and whether the City of Bacolod and its officials are immune from suit for the closure of respondent's business operations. Whether the closure of respondent's bingo operations was effected in a manner consistent with law and due process. Whether respondent is entitled to damages under the principle of damnum absque injuria.
Ruling
The petition is meritorious. The Decision of the Court of Appeals is annulled and set aside, and the Decision of the Regional Trial Court is reinstated.
Ratio Decidendi
On the issue of liability for damages and immunity from suit: The Supreme Court held that the principle of immunity from suit, enshrined in the Constitution, applies to the State and its political subdivisions. The City of Bacolod, as a local government unit, is open to suit only when it consents. Consent may be express or implied. The Court clarified that the authority of city mayors to issue or grant licenses and business permits, as granted by the Local Government Code, is an exercise of the police power of the State, which is a governmental act, not a proprietary function. Therefore, no consent to be sued and be liable for damages can be implied from the mere conferment and exercise of the power to issue business permits and licenses. The Court further emphasized that waiver of immunity from suit, being in derogation of sovereignty, will not be lightly inferred and cannot be made by omission, mistake, or error of officials or agents. The City cannot be estopped from invoking its immunity from suit, even if the defense was raised for the first time on appeal, as the lack of consent to be sued cannot be cured and is a matter of judicial notice. The Court cited Insurance Co. of North America v. Osaka Shosen Kaisha to support the principle that the State's immunity cannot be waived by its officers and can be invoked at any stage of the proceedings. On the issue of whether petitioners acted lawfully in stopping respondent's bingo operation: The Supreme Court found that the trial court had already ruled that respondent Phuture had no right and/or authority to operate bingo games at SM Bacolod because it did not have a Business Permit and had not paid the assessment for bingo operations. The trial court found that petitioners acted lawfully in stopping the operation and closing the establishment for lack of a business permit. The Mayor's Office had released a Business Permit for "Professional Services, Band/Entertainment Services," and Phuture could not expect a permit for "Bingo Operations" without a new application, submission of requirements, and payment of fees. The trial court also found Phuture's reliance on the PAGCOR GOA, SM Award Notice, and the "questionable" Claim Slip tainted with alteration/falsification did not establish a clear and unmistakable right. Phuture's own admission that its primary purpose in its AOI was amended to reflect bingo operations only on February 14, 2007, more than a month after it supposedly applied for a license, cast doubt on its claimed right. Therefore, respondent had no clear and unmistakable legal right to operate its bingo operations at the outset. On the principle of damnum absque injuria: The Court reiterated that for the law to provide redress for an act causing damage, there must be both damnum (damage) and injuria (legal wrong). The act must be not only hurtful but also wrongful. If damage is sustained without a legal injury, it is considered damnum absque injuria, for which the law provides no remedy. Since the Court found that Phuture had no legal right to operate its bingo operations, the petitioners, in ordering the closure, were exercising their duty to implement laws and ordinances, which is a delegated exercise of the State's police power. The nature of bingo operations as gambling means its operation is a mere privilege that can be regulated, revoked, or closed down when public interest requires. Consequently, Phuture was not entitled to damages because it failed to establish a legal right that was violated by the petitioners' lawful exercise of their duties.
Main Doctrine
The exercise of police power by local government units, such as the issuance of business permits and the closure of establishments operating without them, constitutes a governmental act. Consequently, local government units and their officials performing such acts are immune from suit for damages unless they have given their consent, which cannot be implied from the mere conferment and exercise of such power. Furthermore, damages are not recoverable if there is no legal wrong (injuria) inflicted, even if there is damage (damnum), a principle known as damnum absque injuria.