Facts:

The case involves the Air Transportation Office (ATO) as the petitioner and Spouses David and Elisea Ramos as the respondents, adjudicated by the Supreme Court of the Philippines under G.R. No. 159402, decided on February 23, 2011. The underlying dispute arose when the respondents discovered that a segment of their land, which was certified under Transfer Certificate of Title No. T-58894 and measured approximately 985 square meters, was being utilized as part of the runway and shoulder of the Loakan Airport operated by ATO. Following negotiations, the respondents agreed to sell the affected portion of land to ATO for the sum of ₱778,150.00 on August 11, 1995. However, ATO failed to fulfill its payment obligations despite several demands from the spouses Ramos. Consequently, on April 29, 1998, they initiated an action for collection against ATO and several officials in the Regional Trial Court (RTC) in Baguio City, leading to Civil Case No. 4017-R.

In their defense, ATO claimed

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Facts:

Parties Involved

• Petitioner: Air Transportation Office (ATO), an agency of the State engaged in an enterprise.
• Respondents: Spouses David and Elisea Ramos (with David later substituted by his children due to his death).

The Transaction and Dispute

• Discovery of Land Use
• The respondents discovered that a portion of their land (registered under Transfer Certificate of Title No. T-58894 with an area of approximately 985 square meters) was being used as part of the runway and running shoulder of Loakan Airport operated by the ATO.
• Agreement and Non-payment
• On August 11, 1995, after negotiations, the respondents agreed to convey the affected portion of their land to the ATO by deed of sale for the price of P778,150.00.
• The ATO failed to pay the agreed amount despite repeated verbal and written demands.

Initiation of Litigation and Court Proceedings

• Filing of the Action
• On April 29, 1998, the respondents filed an action for collection in the Regional Trial Court (RTC) under Civil Case No. 4017-R against the ATO and some of its officials for the non-payment under the deed of sale.
• ATO’s Defense
• The ATO, along with its co-defendants, in its answer invoked an affirmative defense based on Proclamation No. 1358, asserting that the affected land was reserved by President Marcos for Loakan Airport and that the deed of sale was executed in the performance of governmental functions.
• They argued that the RTC lacked jurisdiction to entertain the suit without the State’s consent.

Procedural History Prior to the Supreme Court

• RTC Proceedings
• The RTC denied the ATO’s motion for a preliminary hearing on the affirmative defense on November 10, 1998.
• The RTC also denied the ATO’s subsequent motion for reconsideration on December 10, 1998.
• Court of Appeals (CA) Involvement
• The ATO commenced a special civil action for certiorari in the CA to assail the RTC’s orders; the CA dismissed the petition for certiorari due to the absence of grave abuse of discretion.
• Later, on February 21, 2001, the RTC rendered a decision on the merits, ordering the ATO to pay the respondents:
• The principal amount of P778,150.00 plus annual interest from August 11, 1995, until payment in full.

ii. Moral and exemplary damages (initially P150,000.00 each, later reduced by the CA). iii. Attorney’s fees and additional charges for court appearances. iv. Costs of the suit.

Issue:

• Whether the ATO, as an agency of the State, could be sued without the State’s consent, given the doctrine of sovereign immunity.
• Whether the functions performed by the ATO—specifically the management and maintenance of airport operations—qualify as governmental (thus immune) or proprietary (thus non-immune) in nature.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)