FACTS:

The case revolves around a dispute between spouses David and Elisea Ramos (respondents) and the Air Transportation Office (ATO). The respondents discovered that a portion of their land was being utilized as part of the runway and running shoulder of Loakan Airport, which was operated by the ATO. Subsequently, the respondents agreed to sell the affected portion of their land to the ATO. However, despite repeated demands, the ATO failed to make the payment as agreed upon.

Due to this non-payment, the respondents filed a collection action against the ATO and its officials. In response, the ATO invoked the State's immunity from suit, contending that the deed of sale had been executed in the performance of governmental functions. The trial court denied the ATO's motion for a preliminary hearing of this affirmative defense.

Unsatisfied with the trial court's ruling, the ATO appealed the case to the Court of Appeals (CA). However, the CA upheld the trial court's decision, affirming the denial of the ATO's motion. Displeased with this outcome, the ATO then appealed the case to the Supreme Court, maintaining that as an agency of the State, it should be immune from suit.

ISSUES:

1. Whether the Air Transportation Office (ATO) could be sued without the State's consent.

RULING:

1. The petition for review has no merit. The Supreme Court ruled that the ATO could indeed be sued without the State's consent. The ATO, being an agency engaged in proprietary functions such as the management and maintenance of airport operations, does not enjoy sovereign immunity from suit. The Court also notes that even in cases involving the exercise of the right of eminent domain, sovereign immunity cannot be invoked to defeat a valid claim for just compensation.

PRINCIPLES:

• Doctrine of Sovereign Immunity or Non-suability of the State: A sovereign is generally exempt from suit unless it gives its consent. However, this does not apply to governmental agencies engaged in proprietary functions.

• Governmental vs. Proprietary Functions: Immunity from suit is determined by the character of the functions performed by the government entity. Agencies engaged in business or proprietary activities are not immune from suit.

• Doctrine on Expropriation: The doctrine of sovereign immunity cannot be used to deny just compensation claims resulting from the taking of private property by the State.

• Transition of Obligations to Successor Agencies: Obligations incurred by a government agency can be enforced against its successor agency, which inherits its powers, duties, rights, assets, and liabilities.