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CITY OF BACOLOD v. PHUTURE VISIONS CO.

FACTS:

The case involves a Petition for Mandamus and Damages filed by Phuture Visions Co., Inc. (Phuture) against the City of Bacolod, Mayor Evelio R. Leonardia, Atty. Allan L. Zamora, and Arch. Lemuel D. Reynaldo. Phuture alleges that it applied for the authority to operate bingo games at SM City Bacolod Mall (SM Bacolod) and received a provisional Grant of Authority (GOA) from the Philippine Amusement and Gaming Corporation (PAGCOR). Phuture processed its application for a permit to engage in business at SM Bacolod and started bingo operations on March 2, 2007, prior to receiving the actual hard copy of the mayor's permit. However, on March 3, 2007, Phuture's bingo outlet was padlocked by agents of the Office of the City Legal Officer based on a Closure Order. Phuture claims that the closure was done without legal authority since PAGCOR had already issued a provisional GOA in its favor. On the other hand, the petitioners argue that Phuture's application for a permit was in relation to the renewal of a previously-issued permit and that Phuture started its bingo operations without waiting for the release of the mayor's permit.

Phuture Gaming Solutions Inc. ("Phuture") is a corporation engaged in the business of operating bingo games. In January 2007, Phuture applied for the renewal of its Mayor's Permit in order to continue its operations at SM Bacolod. The City Mayor granted the renewal, but the permit indicated that it was for the renewal of a previously-issued permit for a different line of business.

Phuture filed a petition before the Regional Trial Court (RTC) seeking the issuance of a temporary mandatory order to remove a padlock allegedly installed illegally at its place of business. However, the RTC denied the prayer for the temporary mandatory order and dismissed the case for lack of merit.

Phuture filed a motion for partial reconsideration, which was also denied by the RTC. Phuture then appealed to the Court of Appeals (CA), which partially granted the appeal by affirming the denial of the application for the temporary mandatory order but reversing the dismissal of the suit for damages. The CA remanded the case to the RTC to determine if damages should be awarded.

Petitioners, the City Mayor and other officials, filed a motion for reconsideration, arguing that hearing the action for damages violates the City's immunity from suit. However, the CA maintained its position, prompting petitioners to bring the matter before the Supreme Court.

ISSUES:

  1. Whether petitioners can be made liable to pay respondent damages.

  2. Whether the petitioners have given their consent to be sued.

  3. Whether the petitioners are liable for damages.

  4. Whether petitioners are liable to respondent for damages.

  5. Whether respondent had the right to operate its bingo operations at SM Bacolod.

  6. Whether or not the respondent is entitled to damages considering that it had no legal right to operate the bingo operations.

RULING:

  1. The 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. The State and its political subdivisions are open to suit only when they consent to it. While the authority of city mayors to issue or grant licenses and business permits is granted by the Local Government Code, this power is an exercise of the police power of the State and not a proprietary function. Therefore, there can be no implied consent to be sued for the issuance or denial of such permits.

  2. The petitioners are not liable for damages. Estoppel does not lie against the government or any of its agencies arising from unauthorized or illegal acts of public officers. Moreover, waiver of immunity from suit will not be lightly inferred. The City of Bacolod cannot be estopped from invoking their immunity from suit on account of having raised it only for the first time on appeal. Failure to state a cause of action can be alleged as a ground for dismissal even on appeal.

  3. No, petitioners are not liable to respondent for damages. The trial court had already ruled that respondent 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 assessment for bingo operation. The Court of Appeals remanded the issue of damages to the trial court for further proceedings, but the Supreme Court stated that it would be an exercise in futility as the trial court's findings on the lack of right to operate bingo games were already conclusive.

  4. No, respondent did not have the right to operate its bingo operations at SM Bacolod. The trial court found that respondent had no clear and unmistakable legal right to operate bingo games at SM Bacolod because it had not duly applied for the proper permit for bingo operations with the Office of the Mayor and relied on questionable documents to support its claim. The trial court also noted that respondent's application form pertained to a renewal of its business for "Professional Services, Band/Entertainment Services" located at a different address, not at SM Bacolod. Therefore, respondent's claim to operate bingo games at SM Bacolod was doubtful.

  5. The petition is granted and the Decision of the Court of Appeals is annulled and set aside. The Decision of the Regional Trial Court is reinstated.

PRINCIPLES:

  • The State cannot be sued without its consent.

  • The power to issue or grant licenses and business permits is an exercise of the police power of the State and not a proprietary function.

  • Estoppel does not lie against the government or any of its agencies arising from unauthorized or illegal acts of public officers.

  • Waiver of immunity from suit will not be lightly inferred.

  • Failure to state a cause of action can be alleged as a ground for dismissal even on appeal.

  • Injury alone does not give the right to recover damages. There must be both a right of action for a legal wrong and damage resulting from that wrong.

  • Wrong without damage, or damage without wrong, does not constitute a cause of action. There must be a breach of duty and imposition of liability for that breach before damages may be awarded.

  • The operation of bingo games is a mere privilege that can be regulated or revoked when public interests require it.

  • In order for an act to be considered wrongful and give rise to a legal injury, it must be not only hurtful but also unlawful.

  • Damages can only be awarded if there is both actual damage (harm or loss) sustained and legal injury (act or omission deemed by law as an injury).

  • If a person sustains actual damage without sustaining any legal injury, the damage is regarded as damnum absque injuria.

  • A party who has no legal right to operate certain operations is not entitled to damages.