VETERANS MANPOWER AND PROTECTIVE SERVICES, INC., PETITIONER, VS. THE COURT OF APPEALS, THE CHIEF OF PHILIPPINE CONSTABULARY AND PHILIPPINE CONSTABULARY SUPERVISORY UNIT FOR SECU…

This is a petition for review on certiorari of the
decision dated August 11, 1989, of the Court of Appeals in CA-G.R. SP No. 15990,
entitled “The Chief of Philippine Constabulary (PC) and Philippine Constabulary
Supervisory Unit for Security and Investigation Agencies (PC-SUSIA) vs. Hon.
Omar U. Amin and Veterans Manpower and Protective Services, Inc. (VMPSI),”
lifting the writ of preliminary injunction which the Regional Trial Court had
issued to the PC and PC-SUSIA enjoining them from committing acts that would
result in the cancellation or non-renewal of the license of VMPSI to operate as
a security agency.

On March 28, 1988, VMPSI filed a complaint in the Regional Trial
Court at Makati, Metro Manila, praying the court to:

“A. Forthwith issue a temporary restraining
order to preserve the status quo, enjoining the defendants, or any one acting
in their place or stead, to refrain from committing acts that would result in
the cancellation or non-renewal of VMPSI’s license;

“B. In due time, issue a writ of preliminary
injunction to the same effect;

“C. Render decision
and judgment declaring null and void the amendment of Section 4 of R.A. No. 5487, by PD No. 11 exempting
organizations like PADPAO from
the prohibition that no person shall organize or have an interest in more than
one agency; declaring PADPAO as an illegal organization existing in violation
of said prohibition, without the illegal exemption provided in PD No. 11; declaring null and void Section
17 of R.A. No. 5487 which
provides for the issuance of rules and regulations in consultation with PADPAO; declaring null and void the
February 1, 1982 directive of Col. Sabas V. Edadas, in the name of the then PC
Chief, requiring all private security agencies/security forces such as VMPSI to join PADPAO as a pre-requisite to
secure/renew their licenses; declaring that VMPSI did not engage in ‘cut-throat
competition’ in its contract with MWSS; ordering
defendants PC Chief and PC-SUSIA to renew the license of VMPSI; ordering the
defendants to refrain from further harassing VMPSI and from threatening VMPSI
with cancellations or non-renewal of license, without legal and
justifiable cause; ordering the defendants to pay to VMPSI the sum of P1,000,000.00 as actual and compensatory
damages, P1,000,000.00 as exemplary
damages, and P200,000.00 as attorney’s fees and expenses of litigation; and
granting such further or other reliefs to VMPSI as may be deemed lawful,
equitable and just.” (pp. 55-56, Rollo.)

The constitutionality of the following provisions of R.A.
5487(otherwise known as the “Private Security Agency Law”), as amended, is
questioned by VMPSI in its complaint:

“SEC. 4. Who may
Organize a Security or Watchman Agency.
– Any Filipino citizen or a corporation, partnership, or association, with a
minimum capital of five thousand pesos, one hundred per cent of which is owned
and controlled by Filipino citizens may organize a security or watchman
agency: Provided, That no
person shall organize or have an interest
in, more than one such agency except
those which are already existing at the
promulgation of this Decree: x x x.” (As amended by P.D. Nos. 11 and
100.)

“SEC. 17. Rules and
Regulations by Chief, Philippine Constabulary. – The Chief of the
Philippine Constabulary, in consultation with
the Philippine Association of Detective and
Protective Agency Operators, Inc. and subject to
the provision of existing laws, is hereby authorized to issue the rules and
regulations necessary to carry out the purpose of this Act.”

VMPSI alleges that the above provisions of R.A. No. 5487 violate
the provisions of the 1987 Constitution against monopolies, unfair competition
and combinations in restraint of trade, and tend to favor and institutionalize
the Philippine Association of Detective and Protective Agency Operators,
Inc. (PADPAO) which is monopolistic
because it has an interest in more than one security agency.

Respondent VMPSI likewise questions the validity of paragraph 3,
subparagraph (g) of the Modifying Regulations on the Issuance of License to
Operate and Private Security Licenses and Specifying Regulations for the
Operation of PADPAO issued by then PC Chief Lt. Gen. Fidel V. Ramos, through
Col. Sabas V. Edades, requiring that “all private security agencies/company
security forces must register as members of any PADPAO Chapter organized within
the Region where their main offices are located…” ((pp. 5-6, Complaint in
Civil Case No. 88-471). As such
membership requirement in PADPAO is compulsory in nature, it allegedly violates
legal and constitutional provisions against monopolies, unfair competition and
combinations in restraint of trade.

On May 12, 1986, a Memorandum of Agreement was executed by PADPAO
and the PC Chief, which fixed the minimum monthly contract rate per guard for
eight (8) hours of security service per day at P2,255.00 within Metro Manila
and P2,215.00 outside of Metro Manila (Annex B, Petition).

On June 29, 1987, Odin Security Agency (Odin) filed a complaint
with PADPAO accusing VMPSI of cut-throat competition by undercutting its
contract rate for security services rendered to the Metropolitan Waterworks and
Sewerage System (MWSS), charging said customer lower than the standard minimum
rates provided in the Memorandum of Agreement dated May 12, 1986.

PADPAO found VMPSI guilty of
cut-throat competition, hence, the PADPAO Committee on Discipline recommended the expulsion of VMPSI from PADPAO and
the cancellation of its license to operate a security agency (Annex D,
Petition).

The PC-SUSIA made similar findings and likewise recommended the cancellation of VMPSI’s license (Annex
E, Petition).

As a result, PADPAO refused to issue a clearance/certificate of
membership to VMPSI when it requested one.

VMPSI wrote the PC Chief on March 10, 1988, requesting him to set
aside or disregard the findings of PADPAO and consider VMPSI’s application for
renewal of its license, even without a certificate of membership from PADPAO
(Annex F, Petition).

As the PC Chief did not reply, and VMPSI’s license was expiring
on March 31, 1988, VMPSI filed Civil Case No. 88-471 in the RTC-Makati, Branch
135, on March 28, 1988 against the PC Chief and PC-SUSIA. On the same date, the court issued a
restraining order enjoining the PC Chief and PC-SUSIA “from committing acts
that would result in the cancellation or non-renewal of VMPSI’s license” (Annex
G, Petition).

The PC chief and PC-SUSIA filed a “Motion to Dismiss, Opposition
to the Issuance of Writ of Preliminary Injunction, and Motion to Quash the
Temporary Restraining Order,” on the grounds that the case is against the State
which had not given consent thereto and that VMPSI’s license already expired
on March 31, 1988, hence, the restraining order or preliminary injunction would
not serve any purpose because there was no more license to be cancelled (Annex
H, Petition). Respondent VMPSI opposed
the motion.

On April 18, 1988, the lower court denied VMPSI’s application for a writ of preliminary injunction for
being premature because it “has up to May 31, 1988 within which to file its
application for renewal pursuant to Section 2 (e) of Presidential Decree No.
199, x x x.” (p. 140, Rollo.)

On May 23, 1988, VMPSI reiterated its application for the
issuance of a writ of preliminary injunction because PC-SUSIA had rejected
payment of the penalty for its failure to submit its application for renewal of
its license and the requirements therefor within the prescribed period in
Section 2(e) of the Revised Rules and Regulations Implementing R.A. 5487, as
amended by P.D. 1919 (Annex M, Petition).

On June 10, 1988, the RTC-Makati issued a writ of preliminary
injunction upon a bond of P100,000.00, restraining the defendants, or any one
acting in their behalf, from cancelling or denying renewal of VMPSI’s license,
until further orders from the court.

The PC Chief and PC-SUSIA filed a Motion for Reconsideration of
the above order, but it was denied by the court in its Order of August 10, 1988
(Annex R, Petition).

On November 3, 1988, the PC Chief and PC-SUSIA sought relief by a
petition for certiorari in the Court of Appeals.

On August 11, 1989, the Court of Appeals granted the
petition. The dispositive portion of
its decision reads:

“WHEREFORE, the petition for certiorari filed by petitioners
PC Chief and PC-SUSIA is hereby GRANTED, and the RTC-Makati, Branch 135, is
ordered to dismiss the complaint filed by respondent VMPSI in Civil Case No.
88-471, insofar as petitioners PC Chief and PC-SUSIA are concerned, for lack of
jurisdiction. The writ of preliminary
injunction issued on June 10, 1988, is dissolved.” (pp. 295-296, Rollo.)

VMPSI came to us with this petition for review.

The primary issue in this case is whether or not VMPSI’s
complaint against the PC Chief and PC-SUSIA is a suit against the State without
its consent.

The answer is yes.

The State may not be sued without its consent (Article XVI,
Section 3, of the 1987 Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend that, being
instrumentalities of the national government exercising a primarily
governmental function of regulating the organization and operation of private
detective, watchmen, or security guard agencies, said official (the PC Chief)
and agency (PC-SUSIA) may not be sued without the Government’s consent,
especially in this case because VMPSI’s complaint seeks not only to compel the
public respondents to act in a certain way, but worse, because VMPSI seeks
actual and compensatory damages in the sum of P1,000,000.00, exemplary damages
in the same amount, and P200,000.00 as attorney’s fees from said public
respondents. Even if its action
prospers, the payment of its monetary claims may not be enforced because the
State did not consent to appropriate the necessary funds for that purpose.

Thus did we hold in Shauf vs. Court of
Appeals, 191 SCRA 713:

“While the doctrine appears to prohibit only suits against the
state without its consent, it is also applicable to complaints filed against
officials of the state for acts allegedly performed by them in the discharge of
their duties. The rule is that if the
judgment against such officials will require the state itself to perform an
affirmative act to satisfy the same, such as the appropriation of the amount
needed to pay the damages awarded against them, the suit must be regarded as
against the state itself although it has not been
formally impleaded.” (Emphasis supplied.)

A public official may sometimes be held liable in his personal or
private capacity if he acts in bad faith, or beyond the scope of his authority
or jurisdiction (Shauf vs. Court of Appeals, supra), however, since the
acts for which the PC Chief and PC­-SUSIA are being called to account in this
case, were performed by them as part of their official duties, without malice,
gross negligence, or bad faith, no recovery may be had against them in their
private capacities.

We agree with the observation of the Court of Appeals that the
Memorandum of Agreement dated May 12, 1986 does not constitute an implied
consent by the State to be sued:

“The Memorandum of Agreement dated
May 12, 1986 was entered
into by the PC Chief in relation
to the exercise of a function sovereign
in nature. The correct
test for the application of state immunity
is not the conclusion of a contract
by the State but the legal nature
of the act. This
was clearly enunciated in the case of
United States of America vs. Ruiz where
the Hon. Supreme Court held:

“‘The restrictive application of State immunity is proper only when
the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic
affairs. Stated differently, a State
may be said to have descended to the level of an individual and can thus be
deemed to have tacitly given its consent to be sued only when it enters into a business
contract. It does not
apply where the contract relates to the
exercise of its sovereign functions.’ (136
SCRA 487, 492.)

“In the instant case, the Memorandum
of Agreement entered into by the PC Chief and
PADPAO was intended to professionalize the
industry and to standardize the salaries
of security guards as well as the
current rates of security services, clearly,
a governmental function. The execution of the said agreement
is incidental to the purpose of R.A.
5487, as amended, which is to regulate
the organization and operation of private
detective, watchmen or security guard agencies. (Underscoring Ours.)” (pp. 258-259, Rollo.)

Waiver of the State’s immunity from suit, being a derogation of
sovereignty, will not be lightly inferred, but must be construed strictissimi
juris (Republic vs. Feliciano, 148 SCRA 424). The consent of the State to be sued must emanate from statutory
authority, hence, from a legislative act, not from a mere memorandum. Without such consent, the trial court did
not acquire jurisdiction over the public respondents.

The state immunity doctrine rests upon reasons of public policy
and the inconvenience and danger which would flow from a different rule. “It is obvious that public service would be
hindered, and public safety endangered, if the supreme authority could be
subjected to suits at the instance of every citizen, and, consequently,
controlled in the use and disposition of the means required for the proper
administration of the government” (Siren vs. U.S. Wall, 152, 19 L. ed. 129, as
cited in 78 SCRA 477). In the same
vein, this Court in Republic vs. Purisima (78 SCRA 470, 473) rationalized:

“Nonetheless, a continued adherence to the doctrine of
non-suability is not to be deplored for as against the inconvenience that may
be caused [by] private parties, the loss of governmental efficiency and the
obstacle to the performance of its multifarious functions are far greater if such a fundamental principle were
abandoned and the availability of judicial remedy were not thus
restricted. With the well known
propensity on the part of our people to go to court, at the least provocation,
the loss of time and energy required to defend against law suits, in the
absence of such a basic principle that constitutes such an effective obstacle,
could very well be imagined.” (citing Providence Washington Insurance Co. vs.
Republic, 29 SCRA 598.)

WHEREFORE, the petition for review is DENIED and the
judgment appealed from is AFFIRMED in toto. No costs.

SO ORDERED.

Medialdea and
Bellosillo, JJ., concur.

Cruz, J., (Chairman), on leave.