G.R. No. 199239 , August 24, 2016.
PERCY MALONESIO in his capacity as General Manager of AIR TRANSPORTATION OFFICE (ATO), Petitioner, vs. ARTURO M. JIZMUNDO, Respondent.

FACTS

Respondent Arturo M. Jizmundo, representing himself and his co-heirs, filed an action for Unlawful Detainer with Preliminary Injunction against petitioner Percy Malonesio, as General Manager of the Air Transportation Office (ATO), before the Municipal Trial Court (MTC) of Kalibo, Aklan. The subject property is a parcel of land covered by Transfer Certificate of Title No. T-18445 in the name of the heirs of Bartola Marquez. The ATO had occupied and used the land as an airport parking area since 1985 without any formal agreement or payment of rentals, based on a promise to pay just compensation which was not fulfilled. Jizmundo demanded that the ATO vacate the premises in June 2006 and filed the ejectment suit in July 2006. The MTC dismissed the complaint, ruling that the Republic of the Philippines was an indispensable party not impleaded. The Regional Trial Court (RTC) affirmed the dismissal, holding the ATO immune from suit. The Court of Appeals reversed, ruling the ATO was not immune from suit as it performed proprietary functions, and ordered the ATO to restore possession to Jizmundo. During the pendency of the case, Republic Act No. 9497 (Civil Aviation Authority Act of 2008) was passed, abolishing the ATO and transferring its powers to the Civil Aviation Authority of the Philippines (CAAP). Malonesio filed this Petition for Review.

ISSUE

Whether the Court of Appeals erred in ordering the ATO (now CAAP) to surrender possession of the subject property used for airport operations and in reversing the dismissal of the case for non-joinder of the Republic of the Philippines as an indispensable party.

RULING

The Supreme Court granted the petition. It held that the ATO, and its successor CAAP, could not claim immunity from suit. Citing Air Transportation Office v. Ramos, the Court ruled the ATO was involved in proprietary functions (airport management), thus not entitled to state immunity. Furthermore, Section 23(a) of Republic Act No. 9497 expressly grants CAAP the power to sue and be sued, constituting a waiver of immunity. However, the Court reversed the Court of Appeals’ order to restore possession to Jizmundo. Applying the doctrine in Forfom Development Corporation v. Philippine National Railways, the Supreme Court ruled that recovery of possession could no longer be allowed as the property was devoted to public use (as part of Kalibo Domestic and International Airport), and dispossession would hamper vital public services. The remedy left to Jizmundo and his co-heirs is the right to just compensation. The Court directed the CAAP to institute the appropriate expropriation action over the property within fifteen (15) days from finality of the decision to determine the just compensation due to the owners.