Veterans Manpower and Protective Services, Inc. v. CA

Veterans Manpower and Protective Services, Inc. v. CA

G.R. No. 91359, September 25, 1992

Grino-Aquino, J.

Facts:

                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 aninterest in, more than one such agency except those which are alreadyexisting 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 thePhilippine 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...”. 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.

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.

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

Issue:

                whether or not VMPSI’s complaint against the PC Chief and PC-SUSIA is a suit against the State without its consent

Held:

                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.

While the doctrine of state immunity 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.

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, 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.

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.

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.

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.