FACTS: Spouses Ramos own a parcel of land that was being used as part of the runway of Loakan Airport operated by petitioner Air Transportation Office (ATO). Spouses Ramos agreed to sell the subject land to petitioner but the latter failed to pay prompting the spouses to file a collection suit against ATO.
ISSUE: Whether ATO, an unincorporated government agency not performing a purely governmental function can be sued without its consent
RULING: Yes. An unincorporated government agency without any separate juridical personality of its own enjoys immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated. However, the need to distinguish between an unincorporated government agency performing governmental function and one performing proprietary functions has arisen. The immunity has been upheld in favor of the former because its function is governmental or incidental to such function; it has not been upheld in favor of the latter whose function was not in pursuit of a necessary function of government but was essentially a business. The ATO is an agency of the government not performing a purely governmental or sovereignty function, but was instead involved in the management and maintenance of the Loakan airport, an activity that was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO had no claim to the State's immunity from suit. Moreover, the doctrine of sovereign immunity cannot be successfully invoked to defeat a valid claim for compensation arising from the taking without just compensation and without the proper expropriation proceedings being first resorted to of the plaintiff's property.