INSURANCE COMPANY OF NORTH AMERICA, PLAINTIFF-APPELLANT, VS. REPUBLIC OF THE PHILIPPINES AND/OR BUREAU OF CUSTOMS AND/OR CUSTOMS ARRASTRE SER­VICE, DEFENDANTS-APPELLEES.

Insurance Company of North America versus Republic of the Philippines

The Case

This is a civil action for recovery of money brought by Insurance Company of North America, as subrogee of a consignee whose shipment of tools was short-delivered, against the Republic of the Philippines, the Bureau of Customs, and the Customs Arrastre Service. The insurer seeks to hold these defendants liable for the value of the missing goods, which had been delivered into the custody of the arrastre service at the Port of Manila. The case matters because it squarely presents the question of state immunity from suit as it applies to the arrastre operations of the Bureau of Customs, and it fixes the rule that a money claim against the Government on that account must be pursued not in court but through the statutory procedure before the Auditor General.

Procedural History

The insurer filed its complaint with the City Court of Manila, which decided in favor of the plaintiff. The defendants appealed to the Court of First Instance, raising immunity from suit and contending that any recovery should be sought through the filing of a claim with the Auditor General under Act Number 3083, as amended by Commonwealth Act Number 327. The Court of First Instance sustained that contention and, on March 3, 1965, issued an order dismissing the complaint, holding that the defendant agencies of the Philippine Government have no juridical capacity to be sued, and that a money claim against the Government may be entertained only upon compliance with Act Number 3083, as amended by Commonwealth Act Number 327. The plaintiff then took a direct appeal to the Supreme Court.

Facts

Six cases of hand tools and ten cases of portable electric tools, consigned to the order of the shipper Dayton Price and Company, Limited, were discharged on May 20, 1963 from the vessel SS Turandot and delivered to the Customs Arrastre Service of the Bureau of Customs, which was then handling arrastre operations at the Port of Manila.

Not all of the shipment was delivered by the Customs Arrastre Service to the consignee. For the loss of tools valued at 3,261 pesos and 21 centavos, the consignee filed a claim with its insurer, the Insurance Company of North America, which paid the claim.

As subrogee of the consignee, the insurance company, on July 20, 1964, filed suit for the same amount, plus attorney's fees and costs, against the Republic of the Philippines and the Bureau of Customs and the Customs Arrastre Service.

Issues

• Whether or not the Bureau of Customs, in operating the arrastre service, is immune from suit.
• Whether or not a money claim arising from the arrastre operations must be filed with the Auditor General under Commonwealth Act Number 327, rather than brought before the courts.

Applicable Provisions

Commonwealth Act Number 327, which amended Act Number 3083, governs the procedure for money claims against the Government, and the Court holds that the claim in this case must be pursued under it:

All claims for money against the Government of the Philippines, its agencies and instrumentalities, arising from contract, express or implied, shall be filed with the Auditor General, who shall examine and settle the same, subject to the approval of the President of the Philippines.

This provision bears on the case because it supplies the exclusive remedy for the insurer's money claim, which the Court holds cannot be enforced through an ordinary suit against the Bureau of Customs.

Ruling

On the first issue, the Court held that the Bureau of Customs, acting as part of the governmental machinery in its operation of the arrastre service as an incident of a prime governmental function, is immune from suit. The Court rested this on its prior ruling in Mobil Philippines Exploration, Incorporated versus Customs Arrastre Service, decided on December 17, 1966, which squarely resolved the very point raised in this appeal.

On the second issue, the Court held that the claim involving money should have been filed with the Auditor General under Commonwealth Act Number 327. Because the defendants are agencies of the Philippine Government with no juridical capacity to be sued, and because the Government may entertain a money claim only upon compliance with Act Number 3083, as amended by Commonwealth Act Number 327, the dismissal of the complaint was correct.

Doctrine

First, the Bureau of Customs, when it operates the arrastre service as an incident of a prime governmental function, acts as part of the governmental machinery and is immune from suit. Second, a money claim against the Government, its agencies and instrumentalities, arising from contract, express or implied, must be filed with the Auditor General under Commonwealth Act Number 327, and may not be enforced through an ordinary court action. These rules are tied to the quoted provision, which channels such claims to the Auditor General for examination and settlement rather than to the courts.

Disposition

The Supreme Court affirmed the order of dismissal, with no pronouncement as to costs; the defendants prevailed and the complaint was dismissed.

Remember This

The single line worth memorizing is that the Bureau of Customs, in its arrastre operations as an incident of a prime governmental function, is immune from suit, and the money claim must go to the Auditor General under Commonwealth Act Number 327. Examiners use this case to test state immunity and the proper forum for money claims against government agencies.