THE LONDON ASSURANCE, PLAINTIFF-APPELLANT, VS. REPUBLIC OF THE PHILIPPINES AND/OR BUREAU OF CUSTOMS AND/OR CUSTOMS ARRASTRE SERVICE, IN THEIR CAPACITY AS ARRASTRE OPERATORS AT T…

London Assurance versus Republic of the Philippines

The Case

This is London Assurance versus the Republic of the Philippines, a suit by an insurer against the State, the Bureau of Customs, and the Customs Arrastre Service. The insurer paid its assured for a lost shipment of electrolytic tinplate and, as subrogee, went after the arrastre operators to recover the insured value. The case matters because it is the Supreme Court's settled answer to a recurring question: may the government and its arrastre entities be sued for the loss or damage of cargo in their custody? The Court says no, and the reason lies in the doctrine of state immunity from suit.

Procedural History

The London Assurance filed its complaint in the Court of First Instance of Manila against the Republic of the Philippines, the Bureau of Customs, and the Customs Arrastre Service, together with private defendants. The private defendants answered. The Solicitor General, however, moved to dismiss as to the State on the ground of immunity from suit, and as to the Bureau of Customs and the Customs Arrastre Service on the ground that they are not juridical entities with legal personality to sue or be sued. Over the insurer's vigorous opposition, the trial court granted the motion and dismissed the complaint as to the government defendants. The insurer appealed, insisting that the arrastre operators perform proprietary or non-governmental functions and are therefore suable. The appeal reached the Supreme Court, which affirmed the dismissal.

Facts

A shipment of twenty-two skids of electrolytic tinplate waste was covered by Bill of Lading Number SF M-8, issued by the Maritime Company of the Philippines in the name of Polok, Winters and Company as shipper, and consigned to the Consolidated Can Corporation of Mandaluyong, Rizal. The shipment was insured with the London Assurance.

The cargo was lost or damaged while in the custody of the arrastre operators, the Bureau of Customs and the Customs Arrastre Service. The insurer paid the insured value of seven thousand two hundred thirty-five pesos and sixty-three centavos, and as subrogee sought to recover that amount from those responsible.

On the fourth of November, nineteen hundred sixty-four, the London Assurance sued in the Court of First Instance of Manila, naming the Republic of the Philippines, the Bureau of Customs, and the Customs Arrastre Service as defendants, along with the Reliance Customs Bonded Warehouse, Carlos Tan, and the Delgado Brokerage Corporation. Only the government defendants are material to this appeal.

Issues

• Whether or not the Republic of the Philippines may be sued for the loss of cargo held by the arrastre operators.
• Whether or not the Bureau of Customs and the Customs Arrastre Service are juridical entities that may be sued in their own name.
• Whether or not the arrastre function, even if proprietary, removes the immunity of the State and its entities from suit.

Applicable Provisions

The decision rests on the constitutional doctrine of state immunity from suit, which the Court applies through its prior ruling in the Mobil Philippines Exploration case. The Court quotes that precedent as follows:

Although said arrastre function may be deemed proprietary, it is a necessary incident of the primary and governmental function of the Bureau of Customs, so that engaging in the same does not necessarily render said Bureau liable to suit.

This passage supplies the test: the character of the arrastre work is measured by its relation to the Bureau's governmental function, not by whether it earns revenue.

The Court continues in the same quotation:

For otherwise, it could not perform its governmental function without necessarily exposing itself to suit.

This explains why immunity must reach the means as well as the end.

And the Court closes the quotation with the governing maxim:

Sovereign immunity granted as to the end, should not be denied as to the necessary means to that end.

This is the rule that disposes of the insurer's proprietary-function argument.

Ruling

On the first issue, the Court held that the Republic of the Philippines is immune from suit, and the trial court correctly dismissed the complaint as to the State.

On the second issue, the Court held that the Bureau of Customs and the Customs Arrastre Service are not juridical entities endowed with legal personality to sue or be sued, so the complaint cannot proceed against them in their own name.

On the third issue, the Court rejected the argument that the arrastre function is proprietary and therefore suable. Even assuming the function may be deemed proprietary, it is a necessary incident of the primary and governmental function of the Bureau of Customs. To allow suit would mean that the Bureau could not perform its governmental function without exposing itself to suit. Sovereign immunity granted as to the end should not be denied as to the necessary means to that end. The Court noted that this conclusion follows a series of similar cases, beginning with Mobil Philippines Exploration.

Doctrine

First, the State may not be sued without its consent, and this immunity extends to its agencies and instrumentalities performing governmental functions.

Second, the Bureau of Customs and the Customs Arrastre Service are not juridical entities with legal personality to sue or be sued; a suit against them is in effect a suit against the State.

Third, the arrastre function, even if proprietary in character, is a necessary incident of the governmental function of the Bureau of Customs. Engaging in it does not render the Bureau liable to suit, because sovereign immunity granted as to the end should not be denied as to the necessary means to that end.

Disposition

The Supreme Court affirmed the order of dismissal appealed from, with no costs.

Remember This

Memorize the line: sovereign immunity granted as to the end should not be denied as to the necessary means to that end. Examiners use this case to test whether a candidate will be misled by the proprietary character of the arrastre function, and to test knowledge that the Bureau of Customs and the Customs Arrastre Service cannot be sued in their own name.