PHILIPPINE INTERNATIONAL SURETY CO., INC., PETITIONER, VS. COMMISSIONER OF CUSTOMS, RESPONDENT.

Appeal by the Philippines International Surety Co., Inc. from a decision of
the Court of Tax Appeals.

From June to August, 1955, four (4) shipments of goods, consigned to Pablo
Gonzales, arrived at the Port of Manila, on board S.S. Bronnyvile, without the
release certificate required by Central Bank Circulars Nos. 44 and 45.
Consequently, said goods were subjected, by the Acting Collector of Customs for
said port, to seizure proceedings, during the pendency of which the merchandise
were, later, ordered released to Gonzales, under bonds issued by appellant
surety. After due hearing, said officer rendered a decision, on April 4, 1960,
ordering the forfeiture of said goods—upon the ground that the importation
thereof had been made in violation of the Circulars above referred to and,
accordingly, of the aforementioned bonds and sentencing Gonzales and the surety
to pay, jointly and severally, the amounts thereof, aggregating P53,434.06. On
appeal, taken by Gonzales, this decision was affirmed by the Commissioner of
Customs. The surety appealed from the latter’s decision to the Court of Tax
Appeals, which, in due course, dismissed said appeal upon the ground that said
surety has no legal capacity to interpose the aforementioned appeal, and that
the same is without merit. Hence, this appeal by the surety, who maintains that
the Court of Tax Appeals has erred on both counts.

With respect to petitioner’s capacity to appeal from the decision of the
Commissioner of Customs, we note that the petition for review filed by the
surety with the court of Tax Appeals is based upon two (2) grounds, namely: (1)
that the Collector of Customs had not furnished a copy of its decision to
Gonzales; and (2) that Central Bank Circulars Nos. 44 and 45 are allegedly null
and void.

According to the decision rendered by the Commissioner of Customs—on appeal
taken, not by the surety, who did not appeal from the
decision of the Collector of Customs, but by the importer, Gonzales—the
latter had limited himself to assailing the validity of the aforementioned
Circulars of the Central Bank. In other words, Gonzales had not impugned the
decision of the Collector of Customs upon the ground of lack of notice, alleged
by the surety, thus showing, either that Gonzales had really received—as the
surety, evidently, had—notice of said decision, as indicated by the fact that he
had appealed therefrom, or that he had waived said notice, which it is his
privilege to renounce. Hence, the surety had no right to invoke in support
of its own appeal, said alleged lack of notice to the importer, not
only because his acts proved that there had been such notice, but, also, that
he had waived it, by appealing from the decision of the
Collector of Customs, and by not interposing an appeal from
the decision of the Commissioner of Customs, thereby allowing the same to become
final and executory, insofar as he is concerned. It may not be amiss to
add that lack of notice of a decision to a given party affects, not the
validity of said decision, but its finality insofar as such
party is concerned, in the sense that his period to appeal does not begin to run
until said notice, and that the decision cannot be executed against him until
after the expiration of the period aforementioned.

It should, also, be pointed out that, as regards the surety herein, which had
not appealed from the decision of the Collector of Customs, the same
had become final and executory upon expiration of the reglementary
period to appeal therefrom. Although the appeal taken from said decision by the
importer might have, perhaps, inured to the benefit of the surety,
if the result of the appeal had been favorable to said
importer, the fact is that he had failed in his appeal. Hence, there is
no legal ground by which the surety may justify its alleged right to appeal from
the decision of the Commissioner of Customs, based upon an alleged violation,
not of its rights as a surety, but of those of the
importer, as such.

It is true that a solidary debtor may “avail himself of all defenses which
are derived from the nature of the obligation and of those which are personal to
him or pertain to his share” (Article 1222, Civil Code of the Philippines).
What, then, is the nature of the obligation of the surety in the case at bar?
Pertinent parts of its bond provide:

“x x x WHEREAS, the Collector of Customs is willing to release and deliver
the above mentioned ___________ to the Principal upon the filing of a surety
bond in the amount of ___________ Philippine Currency, representing the local
appraised value of the merchandise to guaranty the payment of the amount that
the Bureau of Customs or the courts of the Philippines may decide to collect,
depending upon the final outcome of the seizure proceedings:

“WHEREAS, the Principal and the Surety both agree to be bound, as they hereby
do bind themselves, their heirs, executors, administrators, sucessors and
assigns, jointly and severally, for the payment of the obligation herein
mentioned; and

“WHEREAS, the parties hereto have agreed that the Collector of Customs, the
Commissioner of Customs, or any of their subordinates, shall not be held liable
in any manner for the delivery of said merchandise;

“NOW, THEREFORE, the conditions of this obligation are such that, in the
event that it should be finally decided that the merchandise herein mentioned
should be forfeited to the government, and/or that a fine or surcharge should be
imposed,the entire amount of this bond, in case of forfeiture, or the
corresponding amount of the fine or surcharge, as the case may be, shall be paid
in CASH to the Bureau of Customs PROVIDED, HOWEVER, that if within thirty (30)
days from demand for payment of the liability herein mentioned the said
liability is not paid, and it should be found necessary to file an action in
court to effect the collection thereof, a penalty of FIVE HUNDRED PESOS
(P500.00) in addition shall be imposed, otherwise, this obligation shall be void
and of no effect.”

Pursuant thereto, the surety bound itself to pay the sum of money specified
in the bond, “in the event that it should be finally decided that the
merchandise herein mentioned should be forfeited to the Government”. Thus, the
surety guaranteed, not the legality of the importation, but, merely the
payment of the appraised value of the goods imported and released, in
the event aforementioned. As a consequence, the surety would have a right to
object and appeal if it were made to pay, either an amount exceeding its bond,
or without a previous decree of forfeiture of the merchandise. The bond did not,
however, give the surety a right to question the legality of the
seizure or that of the aforementioned Circulars of the Central Bank.
Indeed, the surety in the case at bar, stands in substantially the same
position, legally, as the surety of the accused in a criminal case who is
released on bail. Surely, such surety can not intervene in the proceedings,
before the trial court, to establish the guilt or innocence of the accused
and/or appeal from its judgment convicting him as charged.

At any rate, the authority of the Central Bank to issue Circulars Nos. 44 and
45, and the validity of these Circulars,^[1] as well as the propriety of the decree of
confiscation and forfeiture of the goods imported in violation thereof^[2] are now well settled.

WHEREFORE, the appealed decision of the Court of Tax Appeals is hereby
affirmed, with costs against the Philippines International Surety Co., Inc.

IT IS SO ORDERED.

Reyes, J.B.L., Barrera, Regala, Makalintal,
Bengzon, J.P., Zaldivar, Sanchez and Ruiz Castro, JJ.,
concur.

---

^[1] Commissioner of Customs vs. Serree
Investment Co., L-21007, May 16, 1960; Pascual vs. Commissioner of Customs,
L-10797, June 30, 1959; Commissioner vs. Eastern Sea Trading, L-14279, October
31, 1961; Pascual vs. Collector of Customs, L-12219, April 25, 1962;
Commissioner vs. Nepomuceno, L-11126, March 31, 1962; Commissioner vs. Santos,
L-11911, March 30, 1962; Serree Investment Co. vs. Com- missioner of Customs,
L-19564, November 28, 1964.

^[2]
Serree Investment Co. vs. Commissioner of Customs, L-19564, November 28, 1964;
Commissioner vs. Eastern Sea Trading, L-14279, October 31, 1961; Commissioner
vs. Nepomuceno, L-11126, March 31, 1962; Commissioner vs. Santos, L-11911, March
30, 1962; Serree Investment Co. vs. Commissioner of Customs, L-20847-9, June 22,
1965; Venancio Tong Tek vs. Commissioner, L-11947, June 30, 1959.