MOBIL PHILIPPINES EXPLORATION, INC., PLAINTIFF-APPELLANT, VS. CUSTOMS ARRASTRE SERVICE AND BUREAU OF CUSTOMS, DEFENDANTS-APPELLEES.

Four cases of rotary drill parts were shipped from abroad on S.S. “Leoville”
sometime in November of 1962, consigned to Mobil Philippines Exploration, Inc.,
Manila. The shipment arrived at the Port of Manila on April 10, 1963, and was
discharged to the custody of the Customs Arrastre Service, the unit of the
Bureau of Customs then handling arrastre operations therein. The Customs
Arrastre Service later delivered to the broker of the consignee three cases only
of the shipment.

On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court
of First Instance of Manila against the Customs Arrastre Service and the Bureau
of Customs to recover the value of the undelivered case in the amount of
P18,493.37 plus other damages.

On April 20, 1964 the defendants filed a motion to dismiss the complaint on
the ground that not being persons under the law, defendants cannot be sued.

After plaintiff opposed the motion, the court, on April 25, 1964, dismissed
the complaint on the ground that neither the Customs Arrastre Service nor the
Bureau of Customs issuable. Plaintiff appealed to Us from the order of
dismissal.

Raised, therefore, in this appeal is the purely legal question of the
defendants’ suability under the facts stated.

Appellant contends that not all government entities are immune from suit;
that defendant Bureau of Customs as operator of the arrastre service at the Port
of Manila, is discharging proprietary functions and as such can be sued by
private individuals.

The Rules of Court, in Section 1, Rule 3, provide:

“SECTION 1. Who may be parties.—Only natural or juridical persons or
entities authorized by law may be parties in a civil action.”

Accordingly, a defendant in a civil suit must be (l) a natural person; (2) a
juridical person or (3) an entity authorized by law to be sued. Neither the
Bureau of Customs nor (a fortiori) its function unit, the Customs
Arrastre Service, is a person. They are merely parts of the machinery of
Government. The Bureau of Customs is a bureau under the Department of Finance
(Sec. 81, Revised Administrative Code); and as stated, the Customs Arrastre
Service is a unit of the Bureau of Customs, set up under Customs Administrative
Order No. 8-62 of November 9, 1962 (Annex “A” to Motion to Dismiss, pp. 13-15,
Record on Appeal). It follows that the defendants herein cannot be sued under
the first two abovementioned categories of natural or juridical persons.

Nonetheless it is urged that by authorizing the Bureau of Customs to engage
in arrastre service, the law thereby impliedly authorizes it to be sued
as arrastre operator, for the reason that the nature of this function (arrastre
service) is proprietary, not governmental. Thus, insofar as arrastre operation
is concerned, appellant would put defendants under the third category of
“entities authorized by law” to be sued. Stated differently, it is argued that
while there is no law expressly authorizing the Bureau of Customs to sue or be
sued, still its capacity to be sued is implied from its very power to render
arrastre service at the Port of Manila, which, it is alleged, amounts to the
transaction of a private business.

The statutory provision on arrastre service is found in Section 1213 of
Republic Act 1937 (Tariff and Customs Code, effective June 1, 1957), and it
states:

“SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.
—The Bureau of Customs shall have exclusive supervision and control over the
receiving, handling, custody and delivery of articles on the wharves and piers
at all ports of entry and in the exercise of its functions it is nereby
authorized to acquire, take over, operate and superintend such plants and
facilities as may “be necessary for the receiving, handling, custody and
delivery of articles, and the convenience and comfort of passengers and the
handling of baggage, as well as to acquire fire protection equipment for use in
the piers: Provided, That whenever in his judgment the receiving,
handling, custody and delivery of articles can be carried on by private parties
with greater efficiency, the Commissioner may, after public bidding and subject
to the approval of the department head, contract with any private party for the
service of receiving, handling, custody and delivery of articles, and in such
event, the contract may include the sale or lease of government-owned equipment
and facilities used in such service.

In Associated Workers Union, et al. v. Bureau of Customs, et al,
L-21397, resolution of August 6, 1963, this Court indeed held “that the
foregoing statutory provisions authorizing the grant by contract to any private
party of the right to render said arrastre services necessarily imply that the
same is deemed by Congress to be proprietary or non-governmental function”. The
issue in said case, however, was whether laborers engaged in arrastre service
fall under the concept of employees in the Government employed in
governmental functions for purposes of the prohibition in Section 11,
Republic Act 875 to the effect that “employees in the Government x x x shall not
strike,” but “may belong to any labor organization which does not impose the
obligation to strike or to join in strike”, which prohibition “shall apply only
to employees employed in governmental functions of the Government x x x”.

Thus, the ruling therein was that the Court of Industrial Relations had
jurisdiction over the subject matter of the case, but not that the Bureau of
Customs can be sued. Said issue of suability was not resolved, the resolution
stating only that “the issue on the personality or lack of personality of the
Bureau of Customs to be sued does not affect the Jurisdiction of the lower court
over the subject matter of the case, aside from the fact that amendment may be
made in the pleadings by the inclusion as respondents of the public officers
deemed responsible for the unfair labor practice acts charged by petitioning
Unions”.

Now, the fact that a non-corporate government entity performs a function
proprietary in nature does not necessarily result in its being suable. If said
non-governmental function is undertaken as an incident to its governmental
function, there is no waiver thereby of the sovereign immunity from suit
extended to such government entity. This is the doctrine recognized in Bureau of
Printing, et al. v. Bureau of Printing Employees Association, et al., L-15751,
January 28, 1961:

“The Bureau of Printing is an office of the Government created by the
Administrative Code of 1916 (Act No. 2657). As such instrumentality of the
Government, it operates under the direct supervision of the Executive Secretary,
Office of the President, and is charged with the execution of all printing and
binding, including work incidental to those processes, required by the National
Government and such other work of the same character as said Bureau may, by law
or by order of the (Secretary of Finance) Executive Secretary, be authorized to
undertake xxx.’ (Sec. 1644, Rev. Adm. Code.) It has no corporate existence, and
its appropriations are provided for in the General Appropriations Act. Designed
to meet the printing needs of the Government, it is primarily a service bureau
and, obviously, not engaged in business or occupation for pecuniary profit.

x x x x

“x x x Clearly, while the Bureau of Printing is allowed to undertake private
printing jobs, it cannot be pretended that it is thereby an industrial or
business concern. The additional work it executes for private parties is merely
incidental to its function, and although such work may be deemed proprietary in
character, there is no showing that the employees performing said proprietary
function are separate and distinct from those employed in its general
governmental functions.

“Indeed, as an office of the Government, without any corporate or juridical
personality, the Bureau of Printing cannot be sued. (Sec. 1, Rule 3, Rules of
Court.) Any suit, action or proceeding against it, if it were to produce any
effect, would actually be a suit, a ction or proceeding against the Government
itself, and the rule is settled that the Government cannot be sued without its
consent, much less over its objection. (See Metran vs. Paredes, 4-5
Off. Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River
Workers Union, et al., G.R. Nos. L-10943-44, December 28,
1957.)”

The situation here is not materially different. The Bureau of Customs, to
repeat, is part of the Department of Finance (Sec. 81, Rev. Adm. Code), with no
personality of its own apart from that of the national government. Its primary
function is governmental, that of assessing and collecting lawful revenues from
imported articles and all other tariff and customs duties, fees, charges, fines
and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a
necessary incident. For practical reasons said revenues and customs duties can
not be assessed and collected by simply receiving the importer’s or ship agent’s
or consignee’s declaration of merchandise being imported and imposing the duty
provided in the Tariff law. Customs authorities and officers must see to it that
the declaration tallies with the merchandise actually landed. And this checking
up requires that the landed merchandise be hauled from the ship’s side to a
suitable place in the customs premises to enable said customs officers to make
it, that is, it requires arrastre operations.^[1]

Clearly, therefore, 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. For otherwise, it could not perform its
governmental function without necessarily exposing itself to suit. Sovereign
immunity, granted as to the end, should not be denied as to the necessary means
to that end.

And herein lies the distinction between the present case and that of National
Airports Corporation v. Teodoro, 91 Phil. 203, on which appellant would
rely. For there, the Civil Aeronautics Administration was found to have for its
prime reason for existence not a governmental but a proprietary function, so
that to it the latter was not a mere incidental function:

“Among the general powers of the Civil Aeronautics Administration are, under
Section 3, to execute contracts of any kind, to purchase property, and to grant
concession rights, and under Section 4, to charge landing fees, royalties on
sales to aircraft of aviation gasoline, accessories and supplies, and rentals
for the use of any property under its management.

“These provisions confer upon the Civil Aeronautics Administration, in our
opinion, the power to sue and be sued. The power to sue and be sued is implied
from the power to transact private business. x x x.

x x x x x

“The Civil Aeronautics Administration comes,under the category of a private
entity. Although not a body corporate it was created, like the National Airports
Corporation, not to maintain a necessary function of government, but to run what
is essentially a business, even if revenues be not its prime objective but
rather the promotion of travel and the convenience of the travelling public. x x
x”

Regardless of the merits of the claim against it, the State, for obvious
reasons of public policy, cannot be sued without its consent. Plaintiff should
have filed its present claim to the General Auditing Office, it being for money,
under the provisions of Commonwealth Act 327, which state the conditions under
which money claims against the Government may be filed.

It must be remembered that statutory provisions waiving State immunity from
suit are strictly construed and that waiver of immunity, being in derogation of
sovereignty, will not be lightly inferred. (49 Am. Jur., States, Territories and
Dependencies, Sec. 96, p. 314; Petty v. Tennessee-Missouri Bridge Com.,
359 U.S. 275, 3 L. Ed. 804, 79 S. Ct. 785.) From the provision authorizing the
Bureau of Customs to lease arrastre operations to private parties, We see no
authority to sue the said Bureau in the instances where it undertakes to conduct
said operation itself. The Bureau of Customs, acting as part of the machinery of
the national government in the operation of the arrastre service, pursuant to
express legislative mandate and as a necessary incident of its prime
governmental function, is immune from suit, there being no statute to the
contrary.

WHEREFORE, the order of dismissal appealed from is hereby affirmed,
with costs against appellant.

SO ORDERED.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon,
Regala, Zaldivar and Sanchez, JJ., concur.
Makalintal,
J., concurs in the result.