Insurance Company of North America vs. Republic of the Philippines

The Republic, in performing arrastre operations through the Bureau of Customs or the Customs Arrastre Service as a necessary incident of its primary governmental function of assessing and collecting customs revenues, is immune from suit without its consent.

The Insurance Company of North America was the insurer of a shipment imported by Allied Manufacturing & Trading Company, Inc., covered "against all risks." The Republic of the Philippines operates arrastre services through the Bureau of Customs and the Customs Arrastre Service, which takes custody of importations discharged from vessels at port. Commonwealth Act 327 provides the mechanism for filing money claims against the government, directing such claims to the Auditor General.

Allied Manufacturing & Trading Company, Inc. imported fifteen cases of Harting voltage regulators, Purolator filters, and Wipperman timing chains. On or about June 26, 1964, the shipment was discharged by SS "Glengarry" into the custody of the Customs Arrastre Service of the Bureau of Customs. However, only fourteen cases were later delivered to the consignee; one case was lost while in arrastre custody.

As insurer of the shipment "against all risks," the Insurance Company of North America paid the consignee P4,469.80 — the value of the lost case. As subrogee to the consignee's rights, the insurer sought to recover that amount from the Customs Arrastre Service but was denied recovery.

Thereafter, on June 26, 1965, the insurer filed an action before the City Court of Manila against the Republic of the Philippines as arrastre operator and the Customs Arrastre Service as the entity through which the Republic operated, praying for recovery of P4,469.80 with legal interest, attorney's fees, and costs. The defendants raised allegations of non-suability and denied liability. The City Court ruled in favor of the plaintiff, and on appeal, the Court of First Instance of Manila on November 25, 1966 likewise ordered the defendants to pay P4,469.80.

However, the Supreme Court's ruling in Mobil Philippines Exploration, Inc. vs. Customs Arrastre Service and Bureau of Customs (L-23139, December 17, 1966), declaring the non-suability of the Customs Arrastre Service and the Bureau of Customs, prompted the Court of First Instance on January 7, 1967 to set aside its earlier decision and dismiss the case. The plaintiff's motion for reconsideration was denied, giving rise to the present appeal, in which the insurer contended that Mobil was inapplicable because the Republic was not a party in that suit and that the Republic had personality to be sued.

• Inapplicability of Mobil: Petitioner argued that the Mobil case is not applicable because only the Customs Arrastre Service and the Bureau of Customs were declared non-suable therein, whereas the Republic, a party defendant in the present case, was not included in the Mobil suit.
• Suability of the Republic: Petitioner contended that the Republic has personality to be sued.

• Non-suability and denial of liability: Respondents alleged non-suability of the Republic and the Customs Arrastre Service and denied liability for the lost shipment.

• State Immunity: Whether the Republic of the Philippines, in performing arrastre operations through the Bureau of Customs or the Customs Arrastre Service, is immune from suit without its consent.
• Applicability of Mobil: Whether the ruling in Mobil Philippines Exploration, Inc. vs. Customs Arrastre Service declaring the non-suability of the Customs Arrastre Service and the Bureau of Customs extends to the Republic as a party defendant.
• Nature of the Claim under CA 327: Whether the insurer's claim is liquidated or unliquidated for purposes of Commonwealth Act 327.

• State Immunity: Yes. The Republic is immune from suit without its consent, arrastre operations being a necessary incident of the primary governmental function of assessing and collecting customs revenues, duties, fees, and penalties from importations.
• Applicability of Mobil: Yes. The principle declared in Mobil — that the Customs Arrastre Service and the Bureau of Customs are non-suable — extends to the Republic, which performs the same arrastre operations through those instrumentalities as a governmental function.
• Nature of the Claim under CA 327: The claim is liquidated. The amounts are fixed or can fairly and easily be determined from readily accessible papers and records of the shipment; the existence of a dispute over government liability does not convert a liquidated claim into an unliquidated one.

• State Immunity: Arrastre operations conducted by the Republic through the Bureau of Customs or the Customs Arrastre Service constitute a necessary incident of the primary governmental function of assessment and collection from importations of lawful revenues, tariff and customs duties, fees, charges, fines, and penalties. Because these operations are governmental in nature, the doctrine of state immunity from suit without consent applies. The Republic cannot be sued for acts performed in the exercise of its governmental functions, and the insurer's subrogated claim does not alter this character.
• Applicability of Mobil: Although the Republic was not a party in the Mobil case, the same rationale governs: the arrastre operations are governmental functions, and the Republic, as the principal performing these functions through its instrumentalities, enjoys the same immunity. The insurer's distinction — that the Republic was not named in Mobil — is without legal significance, because the non-suability flows from the governmental character of the function, not from the identity of the party sued.
• Nature of the Claim under CA 327: The propriety of applying Commonwealth Act 327, which provides for money claims against the government to be filed with the Auditor General, was disposed of in the Court's extended resolution in L-26532 (Insurance Company of North America vs. Republic, August 30, 1967), denying a motion for reconsideration. Claims of this nature are not unliquidated, because the amounts are fixed or can fairly and easily be determined from readily accessible papers and records of the shipment. The fact that the government's liability for a liquidated claim is disputed does not alone convert the claim into an unliquidated one.

• State Immunity from Suit — The State cannot be sued without its consent. When the Republic performs governmental functions through its instrumentalities, it is immune from suit. Arrastre operations conducted through the Bureau of Customs or the Customs Arrastre Service are a necessary incident of the primary governmental function of assessing and collecting lawful revenues, tariff and customs duties, fees, charges, fines, and penalties from importations. The Republic is therefore immune from suit without its consent for such operations.
• Liquidated vs. Unliquidated Claims Against the Government — A claim is liquidated when its amount is fixed or can fairly and easily be determined from readily accessible papers and records. The fact that the liability of the Government for a liquidated claim is at issue does not alone convert said claim into an unliquidated one. This distinction is relevant to the application of Commonwealth Act 327, which governs money claims against the government filed with the Auditor General.

• "The Republic in doing arrastre operations through the Bureau of Customs or the Customs Arrastre Service, performs a necessary incident of the primary governmental function of assessment and collection from importations, of lawful revenues, tariff and customs duties, fees, charges, fines and penalties. As such, the Republic is immune from suit without its consent for said operations." — This is the ratio decidendi, establishing that arrastre operations are governmental in nature and that the Republic enjoys state immunity for them.
• "Contrary to appellant's concept, claims of this nature do not appear to be unliquidated, for their amounts are fixed or can fairly and easily be determined from readily accessible papers and records of the shipment. And the fact that the liability of the Government for a liquidated claim is at issue does not alone convert said claim into an unliquidated one." — This defines the distinction between liquidated and unliquidated claims in the context of government liability and the application of Commonwealth Act 327.

• Mobil Philippines Exploration, Inc. vs. Customs Arrastre Service and Bureau of Customs, L-23139, December 17, 1966 — Controlling precedent declaring the non-suability of the Customs Arrastre Service and the Bureau of Customs. The Court of First Instance relied on this ruling to set aside its decision and dismiss the case. The Supreme Court applied the same principle to the Republic, holding that the governmental character of arrastre operations confers immunity on the Republic as well.
• Insurance Company of North America vs. Republic, L-26532, August 30, 1967 — Related case in which the Court, in an extended resolution denying a motion for reconsideration, disposed of the propriety of applying Commonwealth Act 327 to claims of this nature and clarified the liquidated character of such claims.

• Commonwealth Act 327 — Provides for money claims against the government to be filed with the Auditor General. The Court noted that this statute provides the proper avenue for claims of this nature and that such claims are liquidated, not unliquidated, because their amounts are fixed or readily determinable from accessible papers and records.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles, and Fernando, JJ., concur.