G.R. No. L-25478 October 23, 1967
AMERICAN INSURANCE COMPANY, plaintiff-appellant, vs. REPUBLIC OF THE PHILIPPINES and BUREAU OF CUSTOMS, defendants-appellees.

FACTS

In May 1963, the Bureau of Customs received a cargo of four cartons of oven heaters consigned to San Miguel Corporation. The Bureau failed to deliver one carton valued at P690.30. As the insurer of the cargo, American Insurance Company paid the consignee the said amount and subsequently filed a complaint for its recovery against the Republic of the Philippines and the Bureau of Customs in the City Court of Manila. The City Court ruled in favor of the plaintiff. The defendants appealed to the Court of First Instance. During the pre-trial conference, only the plaintiff’s counsel appeared. When the court inquired about the counsel’s authority to compromise, the counsel could not present such authority. Consequently, the Court of First Instance dismissed the complaint for the plaintiff’s failure to appear. The plaintiff appealed this dismissal order.

ISSUE

Whether the Court of First Instance correctly dismissed the complaint against the Republic of the Philippines and the Bureau of Customs.

RULING

The Supreme Court affirmed the order of dismissal. The Court did not resolve the procedural issue regarding the dismissal for failure to appear at pre-trial, as it was rendered moot and academic. The Court held that, based on its precedent in Mobil Philippines Exploration, Inc. v. Customs Arrastre Service and Bureau of Customs, the Bureau of Customs operates the arrastre service as an incident of the governmental function of taxation and is therefore immune from suit. The same immunity applies to the Republic of the Philippines regarding this operation. Thus, the defendants are immune from suit, and the complaint was properly dismissed.