G.R. No. L-24955 July 29, 1968
AMERICAN INSURANCE COMPANY, plaintiff-appellant, vs. REPUBLIC OF THE PHILIPPINES and BUREAU OF CUSTOMS, defendants-appellees.

FACTS

The American Insurance Company filed an action in the Court of First Instance of Manila to recover from the Republic of the Philippines the value of certain cargoes consigned to its insured, San Miguel Corporation. The cargoes were allegedly lost in 1964 while in the possession of the Bureau of Customs acting as an “arrastre” operator. The trial court dismissed the action, prompting the plaintiff-appellant to appeal.

ISSUE

Whether the Republic of the Philippines and the Bureau of Customs may be sued for the value of cargo lost while in the possession of the Bureau of Customs performing arrastre operations, or whether such suit is barred by the doctrine of state immunity from suit.

RULING

The Supreme Court affirmed the order of dismissal. It held that the Bureau of Customs, in operating the arrastre service, performs a necessary incident of the primary governmental function of assessing and collecting lawful taxes, revenues, charges, fines, and penalties. Consequently, neither the Bureau nor the Republic is suable for such operations without the state’s consent, due to the state’s immunity from suit. The Court cited a long line of decisions establishing this doctrine. The proper remedy for the claimant is to file a claim with the Auditor General under Commonwealth Act No. 327 . No reason was shown to depart from this established doctrine. Costs were imposed against the appellant.