G.R. No. L-25362 October 23, 1967
HARTFORD FIRE INSURANCE CO., plaintiff-appellant, vs. CUSTOMS ARRASTRE SERVICE and/or BUREAU OF CUSTOMS and/or REPUBLIC OF THE PHILIPPINES, defendants-appellees.

FACTS

Two packages of nickel Babbitt were shipped from San Francisco, California, consigned to Earnshaw Docks & Honolulu Iron Works in Manila. The shipment was discharged into the custody of the Customs Arrastre Service of the Bureau of Customs from SS “Bougainville” on July 15, 1964. Upon delivery to the consignee, the goods were found to have been pilfered, resulting in a loss of 1,356 pounds valued at P12,572.00. Hartford Fire Insurance Company, the insurer of the goods and a foreign insurance company authorized to do business in the Philippines, paid the consignee the said amount. As subrogee of the consignee, Hartford Fire Insurance Company laid claim against the Customs Arrastre Service. Failing to recover, it filed a complaint before the Court of First Instance of Manila on May 10, 1965, praying that the Customs Arrastre Service, the Bureau of Customs, and the Republic of the Philippines be ordered to pay P12,572.00 with legal interest, plus 25% as attorney’s fees and costs. The lower court dismissed the case, sustaining the defendants’ defense of non-suability.

ISSUE

Whether the defendants (Customs Arrastre Service, Bureau of Customs, and the Republic of the Philippines) may be sued.

RULING

No. The Supreme Court affirmed the lower court’s dismissal, holding that the defendants may not be sued. Citing the case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service and the Bureau of Customs, the Court ruled that a non-corporate government entity performing a proprietary function is not suable if said function is undertaken as an incident to its governmental function. The Bureau of Customs operates the Customs Arrastre Service as an incident of its primary governmental function of assessment and collection of lawful revenues from imported articles and all other tariff and customs duties, fees, charges, fines, and penalties. Therefore, it is not suable for reasons of public policy. The same principle applies to the Republic of the Philippines in relation to said operation of the Bureau of Customs. The judgment appealed from was affirmed, without costs.