G.R. No. L-25663 November 15, 1967
Atlantic Mutual Insurance Company, plaintiff-appellant, vs. Republic of the Philippines, Bureau of Customs and United States Lines Company, defendants-appellees.

FACTS

In April 1964, forty-three cases of Globe Leather were shipped from New York on board SS “Pioneer Mart,” a vessel of the United States Lines Company, consigned to Crown Embroidery Corporation in Manila. Upon arrival, the cargo was discharged to the Bureau of Customs, which was then the arrastre operator. When the goods were delivered to the consignee, a great portion was allegedly found damaged. Atlantic Mutual Insurance Company, as insurer, paid the consignee $3,855.97 for the damage and, as subrogee, filed an action in the Court of First Instance of Manila on March 26, 1965, to recover this amount from the Republic of the Philippines, the Bureau of Customs, and, in the alternative, the United States Lines Company. The United States Lines Company answered, alleging the shipment was discharged in good order and including a cross-claim against the Bureau of Customs. The Republic and the Bureau of Customs moved to dismiss on grounds of non-suability and failure to first file the claim with the Auditor General under Act 3083 as amended by Commonwealth Act 327. The trial court dismissed the complaint based on the requirement to first lodge the claim with the Auditor General.

ISSUE

Whether the Court of First Instance correctly dismissed the complaint against all defendants, including the United States Lines Company, based on the non-suability of the Republic and the Bureau of Customs and the failure to first present the claim to the Auditor General.

RULING

The dismissal order is affirmed as to the Republic of the Philippines and the Bureau of Customs but reversed as to the United States Lines Company. The case is remanded for further proceedings against the United States Lines Company. The Supreme Court ruled that arrastre operations conducted by the Bureau of Customs as a necessary incident to the governmental function of taxation are an activity protected from suit by public policy. Claims against the Republic or its agencies, if they are money claims of the kind provided for in Act 3083 and Commonwealth Act 327, must first be presented to the Auditor General; otherwise, they cannot be sued without consent. The Court found that even assuming the claim was unliquidated, the Republic and the Bureau of Customs remained immune from suit. However, the dismissal order was premised only on the non-suability of the Republic and the Bureau of Customs and did not extend to the United States Lines Company, which did not file a motion to dismiss. The appellant’s suit was filed in the alternative against the carrier, and the dismissal should not have encompassed this defendant.