G.R. No. L-26480 June 15, 1972
FEDERAL INSURANCE COMPANY, plaintiff-appellant, vs. REPUBLIC OF THE PHILIPPINES, defendant-appellee.

FACTS

The plaintiff, Federal Insurance Company, filed a complaint against the Republic of the Philippines for the recovery of a sum of money. The complaint alleged that several boxes of portable typewriters imported by Singer Sewing Machine Company were discharged in good order into the custody of the defendant Republic through its agencies, the Bureau of Customs and the Customs Arrastre Service. Upon delivery to the importer, shortages were discovered valued at P8,655.55.
As the insurer of the goods, the plaintiff paid the importer for the loss and, by right of subrogation, sought to recover this amount from the defendant. Despite repeated demands, the Republic refused payment. The defendant moved to dismiss the complaint on grounds of lack of jurisdiction over its person and the subject matter, and the plaintiff’s lack of cause of action.

ISSUE

Whether the trial court correctly dismissed the complaint on the grounds of state immunity from suit.

RULING

The Supreme Court affirmed the order of dismissal. The legal logic is anchored on the doctrine of state immunity from suit. The Court held that the Republic, acting through the Bureau of Customs in the operation of the arrastre service, was performing a governmental function pursuant to a legislative mandate.
The operation of the arrastre service was deemed a necessary incident to the prime governmental function of customs administration. Consequently, the State is immune from suit unless it expressly consents. The Court cited its precedent in Mobil Philippines Exploration, Inc. vs. Customs Arrastre Service, reiterating that no statute had withdrawn this immunity in the context of arrastre operations. Therefore, the trial court lacked jurisdiction over the suit against the non-suable State. The order of dismissal was sustained.