G.R. No. L-29362 September 27, 1968
DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, plaintiff-appellee, vs. REPUBLIC OF THE PHILIPPINES and/or BUREAU OF CUSTOMS, defendants-appellants.

FACTS

The plaintiff, Domestic Insurance Company of the Philippines, as subrogee of the consignee Philippine Union Commercial, filed an action in the Court of First Instance of Manila to recover the sum of P10,039.66, representing the value of the contents of three cases of dental merchandise which the Bureau of Customs, as arrastre operator, failed to deliver, plus P2,000 for litigation expenses and attorney’s fees. The lower court rendered judgment in favor of the plaintiff. The Republic of the Philippines appealed. The case was elevated to the Supreme Court as the sole question posed was one of law regarding the non-suability of the State.

ISSUE

Whether the Bureau of Customs and/or the Republic of the Philippines, in operating the arrastre service, is immune from suit.

RULING

The Supreme Court reversed the judgment of the lower court and dismissed the complaint. The Court held that the Bureau of Customs, as part of the national government with no separate personality, is immune from suit. Its primary function is governmental—assessing and collecting lawful revenues from imports. The arrastre service is a necessary incident to this primary governmental function. Engaging in such a proprietary function does not render the Bureau liable to suit, as sovereign immunity, granted for the governmental end, cannot be denied for the necessary means to that end. Statutory provisions waiving State immunity are strictly construed, and no such waiver can be inferred from the authority of the Bureau to lease arrastre operations. The proper remedy for the plaintiff is to present the money claim to the Auditor General for adjudication under the provisions of Act 3083 and Commonwealth Act 327.