G.R. No.

166134
June 29, 2010
ANGELES CITY vs. ANGELES CITY ELECTRIC
CORPORATION
AND
REGIONAL
TRIAL
COURT BRANCH 57, ANGELES CITY
Facts:
Respondent Angeles City Electric Corporation
(AEC), which was granted a legislative franchise
to generate and distribute electricity in Angeles
City, Pampanga, pays a franchise tax of two
percent (2%) of its gross receipts to the BIR.
When the Local Government Code (LGC) of 1991
was passed into law, the Sangguniang
Panlungsod of Angeles City enacted a tax
ordinance known as the Revised Revenue Code
of Angeles City (RRCAC) which imposed a local
franchise tax upon AEC. Metro Angeles Chamber
of Commerce and Industry Inc. (MACCI) of which
AEC is a member filed a petition seeking the
reduction of the tax rates and a review of the
provisions of the RRCAC was filed by, claiming
that the ordinance is oppressive. The petition
was referred to the Bureau of Local Government
Finance (BLGF) and an indorsement was issued
to the City Treasurer of Angeles City, instructing
the latter to make representations with the
Sanggunian for the appropriate amendment of
the RRCAC.

On 2004, the City Treasurer issued a Notice of

Assessment to AEC for payment of business tax,
license fee and other charges for the period
1993 to 2004 amounting to P94,861,194.10.
AEC protested the assessment but the City
Treasurer denied the protest. AEC appealed to
the RTC of Angeles City via a Petition for
Declaratory Relief. The City Treasurer however
levied on the real properties of AEC and a Notice
of Auction Sale was published announcing that a
public auction of the levied properties would be
held. This prompted AEC to file with the RTC an
Urgent Motion for Issuance of Temporary
Restraining Order (TRO) and/or Writ of
Preliminary Injunction. After due notice and
hearing, the RTC issued a TRO and a Writ of
Preliminary Injunction. Angeles City filed a
motion for dissolution of preliminary injunction,
contending that the RTC cannot enjoin the
collection of taxes pursuant to the LGC, but the
RTC denied such motion.
Issue: Whether or not the RTC can enjoin the
collection of local taxes.
Ruling: No.
The LGC does not specifically prohibit an
injunction enjoining the collection of taxes. A
principle deeply embedded in our jurisprudence
is that taxes being the lifeblood of the
government should be collected promptly,
without unnecessary hindrance or delay. In line

with this principle, the National Internal

Revenue Code of 1997 (NIRC) expressly
provides that no court shall have the authority
to grant an injunction to restrain the collection
of any national internal revenue tax, fee or
charge imposed by the code. The situation,
however, is different in the case of the
collection of local taxes as there is no express
provision in the LGC prohibiting courts from
issuing
an
injunction
to
restrain
local
governments from collecting taxes. Unlike the
National Internal Revenue Code, the Local Tax
Code does not contain any specific provision
prohibiting courts from enjoining the collection
of local taxes. Nevertheless, it must be
emphasized that although there is no express
prohibition in the LGC, injunctions enjoining the
collection of local taxes are frowned upon.
Courts therefore should exercise extreme
caution in issuing such injunctions.
No grave abuse of discretion was committed by
the RTC in the issuance of the writ of
preliminary
injunction
because
the
two
requisites to warrant the issuance of such,
which are the existence of a clear and
unmistakable right that must be protected and
an urgent and paramount necessity for the writ
to prevent serious damage, have been satisfied.
The Court then had no other recourse but to
grant the prayer for the issuance of a writ of
preliminary injunction considering that if the
respondent will not be restrained from doing the

acts complained of, it will preempt the Court

from properly adjudicating on the merits the
various issues between the parties, and will
render moot and academic the proceedings
before the court. The petition was dismissed
LUZ YAMANE (petitioner) v BA LEPANTO
CONDOMINIUM CORPORATION (respondent)
October 25 2005 | Tinga, J. | Leigh
Local Taxation
SUPERFACTS! The city treasurer imposed
taxes on Lepanto, a corporation that owned a
condominium, saying that because Lepanto
collected assessments for operating expenses
for the common areas of the condominium,
Lepanto was actually engaged in business. The
SC ruled that Lepanto was not organized for
profit. The fees it was collecting from the
condominium unit owners redound to the
owners themselves because the fees collected
are being used for the maintenance of the
condo. Further, it appears that the assessment
issued by the city treasurer did not state the
legal basis for the tax being imposed on
Lepanto it merely states that Makati is
authorized to collect business taxes under the
LGC, but no other reference specific reference
to specific laws were cited.
FACTS:

BA Lepanto Condominium Corporation (Lepanto)

owns title over BA-Lepanto Condominium, and is
authorized by its by-laws to collect regular
assessments from its members for operating
expenses, capital expenditures on common
areas, and other special assessements. In 1998,
it received a tax assessment in the amount of
P1,601,013.77 from Luz Yamane, the City
Treasurer of Makati, for business taxes for the
years 1995-1997. The notice of assessment was
silent as to the statutory basis of the business
taxes
assessed.
Lepanto
protested
the
assessment, saying that:
The Assessment has no basis as the
Corporation is not liable for business taxes and
surcharges and interest thereon, under the
Makati [Revenue] Code or even under the [Local
Government] Code (LGC).
The Makati [Revenue] Code and the LGC do not
contain any provisions on which the Assessment
could be based. One might argue that Sec.
3A.02(m) of the Makati [Revenue] Code imposes
business tax on owners or operators of any
business not specified in the said code. We
submit, however, that this is not applicable to
the Corporation as it is not an owner or operator
of any business in the contemplation of the
Makati [Revenue] Code and even the LGC.
Proceeding from the premise that its tax liability
arose from Section 3A.02(m) of the Makati
Revenue Code, Lepanto argued that under both

the Makati Code and the LGC, business is

defined as trade or commercial activity
regularly engaged in as a means of livelihood or
with a view to profit. It was submitted that
Lepanto, as a condominium corporation, was
organized not for profit, but to hold title over the
common areas of the Condominium, to manage
the Condominium for the unit owners, and to
hold title to the parcels of land on which the
Condominium was located. Neither was Lepanto
authorized, under its AOI or by-laws to engage
in profit-making activities. The assessments it
did collect from the unit owners were for capital
expenditures and operating expenses.
Yamane denied the protest, insisting that the
assessments were made in view of profitmaking, as the assessments which were
collected
improved
the
value
of
the
condominiums, which in turn would increase the
chances of getting higher prices. Lepanto then
appealed the denial to the RTC of Makati. RTC
Makati affirmed the decision of Yamane, saying
that Lepantos activities fell under the definition
of business under Sec. 13(b) of the LGC, and
thus subject to local business taxation. Lepanto
then filed a petition for review under Rule 42
with the Court of Appeals. The Court of Appeals
reversed the RTC, ruling that Lepanto was not
engaged in profit. CA also said that the very
statutory concept of a condominium corporation
showed that it was not a juridical entity
intended to make profit, as its sole purpose was

to hold title to the common areas in the

condominium
and
to
maintain
the
condominium.
Yamane: Lepanto is engaged in business. The
dues collected are used for the beautification
and maintenance of the Condominium, resulting
in full appreciative living values for the
condominium units which would command
better market prices should they be sold in the
future. Moreover, the rationale for business
taxes is not on the profit earned by the
business, but the privilege to engage in
business.
Also, on a procedural note: Lepanto filed
the wrong mode of appeal before the CA when it
filed its petition for review under rule 42. The
RTC decision was rendered in the courts
exercise of original jurisdiction. Thus, with
Lepanto pursuing an erroneous mode of appeal,
the RTC decision became final and executory.
RULING: petition DENIED
PROCEDURAL ISSUE: Does the RTC, in deciding
an appeal taken from a denial of a protest by a
local treasurer under Section 195 of the LGC,
exercise original jurisdiction or appellate
jurisdiction? ORIGINAL, but court still affirmed
the jurisdiction exercised of the CA in this case.
There are 2 conflicting views on this issue:

1)
Position of CA: RTC, in reviewing denials of
protests by local treasurers, exercises appellate
jurisdiction. This is anchored on the language of
Sec. 195 of the LGC which states that the
remedy of the taxpayer whose protest is denied
by the local treasurer is to appeal with the
court of competent jurisdiction. The LGC
however does not elaborate on how such
appeal should be undertaken.
2)
Position of City Treasurer: jurisdiction
exercised is original in character.
Court affirmed the position of the City Treasurer.
The LGC does not expressly confer appellate
jurisdiction on the part of RTCs from the denial
of a tax protest by a local treasurer. On the
other hand, Section 22 of BP 129 expressly
delineates the appellate jurisdiction of the RTCs,
confining appellate jurisdiction to cases decided
by Metropolitan, Municipal, and Municipal Circuit
Trial Courts. BP 129 does not confer appellate
jurisdiction on RTCs over rulings made by nonjudicial entities.
HOWEVER, this pronouncement is subject to two
qualifications.
First, in this case there are significant
reasons for the Court to overlook the procedural
error and ultimately uphold the adjudication of
the jurisdiction exercised by the CA.
Second, the doctrinal weight of the
pronouncement is confined to cases and
controversies that emerged prior to the

enactment of RA 9282 (effective April 2004), the

law which expanded the jurisdiction of the Court
of Tax Appeals (CTA). Under RA 9282, the CTA,
not CA, exercises exclusive appellate jurisdiction
to review on appeal decisions, orders or
resolutions of the RTCs in local tax cases
whether originally decided or resolved by them
in the exercise of their original or appellate
jurisdiction. RA 9282 thus would not apply here
because the case arose prior to the effectivity of
the law.
Moreover, procedural
enforced blindly.

rules

must

not

be

SUBSTANTIVE ISSUE: Can a local government

unit, under the Local Government code, impel a
condominium corporation to pay business
taxes? NO
1) The power of local government units to
impose taxes within its territorial jurisdiction
derives from the Constitution itself, which
recognizes the power of these units to create
its own sources of revenue and to levy taxes,
fees, and charges subject to such guidelines
and limitations as the Congress may provide,
consistent with the basic policy of local
autonomy. These guideline are contained in the
Local Government Code of 1991, which provides
for instances when and how local government
units may impose taxes. The significant
limitations are enumerated primarily in Section

133 of the Code, which include among others, a

prohibition on the imposition of income taxes
except when levied on banks and other financial
institutions. None of the other general
limitations under Section 133 find application to
the case at bar. It is in Art. II, Title II, Book II of
the Code, governing municipal taxes, where the
provisions on business taxation relevant to this
petition may be found.
Sec. 143 enumerates types of business on
which municipalities and cities may impose
taxes.
These
include
manufacturers,
wholesalers, distributors, dealers of any article
of commerce of whatever nature; those
engaged in the export or commerce of essential
commodities;
contractors
and
other
independent contractors; banks and financial
institutions; and peddlers engaged in the sale of
any merchandise or article of commerce.
The coverage of business taxation particular to
the City of Makati is provided by the Makati
Revenue Code (Revenue Code). Article A,
Chapter III of the Revenue Code governs
business taxes in Makati, and it is quite specific
as to the businesses which are covered by
business taxes.
The initial inquiry is what provision of the Makati
Revenue Code does the City Treasurer rely on to
make Lepanto liable for business taxes. Even at
this point, there already stands a problem with

the City Treasurers cause of action. At no point

has the City Treasurer stated in all the records
as to what is the statutory basis under the
Makati Revenue Code for the levying of the
business tax on Lepanto.
The notice of assessment, which stands as the
first instance the taxpayer is officially made
aware of the pending tax liability, should be
sufficiently informative to apprise the taxpayer
the legal basis of the tax. Sec. 195 of the LGC
does not go as far as to require that the notice
of assessment specifically cite the provision of
the ordinance involved but it does require that it
state the nature of the tax, fee or charge, the
amount of deficiency, surcharges, interests and
penalties. In this case, the notice of assessment
sent to Lepanto did state that the assessment
was for business taxes, as well as the amount of
the assessment. There may have been prima
facie compliance with the requirement under
Sec. 195. However, the Revenue Code provides
multiple provisions on business taxes. Hence,
we
could
appreciate
the
Corporations
confusion, as expressed in its protest, as to the
exact legal basis for the tax. Reference to the
local tax ordinance is vital, for the power of local
government units to impose local taxes is
exercised through the appropriate ordinance
enacted by the sanggunian, and not by the LGC
alone. What determines tax liability is the tax
ordinance, the Local Government Code being
the enabling law for the local legislative body.

Moreover, a careful examination of the Revenue

Code shows that while Section 3A.02(m) seems
designed as a catch-all provision, Section
3A.02(f), which provides for a different tax rate
from that of the former provision, may be
construed to be of similar import. While Section
3A.02(f) is quite exhaustive in enumerating the
class of businesses taxed under the provision,
the listing, while it does not include
condominium-related enterprises, ends with
etc. Certainly, we cannot be disposed to
uphold any tax imposition that derives its
authority from enigmatic and uncertain words
such as etc. Yet we cannot even say with
definiteness whether the tax imposed on the
Corporation in this case is based on that
provision. (in other words: walang basis, the
court is just citing these to see if the tax
imposed could fall under any of these
provisions). The City Treasurer has been silent
all through out as to the exact basis for the tax
imposition which she wishes that this Court
uphold.
2) Local tax on businesses is authorized under
Sec. 143 of the LGC. The word business is
defined under Section 131(d) of the Code as
trade or commercial activity regularly engaged
in as a means of livelihood or with a view to
profit. This definition is importance since Sec.
143 allows local government units to impose
local taxes on businesses other than those

specified under the provision. It is thus

imperative that in order that Lepanto may be
subjected to business taxes, its activities must
fall within the definition of business. And to hold
that they do is to ignore the very statutory
nature of a condominium corporation.
The creation of the condominium corporation is
sanctioned by RA. 4726 (Condominium Act).
Under the law, a condominium is an interest in
real property consisting of a separate interest in
a unit in a residential, industrial or commercial
building and an undivided interest in common,
directly or indirectly, in the land on which it is
located and in other common areas of the
building. To enable the orderly administration
over these common areas which are jointly
owned by the various unit owners, the
Condominium Act permits the creation of a
condominium corporation, which is specially
formed for the purpose of holding title to the
common area, in which the holders of separate
interests shall automatically be members or
shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their
respective units.
Thus, it may be authorized in the deed of
restrictions to make reasonable assessments to
meet
authorized
expenditures,
each
condominium unit to be assessed separately for
its share of such expenses in proportion (unless
otherwise provided) to its owners fractional

interest in any common areas. It is the

collection of these assessments from unit
owners that form the basis of the City
Treasurers claim that the Corporation is doing
business.
The
Condominium
Act
imposes
several
limitations on the condominium corporation.
Under Sec. 10 of the law, the corporate
purposes of a condominium corporation are
limited to the holding of the common areas,
either in ownership or any other interest in real
property recognized by law; the management of
the project; and such other purposes as may be
necessary, incidental or convenient to the
accomplishment of such purpose. Further, the
same provision prohibits the AOI or by-laws of
the condominium corporation from containing
any provisions which are contrary to the
provisions of the Condominium Act.
None of these corporate purposes are geared
towards obtaining a livelihood profit. In the
present case, the amounts collected are not
intended for the incurrence of profit by Lepanto
or its members, but to shoulder the necessary
expenses that arise from the maintenance of
the Condominium Project.
The Court cites with approval the two
counterpoints raised by CA in rejecting the
contention of the city treasurer that the
assessments amounted to profits for Lepanto.

First, if any profit is obtained by the sale of the

units, it accrues not to the corporation but to
the unit owner. Second, if the unit owner does
obtain profit from the sale of the corporation,
the owner is already required to pay capital
gains tax on the appreciated value of the
condominium unit. Moreover, by the rationale of
the city treasurer, every Makati City car owner
may be considered as being engaged in
business, since the repairs or improvements on
the car may be deemed oriented towards
appreciating the value of the car upon resale.
There is an evident distinction between persons
who spend on repairs and improvements on
their personal and real property for the purpose
of increasing its resale value, and those who
defray such expenses for the purpose of
preserving the property.
Besides, we shudder at the thought of upholding
tax liability on the basis of the standard of full
appreciative living values, a phrase that defies
statutory explication, commonsensical meaning,
the English language, or even definition from
Google (lol). The exercise of the power of
taxation constitutes a deprivation of property
under the due process clause, and the
taxpayers right to due process is violated when
arbitrary or oppressive methods are used in
assessing and collecting taxes.
The City Treasurer also contends that the fact
that Lepanto is engaged in business is evinced

by the AOI, which specifically empowers

Lepanto to acquire, own, hold, enjoy, lease,
operate and maintain, and to convey, sell,
transfer mortgage or otherwise dispose of real
or personal property. What the City Treasurer
fails to add is that every corporation organized
under the Corporation Code is so specifically
empowered, under Sec. 36(7) of the Corporation
Code.
Again, whatever capacity the Corporation may
have pursuant to its power to exercise acts of
ownership over personal and real property is
limited by its stated corporate purposes, which
are by themselves further limited by the
Condominium Act. A condominium corporation,
while enjoying such powers of ownership, is
prohibited by law from transacting its properties
for the purpose of gainful profit.
Accordingly, we hold that condominium
corporations are generally exempt from local
business taxation under the LGC, irrespective of
any local ordinance that seeks to declare
otherwise.
Still, we can note a possible exception to the
rule. It is not unthinkable that the unit owners of
a condominium would band together to engage
in activities for profit under the shelter of the
condominium corporation. Such activity would
be prohibited under the Condominium Act, but if
the fact is established, we see no reason why

the condominium corporation may be made

liable by the local government unit for business
taxes.
Still, the City Treasurer has not posited the claim
that Lepanto is engaged in business activities
beyond
the
statutory
purposes
of
a
condominium corporation. The assessment is
based solely on the Lepantos collection of
assessments
from
unit
owners,
such
assessments being utilized to defray the
necessary expenses for the Condominium
Project and the common areas. Hence, the
assailed tax assessment has no basis under the
LGC or the Makati Revenue Code, and the
insistence of the city in its collection of the void
tax constitutes an attempt at deprivation of
property without due process of law.
JARDINE DAVIES INSURANCE BROKERS INC
v. ALISPOSA
Pursuant to Republic Act No. 7160, otherwise
known as the Local Government Code of 1991,
the then Sangguniang Bayan of Makati enacted
Municipal Ordinance No. 92-072, otherwise
known as the Makati Revenue Code, which
provides, inter alia, for the schedule of real
estate, business and franchise taxes in the
Municipality of Makati at rates higher than those
in the Metro Manila Revenue Code.
On May 10, 1993, the Philippine Racing Club,
Inc. (PRCI for brevity), a taxpayer of Makati,

appealed to the Department of Justice (DOJ for

brevity) for the nullification of said ordinance,
alleging that it was approved without previous
public hearings, in violation of the Local
Government Code and Article 276 of its
Implementing Rules, and that some of the
ordinances provisions were unconstitutional:
(2)
The in-lieu-of-all-taxes clause of the
franchise of the Philippine Racing Club, Inc.
exempts it from payment of the real property
tax, annual business tax and other new taxes
imposed by the ordinance here in question. To
withdraw the exemption would impair the
obligation of contract in violation of its
constitutional right as franchise holder.
(3) The imposition of the franchise tax is not
within the scope of the taxing powers of the
Municipality of Makati (Sections 134, 137 and
142 of Republic Act No. 7160 and Articles 223,
226 and 231 of Rule XXX of the Implementing
Rules and Regulations of the Local Government
Code of 1991). and
(4)
The Municipality of Makati already shares
5 of the 25% franchise tax provided for in
Section 8 of the franchise of the Philippine
Racing Club, Inc. To allow the said municipality
to impose another franchise tax and to base the
tax on the gross annual receipts, as it does in
the ordinance, would certainly be unjust,
excessive, oppressive or confiscatory (Section

130 of Republic Act No. 7160 and Article 219 of

Rule XXX of the Implementing Rules and
Regulations).[1]

(a)
declaring null and void the DOJ
Decision dated July 5, 1993; and

Although required by the DOJ to comment on

the appeal, respondent Makati failed to do so.

(b)
allowing the full implementation of
Makati Municipal Ordinance No. 92-072.

On July 5, 1993, the DOJ came out with a

resolution[2] declaring null and void and
without legal effect the said ordinance for
having been enacted in contravention of Section
187 of the Local Government Code of 1991 and
its implementing rules and regulations.[3]

Petitioners pray for such further or other reliefs

as this Honorable Court may deem just and
equitable.[5]

On August 19, 1993, respondent Makati sought

a reconsideration of the ruling of the DOJ.
Pending resolution of its motion, said
respondent filed a petition ad cautelam[4] with
the Regional Trial Court (RTC) of Makati, entitled
Hon. Jejomar C. Binay and the Municipality of
Makati, Petitioners, v. Hon. Franklin M. Drilon,
Department of Justice and Philippine Racing
Club, Inc., Respondents, and docketed as Case
No. 93-2844. The case was raffled to Branch
148 of the Makati RTC. Respondent Makati
alleged, inter alia, that public hearings were
conducted before the approval of the ordinance
and hence the ordinance was valid. It prayed
that after due proceedings judgment be
rendered in its favor, thus:
WHEREFORE, petitioners respectfully pray that
this Honorable Court promulgate judgment:

In the meantime, respondent Makati continued

to implement the ordinance. Petitioner Jardine
Davies Insurance Brokers, Inc., a duly-organized
corporation with principal place of business at
No. 222 Sen. Gil J. Puyat Avenue, Makati, Metro
Manila, was assessed and billed by Makati the
amount of P63,822.47 for taxes, fees and
charges under the ordinance for the second
quarter of 1993. It was again billed by
respondent Makati the same amount for the
third quarter of 1993 and the same amount for
the fourth quarter of 1993. Petitioner did not
protest the assessment for its quarterly
business taxes for the second, third and fourth
quarters of 1993 based on said ordinance
effective April 1, 1993. Petitioner, in fact, paid
the said amounts on April 26, 1993 (for the
second quarter), July 12, 1993 (for the third
quarter) and October 19, 1993 (for the fourth
quarter), respectively, without any protest.
Respondent Makati issued the corresponding
receipts in favor of petitioner.[6]

On January 30, 1994, petitioner wrote the

municipal treasurer of Makati requesting that
respondent Makati compute its business tax
liabilities in accordance with the Metro Manila
Revenue Code and not under the ordinance
considering that said ordinance was already
declared by the DOJ null and void. Petitioner
likewise requested that respondent Makati
credit the overpayment in the total amount of
P27,854.91 for the second to fourth quarters of
1993 against its 1994 liabilities for 1994, or in
the alternative, for Makati to refund the said
amount to petitioner.
In a Letter[7] dated February 4, 1994,
respondent Makati, through Maximo L. Paulino
Jr., Acting Chief of its Municipal License Division,
denied the request of petitioner for tax
credit/refund. Respondent Makati insisted that
the questioned ordinance code was valid and
enforceable pending the final outcome of its
petition ad cautelam with the Regional Trial
Court of Makati.
In the meantime, on October 26, 1993, the RTC
rendered judgment in Case No. 93-2844
granting the petition of Makati and declaring the
ordinance valid. On November 9, 1993, the DOJ
issued a memorandum to the Chief State
Counsel directing the latter to refrain from
accepting any appeal or to act on pending
appeals on the validity/constitutionality of the

ordinance until the same shall have been finally

resolved by courts of competent jurisdiction.
When informed of the denial by respondent
Makati of its letter-request, petitioner filed a
complaint on March 7, 1994 with the RTC of
Makati against respondents Makati and its
Acting Municipal Treasurer. The case was raffled
to Branch 150 of said court. Petitioner alleged in
its complaint that in view of the resolution of the
DOJ declaring the Makati Revenue Code null
and void and without legal effect, the
provisions of the Metro Manila Revenue Code
continued to remain in full force and effect;
however, petitioner was assessed and billed by
respondent Makati for taxes, fees and charges
for second, third and fourth quarters for 1993
beginning on April 4, 1993 up to October 14,
1994 at rates fixed in the ordinance despite the
nullity thereof. Petitioner prayed that after due
proceedings judgment be rendered as follows:
1.
Declaring as NULL AND VOID Municipal
Ordinance No. 92-072, (Makati Revenue Code)
of the Municipality of Makati and ordering
Defendants to refund or issue as tax credit in
favor of Plaintiff the sum of P27,854.91 plus
interest.
2.
Assuming without admitting that the
Municipal Ordinance No. 92-072 (Makati
Revenue Code) is valid, declaring that the rates
imposed by said ordinance accrue only on July

1, 1993 and ordering Defendants to refund or

issue as tax credit in favor of Plaintiff the sum of
P9,284.97.[8]
On May 18, 1994, respondents Makati and its
Acting Municipal Treasurer filed a motion to
dismiss[9] the complaint on the ground of
prematurity. They argued that petitioners cause
of action was predicated on the appealed
resolution of the DOJ, and unless and until
nullified by final judgment of a competent court,
the ordinance remained in full force and effect.
On May 26, 1994, petitioner opposed the motion
to dismiss of respondents, contending that its
complaint was not predicated solely on the
invalidity
and
unconstitutionality
of
the
ordinance but also on its claim that the
ordinance took effect only in July 1, 1993 but
Makati applied the ordinance effective April 1,
1993. Petitioner further averred that under
Section 166 of the Local Government Code, new
taxes, fees or charges or charges provided for in
the ordinance shall accrue on the first day of
the quarter following the effectivity of the new
ordinance. Hence, assuming that the tax
ordinance was valid, the same should have
been enforced only from the first (1st) day of
the quarter following next the effectivity of the
ordinance imposing such new levies or rates as
provided for in Section 166 of the Local
Government Code.

On August 29, 1994, the RTC issued an order

granting the motion to dismiss of respondent
and ordering the dismissal of the complaint. The
trial court ruled that plaintiffs cause of action, if
any, had prescribed. Citing Sections 187 and
195 of the Local Government Code of 1991, the
trial court ratiocinated that petitioner failed to
file an opposition or protest to the written notice
of assessment of Makati for taxes, fees and
charges at rates provided for in the ordinance
within 60 days from the notice of said
assessment as required by Section 195 of the
Local Government Code. Hence, petitioner was
barred from demanding a refund of its payment
or that it be credited for said amounts.
Petitioner received a copy of said order on
October 7, 1994. On October 13, 1994,
petitioner filed with the trial court a motion for
reconsideration[10] of the order of dismissal,
arguing that the trial court erred in applying
Section 195 of the Local Government Code of
1991 as its complaint did not involve an
assessment for deficiency taxes but one for
refund/tax credit. Petitioner further claimed that
it was never served with any notice of
assessment from respondents and hence there
was no need for petitioner to protest. Petitioner
argued that what was applicable was Section
196 of the Local Government Code in
conjunction with Article 286 of its Implementing
Rules and Regulations, both of which simply
require the filing of a written claim for refund or

tax credit within two years from the date of

payment.
On December 28, 1994, the trial court issued an
order[11]
denying
the
motion
for
reconsideration of petitioner, a copy of which
was served on petitioner on February 13, 1995.
The trial court declared that Section 195 of the
Local Government Code covers all kinds of
assessments and not merely deficiency
assessments for taxes, fees or charges. The trial
court further ruled that the issue of the validity
and constitutionality of the ordinance was still
pending resolution by Branch 148 of the RTC in
Civil Case No. 93-2844 and until declared null
and void, otherwise by final judgment, the
ordinance remained valid.
Petitioner filed on February 20, 1995 a petition
for review on certiorari under Rule 45 of the
Rules of Court, contending that:
RESPONDENT JUDGE ERRED IN HOLDING THAT
THE INSTANT CASE IS NOT A CLAIM FOR
REFUND UNDER SECTION 196 OF THE LGC IN
RELATION
TO
ARTICLE
286
OF
ITS
IMPLEMENTING RULES, BUT A DEFICIENCY
ASSESSMENT THAT HAS TO BE PROTESTED
UNDER SECTION 195 OF THE SAME CODE.
RESPONDENT JUDGE ERRED IN DISMISSING THE
CASE ON THE GROUND OF PENDENCY OF
ANOTHER ACTION CONTESTING THE LEGALITY

OR CONSTITUTIONALITY OF THE MAKATI

REVENUE CODE IS STILL BEING DETERMINED IN
BRANCH 148 OF THE REGIONAL TRIAL COURT
OF MAKATI.[12]
Anent the first assignment of errors, petitioner
avers that its action in the RTC was one for a
refund of its overpayments governed by Article
196
of
the
Local
Government
Code
implemented
by
Article
286
of
the
Implementing Rules and Regulations of the
Code and not one involving an assessment for
deficiency taxes governed by Section 195 of the
said Code. Petitioner contends that it was not
mandated to first file a protest with respondents
before instituting its action for a refund of its
overpayments or for it to be credited for said
overpayments. For its part, respondent Makati
avers that petitioner was proscribed from filing
its complaint with the RTC and for a refund of its
alleged overpayment, petitioner having paid
without any protest the taxes due to respondent
Makati under the ordinance. It is further
asserted by respondent Makati that until
declared null and void by a competent court,
the ordinance was valid and should be enforced.
The petition has no merit.
The Court agrees with petitioner that as a
general precept, a taxpayer may file a
complaint assailing the validity of the ordinance
and praying for a refund of its perceived

overpayments without first filing a protest to the

payment of taxes due under the ordinance. This
was our ruling in Ty v. Judge Trampe:[13]
. . . Hence, if a taxpayer disputes the
reasonableness of an increase in a real estate
tax assessment, he is required to first pay the
tax under protest. Otherwise, the city or
municipal treasurer will not act on his protest. In
the case at bench, however, the petitioners are
questioning the very authority and power of the
assessor, acting solely and independently, to
impose the assessment and of the treasurer to
collect the tax. These are not questions merely
of amounts of the increase in the tax but
attacks on the very validity of any increase.
In this case, petitioner, relying on the resolution
of the Secretary of Justice in The Philippine
Racing Club, Inc. v. Municipality of Makati case,
posited in its complaint that the ordinance
which was the basis of respondent Makati for
the collection of taxes from petitioner was null
and void. However, the Court agrees with the
contention of respondents that petitioner was
proscribed from filing its complaint with the RTC
of Makati for the reason that petitioner failed to
appeal to the Secretary of Justice within 30 days
from the effectivity date of the ordinance as
mandated by Section 187 of the Local
Government Code which reads:

Sec. 187-Procedure for Approval and Effectivity

of Tax Ordinances and Revenue Measures;
Mandatory Public Hearings.- The procedure for
approval of local tax ordinances and revenue
measures shall be in accordance with the
provisions of this Code: Provided, That public
hearings shall be conducted for the purpose
prior to the enactment thereof: Provided further,
That any question on the constitutionality or
legality of tax ordinances or revenue measures
may be raised on appeal within thirty (30) days
from the effectivity thereof to the Secretary of
Justice who shall render a decision within sixty
(60) days from the date of receipt of the appeal:
Provided, however, That such appeal shall not
have the effect of suspending the effectivity of
the ordinance and the accrual and payment of
the tax, fee, or charge levied therein: Provided,
finally, That within thirty (30) days after receipt
of the decision or the lapse of the sixty-day
period without the Secretary of Justice acting
upon the appeal, the aggrieved party may file
appropriate proceedings with a court of
competent jurisdiction.
In Reyes v. Court of Appeals,[14] we ruled that
failure of a taxpayer to interpose the requisite
appeal to the Secretary of Justice is fatal to its
complaint for a refund:
Clearly, the law requires that the dissatisfied
taxpayer who questions the validity or legality
of a tax ordinance must file his appeal to the

Secretary of Justice, within 30 days from

effectivity thereof. In case the Secretary decides
the appeal, a period also of 30 days is allowed
for an aggrieved party to go to court. But if the
Secretary does not act thereon, after the lapse
of 60 days, a party could already proceed to
seek relief in court. These three separate
periods are clearly given for compliance as a
prerequisite before seeking redress in a
competent court. Such statutory periods are set
to prevent delays as well as enhance the orderly
and speedy discharge of judicial functions. For
this reason the courts construe these provisions
of statutes as mandatory.
A municipal tax ordinance empowers a local
government unit to impose taxes. The power to
tax is the most effective instrument to raise
needed revenues to finance and support the
myriad activities of local government units for
the delivery of basic services essential to the
promotion of the general welfare and
enhancement of peace, progress, and prosperity
of the people. Consequently, any delay in
implementing tax measures would be to the
detriment of the public. It is for this reason that
protests over tax ordinances are required to be
done within certain time frames. In the instant
case, it is our view that the failure of petitioners
to appeal to the Secretary of Justice within 30
days as required by Sec. 187 of R.A. 7160 is
fatal to their cause.

Moreover, petitioner even paid without any

protest the amounts of taxes assessed by
respondents Makati and Acting Treasurer as
provided for in the ordinance. Evidently, the
complaint of petitioner with the Regional Trial
Court was merely an afterthought.
In view of our foregoing disquisitions, the Court
no longer deems it necessary to resolve other
issues posed by petitioner.
IN LIGHT OF ALL THE FOREGOING, the petition is
DENIED. The order of the Regional Trial Court
dismissing the complaint of petitioner is
AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing
and Austria-Martinez, JJ., concur.
SAN JUAN vs CASTRO G.R. No. 174617
December 27, 2007
FACTS:
Petitioner, registered owners of real properties
in Marikina City, with consent of his wife,
conveyed bydeed of assignment, the properties
to the Saints and Angels Realty Corp. (SARC), by
virtue of incorporations, inexchange for shares
of stock therein with a par value of
P2,000,000.0, placed in San Juans name and
theremaining par value in the name of his wife.
Respondents representatives went to the City

Treasurers Office of Marikina to pay the

transfer tax based on the consideration stated
in the deed of assignment. City TreasurerCastro
informed him however that the tax due is based
on
the
fair
market
value
of
the
property.Petitioner protested the basis of the tax
due. To which, the respondent replied stating
that in cases of transfer or real property not
involving monetary consideration, it is certain
that the fair market value or the zonal value of
the property is the basis of the tax
rate.Petitioner filed before the RTC of Marikina a
petition for mandamus and damages against
respondent in hiscapacity as City Treasurer,
among others, praying that respondent be
compelled to perform a ministerial duty
toaccept payment of transfer tax based on the
actual consideration of the transfer and
assignment, citing Section135 of the LGC.
ISSUE:
When can a protest of assessment be availed
of?
RULING:
Under Section 195 of the Local Government
Code, a taxpayer who disagrees with a tax
assessmentmade by a local treasurer may file a
written protest thereof:
SECTION 195. Protest of Assessment
. When the local treasurer or his duly
authorized representative finds thatthe correct
taxes, fees, or charges have not been paid, he
shall issue a notice of assessment stating the
nature of the tax, fee, or charge, the amount of

deficiency, the surcharges, interests and

penalties. Within sixty (60) daysfrom the receipt
of the notice of assessment, the taxpayer may
file
a
written
protest
with
the
local
treasurercontesting the assessment; otherwise,
the assessment shall become final and
executory. The local treasurer shalldecide the
protest within sixty (60) days from the time of
its filing. If the local treasurer finds the protest
to bewholly or partly meritorious, he shall issue
a notice cancelling wholly or partially the
assessment. However, if thelocal treasurer finds
the assessment to be wholly or partly correct,
he shall deny the protest wholly or partly
withnotice to the taxpayer. The taxpayer shall
have thirty (30) days from the receipt of the
denial of the protest orfrom the lapse of the
sixty-day (60) period prescribed herein within
which to appeal with the court of competent
jurisdiction, otherwise the assessment becomes
conclusive and unappealable. That petitioner
protested in writing against the assessment of
tax due and the basis thereof is on record as in
fact it was on that account that respondent sent
him the above-quoted July 15, 2005 letter which
operated as a denialof petitioners written
protest. Petitioner should thus have, following
the earlier above-quoted Section 195 of the
Local Government Code,either appealed the
assessment before the court of competent
jurisdiction[15] or paid the tax and then sought
arefund.

Petitioner did not observe any of these remedies

available to him, however. He instead opted to
file a petitionfor mandamus to compel
respondent to accept payment of transfer tax as
computed by him.
Team Pacific Corporation v. Daza G.R. No.
167732. July 11, 2012.Second Division;
Perez,
J.
Facts:
Team Pacific Corporation (TPC), a domestic
corporation engaged in the business of
assembling
and
exporting
semiconductor
devices, conducts its business at the FTI
Complex in the then Municipality of Taguig. It
appears that since the start of its operations in
1999, TPC had beenpaying local business taxes
assessed at 1/2 rate pursuant to Section 75 (c)
of the Taguig RevenueCode (TRC). When it
renewed its
business license in 2004, however, TPCs
business tax for the first
quarter of the same year was computed by
Josephine Daza, in her capacity as then
Municipal Treasurer of Taguig, by applying the
full value of the rates provided under Section 75
of the TRC,instead of the 1/2 rate provided
under paragraph (c) because, according to her,
Section 75 (c) of the TRC applies only to
exporters of essential commodities

e.g., (1) rice and corn; (2) wheat or

cassavaflour, meat, dairy products, locally
manufactured, processed or preserved food,
sugar, salt and otheragricultural, marine, and
fresh water products, whether in their original
state or not; (3) cooking oiland cooking gas; (4)
laundry soap, detergents, and medicine; (5)
agricultural implements, equipmentand postharvest
facilities,
fertilizers,
pesticides,
insecticides, herbicides and other farm inputs;
(6)poultry feeds and other animal feeds; (7)
school supplies; and (8) cement. Constrained to
pay the assessed business tax on January 19,
2004 in view of its being a precondition for the
renewal of its business permit, TPC filed on the
same day a written protest with Daza, insisting
on the 1/2 rate on which its business tax was
previously assessed. Subsequent to its demand
for the refund and/or issuance of a tax credit for
the sum of P104,054.88 which it considered as
an overpayment of its business taxes for the
same year, TPC filed s Rule 65 petitionfor
certiorari before a Regional Trial Court (RTC).
Issue:
Whether or not TPC availed of the correct
remedy against Dazas illegal assessment when
it
filed its petition for certiorari before the RTC?
Held:
No. The rule is settled that, as a special civil
action, certiorari is available only if the following
essential requisites concur: (1) it must be
directed against a tribunal, board, or officer

exercising judicial or quasi-judicial functions; (2)

the tribunal, board, or officer must have acted
without or inexcess of jurisdiction or with grave
abuse of discretion amounting to lack or excess
of jurisdiction;and, (3) there is no appeal nor
any plain, speedy, and adequate remedy in the
ordinary course of law. Judicial function entails
the power to determine what the law is and
what the legal rights of theparties are, and then
undertakes to determine these questions and
adjudicate upon the rights of theparties. Quasijudicial function, on the other hand, refers to the
action and discretion of publicadministrative
officers or bodies, which are required to
investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from
them as a basis for their official action and
toexercise discretion of a judicial nature.Gauged
from the foregoing definitions, Daza cannot be
said to be performing a judicial orquasijudicial function in assessing TPCs business
tax and/or effectively denying its protest as
thenMunicipal Treasurer of
Taguig. For this reason, Dazas actions are not
the proper subjects of a Rule
65 petition for certiorari which is the
appropriate remedy in cases where a the
tribunal, board, orofficer exercising judicial or
quasi-judicial functions acted without or in
grave abuse of discretionamounting to lack or
excess of jurisdiction and there is no appeal or
any plain, speedy, and adequateremedy in law.
Narrow in scope and inflexible in character,

certiorari is an extraordinary remedy designed

for the correction of errors of jurisdiction and
not errors of judgment. It is likewiseconsidered
mutually exclusive with appeal like the one
provided by Article 195 of the LocalGovernment
Code for a local treasurers denial of or inaction
on a protest.
2nd issue: whether or not, as an exporter of
semiconductor devices, it should be assessed
business taxes at the full rate instead of the
one-half (1/2) rates provided under Section 75
(c) of the Taguig Revenue Code and 143 (c) of
the Local Government Code.
HELD: A taxpayer dissatisfied with a local
treasurers denial of or inaction on his protest
over an assessment has thirty (30) days within
which to appeal to the court of competent
jurisdiction. Under the law, said period is to be
reckoned from the taxpayers receipt of the
denial of his protest or the lapse of the sixty
(60) day period within which the local treasurer
is required to Decide the protest, from the
moment of its filing. This much is clear from
Section 195 of the Local Government Code
Absent any showing of the formal denial of the
protest by Atty. Miranda, then Chief of the
Taguig Business Permit and Licensing Office, we
find that TPCs filing of its petition before the
RTC on 19 April 2004 still timely. Reckoned from
the filing of the letter protest on 19 January
2004, Daza had sixty (60) days or until 19

March 2004 within which to resolve the same in

view of the fact that 2004 was a leap year. From
the lapse of said period, TPC, in turn, had thirty
(30) days or until 18 March 2004 within which to
file its appeal to the RTC. Since the latter date
fell on a Sunday, the RTC correctly ruled that
TPCs filing of its petition on 19 April 2004 was
still within the period prescribed under the
above quoted provision.
G.R. No. 111223

information regarding the presence of allegedly

untaxed vehicles and parts in the premises
owned by a certain Pat Hao located along
Quirino Avenue, Paranaque and Honduras St.,
Makati. After conducting a surveillance of the
two places, respondent Major Jaime Maglipon,
Chief of Operations and Intelligence of the ESS,
recommended the issuance of warrants of
seizure and detention against the articles stored
in the premises.

October 6, 1995

NARCISO O. JAO and BERNARDO M.

EMPEYNADO, petitioners,
vs.
THE HONORABLE OMBUDSMAN CONRADO
M. VASQUEZ, and SINDULFO SEBASTIAN,
JAIME
MAGLIPON;
JOSE
YUCHONGCO;
RICARDO CORONADO; VICTOR BARROS;
DENNIS BANTIGUE; ROY LARA; BENJAMIN
SANTOS;
RODOLFO
GONDA;
ADONIS
REJOSO; DANIEL PENAS; NICANOR BONES;
ABUNDIO JUMAMOY; ARTEMIO CASTILLO;
ANDRESITO ABAYON; RUBEN TAGUBA;
JAIME JAVIER; HERBERT DOLLANO, all with
the Bureau of Customs; JOVY GUTIERREZ
of the Makati police, and 'JOHN DOES',
respondents.
FACTS:
Office of the Director, Enforcement and Security
Services (ESS), Bureau of Customs, received

On August 13, 1990, District Collector of

Customs Titus Villanueva issued the warrants of
seizure and detention.
On the same date, respondent Maglipon
coordinated with the local police substations to
assist them in the execution of the respective
warrants of seizure and detention. Thereafter,
the team searched the two premises.
In Makati, they were barred from entering the
place, but some members of the team were
able to force themselves inside. They were able
to inspect the premises and noted that some
articles were present which were not included in
the list contained in the warrant.. Hence, on
August 15, 1990, amended warrants of seizure
and detention were issued by Villanueva.
On August 25, 1990, customs personnel started
hauling the articles pursuant to the amended
warrants. This prompted petitioners Narciso Jao

and Bernardo Empeynado to file a case for

Injunction and Damages, docketed as Civil Case
No. 90-2382 with prayer for Restraining Order
and Preliminary Injunction before the Regional
Trial Court of Makati Branch 56 on August 27,
1990 against respondents. On the same date,
the trial court issued a Temporary Restraining
Order.
On September 7, 1990, respondents filed a
Motion to Dismiss on the ground that the
Regional Trial Court has no jurisdiction over the
subject matter of the complaint, claiming that it
was the Bureau of Customs that had exclusive
jurisdiction over it.
On November 20, 1990, the trial court denied
respondents' motion to dismiss.
On November 29, 1990, petitioners' application
for preliminary prohibitory and mandatory
injunction was granted conditioned upon the
filing of a one million peso bond.
The Court also prohibited respondents from
seizing, detaining, transporting and selling at
public auction petitioners' vehicles, spare parts,
accessories and other properties located at No.
2663 Honduras St., San Isidro, Makati and at No.
240 Quirino Avenue, Tambo, Paranaque, Metro
Manila. Respondents were further prohibited
from disturbing petitioners' constitutional and
proprietary rights over their properties located

at the aforesaid premises. Lastly, respondents

were ordered to return the seized items and to
render an accounting and inventory thereof.
On December 13, 1990, respondents filed a
motion for reconsideration based on the
following grounds:
a)
the lower court having no jurisdiction over
the subject matter of the complaint, it has no
recourse but to dismiss the same; and
(b) the lower court had no legal authority to
issue an injunction therein.
On
January
3,
1991
the
motion
for
reconsideration was denied. Respondents then
went to the Court of Appeals on the ground that
the judge acted with grave abuse of discretion
in denying their motion to dismiss and in
granting petitioners' application for preliminary
injunction. They argued that the Regional Trial
Court had no jurisdiction over seizure and
forfeiture proceedings, such jurisdiction being
exclusively vested in the Bureau of Customs.
The Court of Appeals set aside the questioned
orders of the trial court and enjoined it from
further proceeding with Civil Case No. 90-2382.
The appellate court also dismissed the said civil
case.

On May 2, 1992, petitioners filed a petition with

this Court to review the decision of the Court of
Appeals docketed as G.R. No. 104604.

purpose of searching smuggled goods found

therein without the consent of the owner
thereof;

As regards G.R. No. 111223, petitioners filed

criminal charges against respondents, other
officers and employees of the Bureau of
Customs and members of the Makati Police
before the Office of the Ombudsman for
Robbery, Violation of Domicile and Violation of
Republic Act No. 3019, docketed as OMB Case
No. 0-90-2027.

That after the search, respondents on August

13, 1990 up to August 25, 1990, this time
clothed with a Warrant of Seizure and
Detention, with the aid of the Makati Police and
several
heavily
armed
men
entered
complainants stockyard located at 2663
Honduras St., Makati, Metro Manila, and pulled
out therefrom several machineries and truck
spare parts without issuing the corresponding
receipts to the complainants to cover all the
items taken.

Respondent Ombudsman summarized the case

before it as follows:
This is an affidavit-complaint filed by the
complainants against the respondents, Officers
and Employees of the Bureau of Customs and
members of the Makati Police allegedly for
violation of Domicile and Robbery defined and
penalized under Articles 128, 293 and 294 of
the Revised Penal Code and for violation of R.A.
3019 committed as follows, to wit:
That on August 11, 1990, after receiving
intelligence information of the presence of
smuggled goods, some of the respondents
headed by Jaime Maglipon posed themselves as
Meralco inspectors and entered complainants'
stockyards and residence located at 2663
Honduras Street, Makati, Metro Manila and at
240 Quirino Avenue, Tambo Paranaque for the

Respondents claimed in their consolidated and

verified comment that they are not liable for
violation of domicile because the places entered
and searched by them appear not to be the
residences of the complainants but only their
warehouses. As proof of this allegation, the
respondents presented the pictures of said
warehouses, which are attached to their
comment as Annexes "6", "6-A" to "6-C" and the
Sheriff's return likewise attached to their
verified comments as Annex "7". According to
the respondents, a charge for violation of
domicile may apply only if the place entered
into against the will of the owner is used
exclusively for dwelling. In the case at bar, the
place entered into was used more of a
warehouse than a dwelling place.

Further respondents also claimed not liable for

robbery (sic) because the complainants appear
not to be the owners of the properties taken.
Moreover, the respondents claimed that the
taking is lawful because the same proceeded
from a warrant of Seizures and Detention; there
was no violence or intimidation of person
committed and that there was no intent to gain
on the part of the respondents, the purpose of
the seizure of the subject goods being to collect
customs duties and taxes due the government.
Lastly, the respondents disclaimed liability for a
violation of R.A. 3019 because they deny having
demanded from the complainants the sum of
P100,000.00.
Instead
according
to
the
respondents, it was the complainants who
offered them P70,000.00 to delay the hauling of
the seized goods as attested to in the joint
affidavit of CPSGT, Ricardo Coronado and
Dennis Bantequi.
A preliminary investigation was conducted and
on May 31, 1991, another hearing was held to
give the parties a chance to submit further
evidence to support their respective claims.
On March 15, 1993 respondent Ombudsman
issued a Resolution recommending that the
case be dismissed for lack of merit.

On May 17, 1993, petitioners moved for the

reconsideration of said resolution, but the same
was denied on July 8, 1993.
Hence, the petition in G.R. No. 111223, which
was filed on August 16, 1993.
In G.R. No. 111223, petitioners claim that
respondent Ombudsman gravely abused his
discretion in dismissing the case and in denying
petitioners' motion for reconsideration.
They allege that respondent Ombudsman
ignored evidence incriminatory to the raiders;
that the receipts did not tally with petitioners'
receipts nor with the Commission on Audit's
inventory; that the respondents are guilty of
robbery
and
of
violating
petitioners'
constitutional right against violation of domicile.
For these reasons, petitioners pray that the
Ombudsman's resolution be reversed and that
the Court direct the Ombudsman to cause the
filing of criminal charges as may be warranted
against respondents.
We find the petition in G.R. No. 111223 devoid
of merit.
The Court, recognizing the investigatory and
prosecutory powers granted by the Constitution
to the Office of the Ombudsman and for reasons
of practicality, declared, in an En Banc
resolution dated August 30, 1993, issued in G.R.

Nos. 103446-47 3 that the Court will not

interfere nor pass upon findings of public
respondent Ombudsman to avoid its being
hampered by innumerable petitions assailing
the dismissal of investigatory proceedings
conducted by the Office of the Ombudsman with
regard to complaints filed before it, and that it
will not review the exercise of discretion on the
part of the fiscals or prosecuting attorneys each
time they decide to file an information in court
or dismiss a complaint by a private
complainant. The dismissal by the Ombudsman
of petitioners' complaint, therefore, stands.

There is no question that Regional Trial Courts

are devoid of any competence to pass upon the
validity or regularity of seizure and forfeiture
proceedings conducted by the Bureau of
Customs and to enjoin or otherwise interfere
with these proceedings 4 The Collector of
Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear
and determine all questions touching on the
seizure and forfeiture of dutiable goods. The
Regional Trial Courts are precluded from
assuming cognizance over such matters even
through petitions of certiorari, prohibition or
mandamus. 5

We will now discuss G.R. No. 104604.

Petitioners contend: (1) that the Court of
Appeals erred in not holding that the Collector
of Customs could no longer order the seizure for
the second time of items previously seized and
released after amnesty payments of duties and
taxes; (2) that the Bureau of Customs has lost
jurisdiction to order the seizure of the items
because the importation had ceased; (3) that
the seizure of the items deprived the petitioners
of their properties without due process of law;
and (4) that there is no need to exhaust
administrative remedies.
HELD:
COURT RULED IN FAVOR OF RESPONDENTS
We find no merit in petitioners' contentions.

It is likewise well-settled that the provisions of

the Tariff and Customs Code and that of
Republic Act No. 1125, as amended, otherwise
known as "An Act Creating the Court of Tax
Appeals," specify the proper fora and procedure
for the ventilation of any legal objections or
issues raised concerning these proceedings.
Thus, actions of the Collector of Customs are
appealable to the Commissioner of Customs,
whose decision, in turn, is subject to the
exclusive appellate jurisdiction of the Court of
Tax Appeals and from there to the Court of
Appeals.
The rule that Regional Trial Courts have no
review powers over such proceedings is
anchored upon the policy of placing no
unnecessary hindrance on the government's

drive, not only to prevent smuggling and other

frauds upon Customs, but more importantly, to
render effective and efficient the collection of
import and export duties due the State, which
enables the government to carry out the
functions it has been instituted to perform. 6
Even if the seizure by the Collector of Customs
were illegal, which has yet to be proven, we
have said that such act does not deprive the
Bureau of Customs of jurisdiction thereon.
Respondents assert that respondent Judge could
entertain the replevin suit as the seizure is
illegal, allegedly because the warrant issued is
invalid and the seizing officer likewise was
devoid of authority. This is to lose sight of the
distinction between the existence of the power
and the regularity of the proceeding taken
under it. The governmental agency concerned,
the Bureau of Customs, is vested with exclusive
authority. Even if it be assumed that in the
exercise of such exclusive competence a taint of
illegality may be correctly imputed, the most
that can be said is that under certain
circumstances the grave abuse of discretion
conferred may oust it of such jurisdiction. It
does not mean however that correspondingly a
court of first instance is vested with
competence when clearly in the light of the
decisions the law has not seen fit to do so. 7

The allegations of petitioners regarding the

propriety of the seizure should properly be
ventilated before the Collector of Customs. We
have had occasion to declare:
The Collector of Customs when sitting in
forfeiture proceedings constitutes a tribunal
expressly vested by law with jurisdiction to hear
and determine the subject matter of such
proceedings without any interference from the
Court of First Instance. (Auyong Hian v. Court of
Tax Appeals, et al., 19 SCRA 10). The Collector
of Customs of Sual-Dagupan in Seizure
Identification No. 14-F-72 constituted itself as a
tribunal to hear and determine among other
things, the question of whether or not the M/V
Lucky Star I was seized within the territorial
waters of the Philippines. If the private
respondents believe that the seizure was made
outside the territorial jurisdiction of the
Philippines, it should raise the same as a
defense before the Collector of Customs and if
not satisfied, follow the correct appellate
procedures. A separate action before the Court
of First Instance is not the remedy. 8
WHEREFORE, the petitions in G.R. No. 104604
and in G.R. No. 111223 are hereby DISMISSED
for lack of merit.
SO ORDERED.

Feliciano,
Padilla,
Regalado,
Davide,
Jr.,
Bellosillo, Puno, Vitug, Kapunan, Mendoza,
Francisco and Hermosisima, Jr., JJ., concur.
SBMA v. RODRIGUEZ ET. AL
SHORT DIGEST:
FACTS: On September 29, 2001, a shipment
described as agricultural product arrived at
Subic Bay Freeport Zone. The BOC issued a
Memorandum stating that upon examination the
shipment was found to contain rice. The
representative of the importer then stated that
there was a misshipment and manifested
willingness to pay appropriate duties and taxes.
Later on, the BOC then issued a Hold Order.
Despite several certifications for its clearance,
Petitioner SBMA refused to allow the release of
the rice shipment. Hence, the respondentimporters filed with RTC Olongapo a complaint
for Injunction and Damages against SBMA.
ISSUE: Did the RTC have jurisdiction over the
case?
HELD: NO. The Collector of Customs has
exclusive jurisdiction over seizure and forfeiture
proceedings and the regular courts cannot
interfere nor can it enjoin these proceedings.
This is the rule from the moment the imported
goods are in the possession or control of the
Customs authorities even if no warrant for
seizure or detention had previously been issued.

The actions of the BOC are then only appealed

to the CTA. The Court also said that this rule,
which is anchored upon the policy of placing no
unnecessary hindrance on the governments
drive to prevent smuggling and fraud a nd to
collect correct duties, is absolute.
DETAILED DIGEST:
FACTS:
1. A cargo shipment described as agricultural
product and valued at US$6,000 arrived at
the Port of Subic. On the basis of its declared
value, the shipment was assessed customs
duties and taxes totaling P57,101 which were
paid by respondent WIRA, the shipments
consignee.
2. BOC Subic Port later on issued a
Memorandum addressed to the BOC Subic
Port District Collector, stating that upon
examination, the subject shipment was found
to contain rice.
3. The Memorandum further stated as follows:
that the importer claimed there was a
misshipment since it also had a pending
order for rice; that the warehousing entry
was amended to reflect the change in
description from agricultural product to
rice; that the shipment, as a warehoused
cargo inside the freeport zone, was duty and
tax free, and was not recommended for any
imposition of penalty and surcharge; that the
consumption entry was changed to reflect a
shipment of rice; and that the consumption

4.

5.

6.

7.

entry, together with supporting documents

belatedly received by the importer, was
submitted to the bank although not yet filed
with the BOC.
Hilda
Bacani
(respondents
authorized
representative) wrote BOC Subic Port District
Collector Billy Bibit, claiming that she was the
representative of Metro Star Rice Mill (Metro
Star), the importer of the subject cargo. She
stated that there was a misshipment of
cargo which actually contained rice, and that
Metro Star is an authorized importer of rice as
provided in the permits issued by the
National Food Authority (NFA).
Bacani
requested that the misshipment be
upgraded from agricultural product to a
shipment of rice, and at the same time
manifested willingness to pay the appropriate
duties and taxes.
The following day, the BOC issued Hold
directing BOC Subic Port officers to (1) hold
the delivery of the shipment, and (2) to cause
its transfer to the security warehouse.
Respondent WIRA, as the consignee of the
shipment, paid the amount of P259,874 to
the BOC representing additional duties and
taxes for the upgraded shipment.
BOC Commissioner Titus Villanueva issued a
directive stating as follows: Accordingly,
the same may be released subject to
payment of duties and taxes based on
an upgraded value as provided for by
the
National
Food
Authority
at

$153.00/MT and compliance with all

existing rules and regulations.
8. In accordance with the shipment upgrade,
respondent WIRA paid a further amount of
P206,212 as customs duties and taxes.
9. BOC Subic Port issued a certification/letter
addressed to Mr. Augusto Canlas, General
Manager of the Seaport Department, stating
that the Collecting Officer validated a
revenue of Php 523,187.00 from abovementioned importation. And a Gate Pass
was issued with signature of Mr. Percito
V. Lozada, Chief Assessment in behalf of
the District Collector Billy C. Bibit.
10. Despite the above certification/letter,
petitioner SBMA refused to allow the release
of the rice shipment.
11. Hence, respondents filed with the RTC
Olongapo a complaint for Injunction and
Damages with prayer for issuance of Writ of
Preliminary
Prohibitory
and
Mandatory
Injunction and/or Temporary Restraining
Order against petitioner SBMA and Augusto L.
Canlas.
RTC: Order was issued by the Executive Judge
where granted plaintiffs/petitioners application
for injunctive relief. The following day, Sheriffs
went back to defendants/respondents' office to
determine whether or not the TRO issued by
Branch 72 and served by them was followed.
They
were
however,
met
by
defendants/respondents Attys. Abella and

Katalbas, in the office of defendant/respondent

Canlas, who after much discussion, refused to
honor the TRO issued by Branch 72 alleging
among other[s], that said Order was illegal. On
the same day also, plaintiffs/petitionersmovants filed in the instant case a verified
indirect
contempt
charge.
Defendants/respondents filed a manifestation
with formal offer of evidence in the indirect
contempt case essentially alleging that it is the
Bureau of Customs that has jurisdiction over
this case. Therefore, the indirect contempt case
has no legal leg. RTC issued an Order on the
indirect contempt case finding all of the
defendants/respondents
guilty
of
indirect
contempt of court.
RTC issued another Order considering the
pending incidents in the injunction case. The
RTC held that there should be prior
determination by the BOC on whether the 2,000
bags of imported rice were smuggled.
CA: CA rendered a Decision dismissing the
petition for lack of merit and affirming the
Orders issued by the RTC.
ISSUE: Whether the CA erred in affirming the
RTC Orders - YES
HELD: We find the appeal meritorious.
1. As a rule, actions for injunction and damages

lie within the jurisdiction of the RTC pursuant

to Section 19 of BP 129.
2. An action for injunction is a suit which has for
its purpose the enjoinment of the defendant,
perpetually or for a particular time, from the
commission or continuance of a specific act,
or his compulsion to continue performance of
a particular act. It has an independent
existence, and is distinct from the ancillary
remedy of preliminary injunction which
cannot exist except only as a part or an
incident of an independent action or
proceeding. In an action for injunction, the
auxiliary remedy of preliminary injunction,
prohibitory or mandatory, may issue.
3. Until the propriety of granting an injunction,
temporary or perpetual, is determined, the
court (i.e., the RTC in this case) may issue a
temporary restraining order. A TRO is an
interlocutory order or writ issued by the court
as a restraint on the defendant until the
propriety of granting an injunction can be
determined, thus going no further in its
operation than to preserve the status quo
until that determination. A TRO is not
intended to operate as an injunction
pendente lite, and should not in effect
determine the issues involved before the
parties can have their day in court.
4. Petitioner alleges that the RTC of Olongapo
City has no jurisdiction over the action for
injunction as said action is within the
exclusive original jurisdiction of the BOC

pursuant to Section 602 of Republic Act No.

1937, otherwise known as the Tariff and
Customs Code of the Philippines. Petitioner
contends that the imported 2,000 bags of rice
were in the actual physical control and
possession of the BOC as early as 25 October
2001, by virtue of the BOC Subic Port Hold
Order of even date, and of the BOC Warrant
of Seizure and Detention dated 22 May 2002.
As such, the BOC had acquired exclusive
original
jurisdiction
over
the
subject
shipment, to the exclusion of the RTC.
a. We agree with petitioner.
b. It is well settled that the Collector of
Customs
has
exclusive
jurisdiction over seizure and
forfeiture proceedings, and regular
courts cannot interfere with his
exercise thereof or stifle or put it at
naught. The Collector of Customs
sitting in seizure and forfeiture
proceedings has exclusive jurisdiction
to hear and determine all questions
touching on the seizure and forfeiture
of dutiable goods.
5. The rule is that from the moment
imported goods are actually in the
possession or control of the Customs
authorities, even if no warrant for seizure or
detention had previously been issued by the
Collector of Customs in connection with the
seizure and forfeiture proceedings, the BOC
acquires exclusive jurisdiction over such

imported goods for the purpose of

enforcing the customs laws, subject to
appeal to the Court of Tax Appeals
whose decisions are appealable to this
Court.
6. Here, the BOC Subic Port issued a Hold Order
against the subject rice shipment. However,
BOC Commissioner Titus Villanueva issued a
directive to the BOC District Collector stating
that the shipment may be released subject
to payment of duties and taxes based on an
upgraded value x x x and compliance with all
existing rules and regulations. Accordingly,
respondents made additional payments of
customs duties and taxes for the upgraded
shipment. Consequently, on 4 December
2001, the Officer-in-Charge of the BOC Subic
Port Cash Division issued a certification/letter
addressed to Augusto Canlas, the General
Manager of the Subic Seaport Department,
stating that respondents have already paid
the customs taxes and duties due on the
shipment, and a Gate Pass was issued on
December 3, 2001 with signature of Mr.
Percito V. Lozada, Chief Assessment (sic) in
behalf of the District Collector Billy C.
Bibit.[35] Thus, the Hold Order previously
issued by the BOC[36] had been superseded,
and made ineffective, by the succeeding BOC
issuances. However, BOC Subic Port District
Collector Felipe A. Bartolome subsequently
issued a Warrant of Seizure and Detention
dated 22 May 2002 against the subject rice

shipment. The warrant was issued upon

recommendation made by Atty. Baltazar
Morales of the Customs Intelligence and
Investigation Service (CIIS) on 29 April 2002.
[37]
7. With the issuance of the warrant of seizure
and detention, exclusive jurisdiction over the
subject shipment was regained by the BOC.
8. We note that the appellate court found
suspicious the existence of the warrant of
seizure and detention at the time of filing of
the injunction and damages case with the
RTC by respondents. The CA pointed out that
petitioner did not mention the existence of
the warrant in its Answer and only mentioned
the warrant in its Consolidated Motion to
Dismiss [the Complaint for Injunction and
Damages, and the Petition for Indirect
Contempt], filed on 1 August 2002.
9. We do not agree with the appellate court.
Petitioner's apparent neglect to mention the
warrant of seizure and detention in its Answer
is insufficient to cast doubt on the existence
of said warrant.
RE INDIRECT CONTEMPT
10. Respondents filed a case for indirect
contempt against Augusto L. Canlas, Atty.
Francisco A. Abella, Jr., and Atty. Rizal V.
Katalbas, Jr. for allegedly defying the TRO
issued by the RTC in connection with the
complaint for injunction and damages
previously filed by respondents.

11. Contempt constitutes disobedience to the

court by setting up an opposition to its
authority, justice and dignity. There are two
kinds of contempt punishable by law: direct
contempt and indirect contempt.
12. When the TRO issued by the RTC was
served upon the SBMA officers on 13 June
2002, there was already an existing warrant
of seizure and detention (dated 22 May 2002)
issued by the BOC against the subject rice
shipment. Thus, as far as the SBMA officers
were concerned, exclusive jurisdiction over
the subject shipment remained with the BOC,
and the RTC had no jurisdiction over cases
involving said shipment. Consequently, the
SBMA officers refused to comply with the TRO
issued by the RTC.
13. Considering the foregoing circumstances,
we believe that the SBMA officers may be
considered to have acted in good faith when
they refused to follow the TRO issued by the
RTC.
Accordingly, these SBMA officers
should not be held accountable for their acts
which were done in good faith and not
without legal basis. Thus, we hold that the
RTC Order which found the SBMA officers
guilty of
indirect contempt should be
invalidated.
14. Finally, the RTC stated in its Order that
based on the records, there is a pending
case with the Bureau of Customs District XIII,
Port of Subic, Olongapo City, and involving
the same 2,000 bags of imported rice that is

also the subject matter of the case herein.

The existence and pendency of said case
before the Bureau of Customs have in fact
been admitted by the parties.
RE DIRECTIVE ON BOC TO RESOLVE SEIZURE
CASE:
The RTC then proceeded to order the
suspension of court proceedings, and directed
the BOC Subic Port Chief of the Law Division and
Deputy Collector for Administration, Atty. Titus
Sangil, to resolve the seizure case and submit to
the RTC. We find the issuance of the RTC Order
improper. The pendency of the BOC seizure
proceedings which was made known to the RTC
through petitioner's consolidated motion to
dismiss should have prompted said court to
dismiss the case before it. As previously
discussed, the BOC has exclusive original
jurisdiction over seizure cases under
Section 602 of the Tariff and Customs
Code. The rule that the RTC must defer to the
exclusive original jurisdiction of the BOC in
cases involving seizure and forfeiture of goods
is absolute. Thus, the RTC had no jurisdiction to
issue its Order dated 27 November 2002.
DISPOSITIVE: WHEREFORE, we GRANT the
petition. We REVERSE the Court of Appeals
Decision dated 20 June 2003 and Resolution
dated 8 October 2003 in CA-G.R. SP No. 74989.
We declare VOID the Regional Trial Court Orders

dated 21 November 2002 and 27 November

2002.
HON. JUAN PONCE ENRILE, Commissioner
of Customs and LT. GENERAL PELAGIO A.
CRUZ, (Ret.) Chairman, Anti-Smuggling
Action Center (ASAC), petitioners,
vs.
ANDRES M. VINUYA and HON. WALFRIDO
DE LOS ANGELES, presiding judge of
Branch IV, Court of First Instance of Rizal
(sitting at Quezon City), respondents.
Upon the application of the ASAC, then Collector
of Customs of the Port of Manila issued a
warrant of seizure and detention against the
Cadillac Car herein.
Owner-claimant is Rodolfo Ceadoza. Taxes and
duties had not been paid
Warrant was served and enforced, even before a
complaint for replevin was filed against Judge
de los Angeles (respondent judge)
The circumstances for failure to pay were
alleged in the petition: INFORMAL ENTRY AND
CERTIFICATE of payment was for a 1961 Fiat car,
and not the Cadillac in dispute. Also, the person
who paid taxes was Pablo Cruz, not a party
herein

 Ceadoza is the predecessor in interest of

herein respondent Andres Vinuya
Claiming to be aggrieved by such seizure,
Vinuya filed a complaint for replevin in the sala
of Judge. After filing a 60,000 bond, Judge
issued an ex-parte order to a special sheriff to
take possession of the Cadillac.
On the very same day, Judge gave due course
to the replevin complaint and required
petitioners to file an answer
Petitioners filed MTD as well as to lift ex-parte
order. For MTD, petitioners claim the fact that
forfeiture proceedings had already been
instituted before the COC who has sole
jurisdiction to determine questions affecting
disposition of property under seizure
Judge denied MTD, claiminf that such is without
merit.
A preliminary injunction was issued. In the
answer filed by respondents, they admitted that
the COC issued a warrant of seizure and
detention against the Cadillac, but they denied
that the registration covered the card was
illegally secured. Vinuya allegedly relied on a
public document which was valid and regular on
its face.

As their defense, they posture that the warrant

is invalid and the seizing officer was devoid of
authority. Hence, they assert that an illegal
seizure cannot confer jurisdiction on the COC.
ISSUE: W Judge de los Angeles has jurisdiction
to entertain a replevin complaint filed by Vinuya
for recovery of a Cadillac car which is subject of
a seizure and forfeiture proceeding? NO
1. The prevailing DOCTRINE is that the
exclusive jurisdiction in seizure and
forfeiture cases vested in the Collector of
Customs prevents a CFI from assuming
cognizance over such a matter. (Pacis v.
Averia)
The
Collector's
decision
is
appealable
to
the
Commissioner
of
Customs whose decision is in turn
appealable to the CTA. An aggrieved party
may appeal from a judgment of the Court
of Tax Appeals directly to this Court.
On the other hand, 44(c) of the Judiciary Act of
1948 lodges in the CFI original jurisdiction in all
cases in which the value of the property in
controversy amounts to more than ten thousand
pesos.
Such cannot be applicable to Tax cases,
because when exercised in an action for
recovery of personal property which is a
subject of a forfeiture proceeding in the
Bureau of Customs; such will encroach

upon, and to render futile, the jurisdiction

of the Collector of Customs in seizure and
forfeiture proceedings.
The judicial recourse of the property
owner is not in the Court of First Instance
but in the Court of Tax Appeals, and only
after exhausting administrative remedies
in the Bureau of Customs." 11
2. Respondents, however, notwithstanding the
compelling force of the above doctrines, would
assert that respondent Judge could entertain the
replevin suit as the seizure is illegal, allegedly
because the warrant issued is invalid and the
seizing officer likewise was devoid of authority.
This is to lose sight of the distinction, as earlier
made mention of, between the existence of the
power and the regularity of the proceeding
taken under it. The governmental agency
concerned, the Bureau of Customs, is
vested with exclusive authority. Even if it be
assumed that in the exercise of such exclusive
competence a taint of illegality may be correctly
imputed, the most that can be said is that
under certain circumstances the grave
abuse of discretion conferred may oust it
of such jurisdiction. It does not mean
however that correspondingly a court of
first instance is vested with competence
when clearly in the light of the above
decisions the law has not seen fit to do so.
The proceeding before the Collector of Customs

is not final. An appeal lies to the

Commissioner of Customs and thereafter
to the Court of Tax Appeals. It may even
reach this Court through the appropriate
petition for review. The proper ventilation of
the legal issues raised is thus indicated.
Certainly a court of first instance is not therein
included. It is devoid of jurisdiction.
WHEREFORE, the writ of certiorari prayed for is
GRANTED, respondent Judge being clearly
without jurisdiction. As a result whereof, the
orders complained of are set aside and declared
to be without any force or effect. The writ of
prohibition is likewise granted restraining
respondent Judge from otherwise proceeding
and continuing in any manner whatsoever in
said Civil Case No. Q-12025 pending in his sala
which he is required to dismiss. The writ of
preliminary injunction issued by this Court is
made permanent.
G.R. No. L-24348

July 30, 1968

FELIClDAD VIERNEZA, petitioner,

vs.
THE
COMMISSIONER
OF
CUSTOMS,
respondent.
Juan T. David for petitioner.
Office of the Solicitor General for respondent.
REYES, J.B.L., J.:

An appeal from the decision of the Court of Tax

Appeals (C.T.A. Case No. 762) sustaining a
decision of respondent Commissioner of
Customs forfeiting, in favor of the Government,
760 cartons of Chesterfield and Camel
cigarettes with blue seals but without internal
revenue strip stamps.
Reproduced below are the undisputed findings
of facts in the decision appealed from:
1wph1.t
At about 2:00 a.m. on September 16, 1957 the
M/V "Legaspi" a coastwise vessel coming from
Jolo docked at the port of Cebu on her way to
Manila. Acting upon a confidential telegraphic
report from an informer in Jolo that the said
vessel was carrying a substantial quantity of
smuggled foreign cigarettes, the Customs
authorities of the port of Cebu conducted a
search of the vessel which eventually led to the
discovery of eight cases containing SIX
HUNDRED FIFTY (650) CARTONS of Chesterfield
cigarettes and ONE HUNDRED TEN (110)
CARTONS of Camel cigarettes without the
required Internal Revenue strip stamps. Upon
investigation it was also discovered that the
subject merchandise was covered by Bill of
Lading No. 24-A (Exhibit B) with "personal
belongings"
as
its
declaration
and
correspondingly entered into the manifest of the
vessel likewise with "personal belongings" as

the noted description, and with Sultan Pula of

Jolo as the consignor and a certain Carlos Valdez
as the consignee in Manila. Upon further
investigation, however, it was found that a
woman passenger was accompanying the
subject merchandise appearing later to be Mrs.
Felicidad Vierneza, the present claimant, who all
the while holds the bill of lading. It should be
noted that when Mrs. Vierneza was questioned
during the course of the search she disclaimed
under oath (Exhibit H) ownership of the
merchandise.
Believing that there is a strong evidence of
violations of Customs laws, the Collector of
Customs of Cebu seized the merchandise and
instituted the forfeiture proceedings for violation
of Section 2530 (f), (g) and (m-4) of the Tariff
and Customs Code of the Philippines and
Section 174 of the Internal Revenue Code. After
complying with the procedural requirement, of
the law, the Collector of Customs of Cebu
conducted a hearing of the case ... (and) on
February 5, 1958, ... rendered his decision
forfeiting the subject merchandise in favor of
the Government ... (pp. 42-43, Customs
records.)
The claimant of the merchandise, petitioner
herein, appealed in due time from the decision
of the Collector of Customs of Cebu to the
Commissioner of Customs who affirmed the
decision of the Collector, with the modification

that the forfeiture was sustained, among others,

under paragraph (m-1) of Section 2530 of the
Tariff and Customs Code instead of under
paragraph (m-4) of the same section. ...

seized and libeled for alleged violation of

particular provisions of law can not be legally
forfeited for violation of any other provision of
law.

Elevated to the Court of Tax Appeals, the

decision of respondent Commissioner of
Customs was affirmed, the court "(f)inding that
the Collector of Customs of Cebu had
jurisdiction to order the seizure and forfeiture of
said cigarettes and that the forfeiture of the
same is in accordance with Section 2530 (f) of
the Tariff and Customs Code". Thus, petitioner,
who claimed to have merely purchased the
cigarettes in the open market in Jolo, now turns
to us for relief, advancing the following
assignment of errors:
ISSUE/S:
1. The Court of Tax Appeals erred in affirming
the decision of the respondent finding that the
Collector of Customs for the port of Cebu acted
with
jurisdiction
in
instituting
seizure
proceedings against the merchandise herein
involved.

All three assigned errors are untenable.

2. The Court of Tax Appeals erred in affirming

the decision of the respondent finding that the
merchandise involved are liable to the penalty
of forfeiture (under Section 2530 (f) of the Tariff
and Customs Code).
3. The Court of Tax Appeals erred in not finding
that the merchandise involved which were

1. Petitioner argues that the Collector of

Customs of Jolo, who has "jurisdiction over all
matters arising from the enforcement of tariff
and customs laws within his collection district",
as provided for in Section 703 of the Tariff and
Customs Code, is exclusively authorized to
proceed against the cigarettes in question
inasmuch as the smuggling was allegedly
perpetrated in his collection district. Hence,
petitioner concludes that the seizure and
forfeiture thereof by the Collector of Customs of
Cebu is irregular and illegal for lack of
jurisdiction.
We do not agree. First, because Section 703, on
which petitioner's conclusion is premised, is
legally non-existent, the same having been
vetoed by the President.1 Secondly, the Tariff
and Customs Code clearly empowers the
Bureau of Customs to prevent and suppress
smuggling and other frauds upon the Customs
[Sec. 602 (b)] over all seas within the
jurisdiction of the Philippines and over all
coasts, ports, airports, harbors, bays, rivers and
inland waters navigable from the sea and, in
case of "hot pursuit", even beyond the maritime

zone (Sec. 603). For the due enforcement of this

function, a Collector, among others, is
authorized to search and seize (Sec. 2203), at
any place within the jurisdiction of the said
Bureau (Sec. 2204, sec. par.), any vessel,
aircraft, cargo, article, animal or other movable
property when the same is subject to forfeiture
or liable for any fine imposed under customs
and tariff laws (Sec. 2205). It is of no moment
where the introduction of the property subject
to forfeiture took place. For, to our mind, "(i)t is
the right of an officer of the customs to seize
goods which are suspected to have been
introduced into the country in violation of the
revenue laws not only in his own district, but
also in any other district than his own". [Taylor
vs. U.S., 44 U.S. (3 How.) 197, 11 L. ed. 559].
Any other construction of the Tariff and Customs
Code, such as the one proposed by petitioner,
would virtually place the Collector of Customs in
a straitjacket and render inutile his police power
of search and seizure, thereby frustrating
effective enforcement of the measures provided
in the Code to prevent and suppress smuggling
and other frauds upon the Customs. This we can
not sanction by subscribing to petitioner's
conclusion. The Code, as a revenue law, is to be
construed to carry out the intention of Congress
in enacting it and as would most effectually
accomplish its objects (15 Am. Jur. 304).
Petitioner also attacks the jurisdiction of the
Collector of Customs of Cebu on the ground that

the forfeiture of the cigarettes is not in

accordance with Section 2531 of the Code, as
the same were, at the time of seizure, no longer
in the custody and control of the Bureau of
Customs nor in the hands, or subject to control,
of the importer, original owner, consignee,
agent or person with knowledge that the same
were imported contrary to law.
Again, we disagree. The forfeiture is effected
precisely in accordance with Section 2531 aforecited, which plainly provides "that forfeiture
shall be effected when and while the article is in
the custody or within the jurisdiction of the
customs authority ... or in the hands or subject
to the control of ... some person who shall
receive, conceal, buy, sell or transport the same
... with knowledge that the article was
imported ... contrary to law" (Emphasis
supplied). There can be no question that the
cigarettes involved were seized and forfeited at
the port of Cebu which is within the jurisdiction
of the Bureau of Customs and, as will be shown
later, while the cigarettes were subject to the
control of petitioner, who bought, concealed,
and transported the same aboard the M/V
"Legaspi" with knowledge that they were
imported contrary to law. Besides, it is a settled
jurisprudence that forfeiture proceedings are in
the nature of proceedings in rem wherein the
jurisdiction to proceed against the res is vested
in the court of the district where the same is
found or seized (25 C.J.S. 572). Therefore, the

Collector of Customs of Cebu, who has the

authority under the Tariff and Customs Code to
institute
forfeiture
proceedings,
lawfully
assumed jurisdiction to forfeit, in favor of the
Government, the smuggled cigarettes found
and seized within his collection district.
2. Petitioner next argues that the cigarettes in
question are not merchandise of prohibited
importation inasmuch as she had purchased the
same in the open market in Jolo; which goes to
show that she is not the importer, original
owner, consignee, agent or person who effected
the importation thereof; and that in the absence
of evidence that she bought the same with
knowledge that they were imported contrary to
law in accordance with Section 2531, as the lack
of internal revenue stamps is not evidence of
illegal importation much less her knowledge
thereof, the said cigarettes are not subject to
forfeiture under Section 2530 (f) of the Code.
This is not the first time that this question has
been posed before us. In the case of Gigare vs.
Commissioner of Customs (G.R. No. L-21376,
August 29, 1966, 17 S.C.R.A. 1001), we
disposed of the same by holding that "(s)ince,
admittedly, the internal revenue tax on the
cigarettes indispute has not been paid, it is
clear that said cigarettes fall within the category
of "merchandise of prohibited importation," the
importation of which is contrary to law and may
justify its forfeiture, as provided in Sections

1363 (f) and 1364 of the Revised Administrative

Code," which correspond to Sections 2530 (f)
and 2531, respectively, of the Tariff and
Customs Code. "Moreover, the blue seals affixed
on said commodities prove satisfactorily that
they
are
foreign
products.
Again,
the
importation thereof into the Philippines is
attested by the presence of said products within
our
jurisdiction"
(Ibid.)
And
concerning
petitioner's knowledge of these facts, the
following disquisition by the Court of Tax
Appeals, lengthily quoted in the Gigare case,
finds significant application in the case at bar:
Were the cigarettes in question illegally
imported into the Philippines? We are of the
opinion that, the Commissioner of Customs
should be sustained in his finding that the
cigarettes in question were imported illegally.
The absence of Philippine internal revenue strip
stamps on cigarettes indicates that they are
either manufactured clandestinely within the
Philippines or imported illegally into the country.
In the case at bar, concomitant circumstances
militate against the clandestine manufacture
within the Philippines of the cigarettes. The
affixture of blue seals on the packs of the
cigarettes, the wrappers, the purchase of the
cigarettes in the open market of Jolo, a place
where American and other foreign made
cigarettes
are,
of
common
knowledge,
frequently smuggled from Borneo ... and the
failure of petitioner to show that the cigarettes

in question were locally manufactured rule out

the possibility that the cigarettes in question
were
manufactured
in
the
Philippines.
Consequently, we are constrained to conclude
that these cigarettes were foreign (American)
made. They were merchandise of prohibited
importation, the importation of which was
contrary to law, and should be forfeited under
Section 1363 (f) of the Revised Administrative
Code.
xxx

xxx

xxx

The fact that petitioner is merely a buyer of the

cigarettes in the open market of Jolo does not
render the cigarrettes immune from the penalty
of forfeiture. This is so because forfeiture
proceedings are instituted against the res
(cigarettes) ... and, by express provision of
Section 1364 of the Revised Administrative
Code, the forfeiture shall occur while the
merchandise is in the hands or subject to
control of some person who shall receive,
conceal, buy, sell, or transport the same with
knowledge that the merchandise was imported
contrary to law. Petitioner cannot but be
charged with the knowledge that the cigarettes
in question were imported contrary to law, for if
it were otherwise, why were these cigarettes
concealed on board the vessel ... ? Why did she
deny ownership over said cigarettes? For what
plausible reason was she afraid of detention?
What impelled her to believe that she would be

detained by the customs authorities? To uphold

the claim of petitioner and forego the forfeiture
would be giving a chance to accessories after
the fact of smugglers of foreign cigarettes to ply
their trade with impunity and with sanction of
the courts. What the executive department
could not curb, that is rampant smuggling of
foreign cigarettes, the courts should not tolerate
...
3. Petitioner finally contends that the decision of
the Commissioner of Customs libeling and
forfeiting the cigarettes involved in the present
case for violation of Section 2530 (m-1) of the
Tariff and Customs Code is unconstitutional, in
view of the fact that she was allegedly not
afforded an opportunity to defend the cigarettes
against such charge, said section not being one
of the original grounds cited by the Collector of
Customs of Cebu in forfeiting the same.
The contention has no merit. Certainly, the
appellate power of the Commissioner of
Customs to review seizure and protest cases is
not limited to a review of the issues raised on
appeal. He may affirm, modify or reverse the
decision of the Collector (Section 2313) on other
questions provided that his findings and
conclusions are, as in the case at bar, supported
by evidence. It is of no consequence whatsoever
what were the original grounds of the seizure
and forfeiture if, in point of fact, the goods are
by law subject to forfeiture [Wood vs. U.S., 16

Pet. (U.S.) 342, 10 L. ed. 987]. As there is

evidence on record showing that the cigarettes
in question were imported and introduced into
the country without passing through a customs
house, the same may be forfeited under said
Section
2530
(m-1)
of
the
Code,
notwithstanding that it is not one of the original
charges. As we held in Que Po Lay vs. Central
Bank, et al. (104 Phil. 853), what counts is not
the designation of the particular section of the
law that has been violated but the description of
the violation in the seizure report.2
WHEREFORE, the decision appealed from is
hereby affirmed, with costs against petitioner.
1wph1.t

seized logs forfeited in favor of the government

to be disposed of according to law.
Instead of appealing the Collectors decision to
the Commissioner of Customs, the private
respondents filed an original petition for
certiorari with the Davao CFI. Respondent
alleged lack of jurisdiction of the CFI.
ISSUE:
W/N the lower court has jurisdiction to review a
decision of the Collector of Customs
HELD: NO
The Supreme Court held in the negative.

RIGOR v. ROSALES
FACTS:
Collector Sabino Rigor issued a Warrant of
Seizure and Detention against the vessel LCT759 and its cargo, consisting of 103 pieces of
logs for failure to present a manifest for the said
logs within the period prescribed. The parties
who were duly notified and represented,
voluntarily submitted to the jurisdiction of the
respondent Collector. After hearing,
the
Collector rendered a decision ordering the

Articles subject to seizure do not have to be

goods imported from a foreign country. The
provisions of the Code refer to unmanifested
articles found on vessels or aircraft engaged in
the coastwise trade. The customs authorities do
not have to prove to the satisfaction of a court
of first instance that the articles on board a
vessel were imported from abroad or are
intended to be shipped abroad before they may
exercise the power to effect customs searches,
seizure, or arrests provided by law and to
continue with the administrative hearings on
whether or not the law may have been violated.

Regarding the nature of the port of origin and

the port of destination, it is enough if one of the
ports is a port of entry. The respondent courts
finding that port of entry must be limited to
the wharves of Sta. Ana and Sasa where the
customs house is located and not extended to
every inch of the City of Davao would unduly
hamper if not cripple the effective enforcement
of customs and tariff laws. Customs officials
cannot stand by helplessly for want of
jurisdiction simply because a restrictive
interpretation of port of entry would enable
coastwise
vessels
to
load
or
unload
unmanifested goods with impunity outside of
the specific area where the wharves and the
customs house are located.
Furthermore, the Supreme Court ruled that the
customs officials have authority under the law
to make the initial determination on the limits of
their administrative jurisdiction, to act speedily
and to make decisions on the basis of that
determination, and to have such act or decision
reviewable only in the manner provided by the
Customs and Tariff Code. The Collectors
decisions are appealable to the Commissioner of
Customs, whose decisions, in cases involving
seizure, detention or release of property, may in
turn be reviewed only by the CTA.

PAPA v. MAGO
G.R. No. L-27360/February 28, 1968/EN
BANCOriginal action in the SC for prohibition
and certiorari , praying for the annulment of the
order issued by respondent judge
Parties: Petitioners:Ricardo G. Papa (Chief of
Police
of
Manila),
Juan
Ponce
Enrile
(Commissioner
of
Customs),
Pedro
Pacis(Collector of Customs of the Port of Manila),
Martin Alagao (Patrolman, head of counterintelligence
of
theManila
Police
Department)Respondents:Remedios
MagoHilarion Jarencio (Presiding Judge of Br. 23,
CFI of Manila)
J. Zaldivar
November
4,
1966

having
received
information the day before that a certain
shipment of misdeclared and undervalued
personal effects would be released from the
customs zone of the port of Manila, Alagao and
aduly deputized agent of the Bureau of Customs
conducted surveillance of two trucks allegedly
carrying thegoods. When the trucks left the
customs zone, elements of the counterintelligence unit intercepted them inErmita. The
trucks and the nine bales of goods they carried
were seized on instructions of the Chief of
Police. Upon investigation those claiming
ownership showed the policemen a Statement
of Receipts of Duties Collected in Informal Entry
No. 147-5501 issued by the Bureau of Customs

in the name of one Bienvenido Naguit.Mago

filed with the CFI of Manila a Petition for
Mandamus
with restraining order or preliminary injunction,
alleging that she was the owner of the goods
seized, which were purchased from Sta.
MonicaGrocery in San Fernando, Pampanga. She
hired the trucks owned by Lanopa (who filed
with her) to bringthe goods to her residence in
Sampaloc, Manila. She complained that the
goods were seized without a warrant, and that
they were not subject to seizure under Section
2531 of the Tariff and Customs Code even if
they were misdeclared and undervalued
because she had bought them without knowing
they had been imported illegally. They asked
that the police not open the bales, the goods be
returned,
and
for
moral
andexemplary
damages.November 10, 1966 Judge issued an
order restraining the police from opening the
nine bales in question, but by then some had
already been opened. Five days later Mago filed
an
amended
petition
including
asparty
defendants
Pedro
Pacis
and
Martin
Alagao.December 23, 1966 Mago filed a
motion to release the goods, alleging that since
the inventory ordered by the court of the goods
seized did not show any article of prohibited
importation, the same should be releasedupon
her posting of the appropriate bond. The
petitioners in the instant case filed their
opposition, allegingthat the court had no
jurisdiction over the case and thus no

jurisdiction to order the release (case under

jurisdiction of CTA), and as the goods were not
declared they were subject to forfeiture.
March 7, 1967 assailed Order issued by
Jarencio, authorized release under bond of
goods seized and held by petitioners in
connection with the enforcement of the Tariff
and Customs Code. The bond of P40,000.00 was
filed five days later. On the same day, Papa filed
on his own behalf a motion for reconsideration
on theground that the Manila Police Department
had been directed by the Collector of Customs
to hold the goodspending termination of the
seizure proceedings. Without waiting for the
courts action on the MR, petitioners filed the
present action. Arguments of Petitioners (that
seem important)(1) CFI had no jurisdiction over
the case(2) Mago had no cause of action in the
civil case filed with the CFI due to her failure to
exhaust alladministrative remedies before
invoking judicial intervention Arguments of
Respondents(1) It was within the jurisdiction of
the lower court presided by respondent Judge to
hear and decide CivilCase No. 67496 and to
issue the questioned order of March 7, 1967,
because said Civil Case No. 67496 wasinstituted
long
before
seizure,
and
identification
proceedings against the nine bales of goods in
question were instituted by the Collector of
Customs(2) Petitioners could no longer go after
the goods in question after the corresponding

duties and taxes had been paid and said goods

had left the customs premises and were no
longer within the control of the Bureauof
Customs
IMPORANT ISSUE
(theres another involving illegal search and
seizure)
:
WON the judge acted with jurisdiction in issuing
the Order releasing the goods in question
HELD: NO.
Petition granted, case filed by Mago dismissed.
The Bureau of Customs has the duties, powers
and jurisdiction, among others, to(1) assess and
collect all lawful revenues from imported
articles, and all other dues, fees, charges, fines
and penalties, accruing under the tariff and
customs
laws(2)
prevent
and
suppress
smuggling and other frauds upon the customs;
and(3) to enforce tariff and customs laws. The
goods in question were imported from
Hongkong, as shown in the "Statement and
Receipts of DutiesCollected on Informal Entry".
As long as the importation has not been
terminated the importedgoods remain under the
jurisdiction of the Bureau of customs.
Importation is deemed terminated only upon
the payment of the duties, taxes and other
charges upon the articles,or secured to be paid,
at the port of entry and the legal permit for
withdrawal shall have beengranted. The
payment of the duties, taxes, fees and other
charges must be in full.The record shows, by

comparing the articles and duties stated in the

aforesaid "Statement and Receipts of Duties
Collected on
Informal Entry" with
the
manifestation of the Office of the Solicitor
General wherein it is stated that the estimated
duties, taxes and other chargeson the goods
subject of this case amounted to P95,772.00 as
evidenced by the report of theappraiser of the
Bureau of Customs,
that the duties, taxes and other charges had not
been paid in full. Furthermore , a comparison of
the goods on which duties had been assessed,
as shown in the "Statement and Receipts of
Duties Collected on Informal Entry" and the
"compliance" itemizing the articles found in the
bales upon examination and inventory, shows
that the
quantity
of the
goods
was
underdeclared, presumably to avoid the
payment of duties thereon.
(e.g. 40 pieces of ladiessweaters assessed in
the Statement when there actually
42 dozen ; 100 watch bands were assessed but
2,209dozen, etc.)
The articles contained in the nine bales in
question, were, therefore, subject to forfeiture
under Section 2530, pars. e and m, (1), (3), (4),
and (5) of the Tariff and Customs Code. The
Court had held before (and did again in this
case) that
merchandise, the importation of which is
effected contrary to law, is subject to forfeiture,
and that goods released contrary to law are
subject to seizureand forfeiture.

Even if it be granted, arguendo , that after the

goods in question had been brought out of the
customs area the Bureau of Customs had lost
jurisdiction over the same, nevertheless, when
said goods were intercepted at the Agrifina
Circle on November 4, 1966 by members of the
Manila Police Department, acting under
directions and orders of their Chief, Ricardo C.
Papa, who had been formally deputized by the
Commissioner of Customs,
the Bureau of Customs had regained jurisdiction
and custody of the goods.
Section 1206 of the Tariff and Customs
Code imposes upon the Collector of Customs
the duty to hold possession of all imported
articles upon which duties, taxes, and other
charges havenot been paid or secured to be
paid, and to dispose of the same according to
law. The goodsin question, therefore, were
under the custody and at the disposal of the
Bureau of Customs at the time the petition for
Mandamus was filed in the Court of First
Instance of Manila onNovember 9, 1966. The
Court of First Instance of Manila, therefore,
could not exercise jurisdiction over said goods
even if the warrant of seizure and detention of
the goods for thepurposes of the seizure and
forfeiture proceedings had not yet been issued
by the Collectorof Customs.
The Court reiterated its ruling in

De Joya v. Lantin: The owner of seized goods

may set up defenses beforethe Commissioner of
Customs during the proceedings following
seizure. From his decision appeal may bemade
to the Court of Tax Appeals. To permit recourse
to the Court of First Instance in cases of seizure
of imported goods would in effect render
ineffective the power of the Customs authorities
under the Tariff and Customs Code and deprive
the Court of Tax Appeals of one of its exclusive
appellate jurisdictions.
Republic Acts 1937 and 1125 vest jurisdiction
over seizure and forfeiture proceedings
exclusively upon the Bureau of Customs and the
Court of Tax Appeals. Such law being special in
nature, while the Judiciary Act defining the
jurisdiction of Courts of First Instance is a
general legislation, not to mention that the
former are later enactments, the Court of First
Instance should yield to the jurisdiction of the
Customs authorities.
The Bureau of Customs acquires exclusive
jurisdiction over imported goods, for the
purposes of enforcement of the customs laws,
from the moment the goods are actually in its
possession or control, even if no warrant of
seizure or detention had previously been issued
by the Collector of Customs in connection with
seizure and forfeiture proceedings. In the
present case, the Bureau of Customs actually
seized the goods in question on November
4,1966, and so from that date the Bureau of

Customs acquired jurisdiction over the goods for

the purposes of the enforcement of the tariff
and customs laws, to the exclusion of the
regular courts. Much less then would the Court
of First Instance of Manila have jurisdictionover
the goods in question after the Collector of
Customs had issued the warrant of seizure and
detention on January 12, 1967.
Not having acquired jurisdiction over the goods,
it follows that the Court of First Instance of
Manila had no jurisdiction to issue the
questionedorder of March 7, 1967 releasing said
goods.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,
Bengzon, J.P., Sanchez, Castro, Angeles and
Fernando, JJ., concur.

R.V Marzan Freight

Manufacturing
GRN 128064

vs.

CA/

Shielas

Facts:
Philfire issued insurance policy to R.V Marzan,
owner of a customs bonded warehouse. Shielas
manufacturing engaged in the garment
business, the consignee of raw materials from
Taiwan. The BOC treated the materials as
subject to ordinary import taxes and were not

immediate released to respondent.

The
consignee failed to file the requisite import
entry and to claim the cargo.BOC authorized
petitioners for stripping and safekeeping after 5
months,
notice
of
abandonment
giving
respondents 15 days from notice to file entry
the file cargoes without prejudice to right of the
consignee to redeem articles cargoes would
redeemed abandoned and be sold at public
auction. After a month the declaration of
abandonment has become final and executory
but before inventory and sale public auction of
goods the warehouse was burned. Philfire paid
12,000.00 for the warehouse. After the Lapse of
more than 2 years from the arrival of the cargo,
the private respondent filed a complaint for
damaged before RTC. Petitioner arrived that
there is no private of Contract between them
since the cargo was received from BOC and that
respondent failed to claim the cargo, pay taxes
thus not entitled to insurance proceeds.
Issue:
Whether or not the trial court had jurisdiction to
review and declare ineffective the declaration of
the BOC in abandonment proceedings and that
the government ipso facto became the owner
thereof.
Ruling: NO
The declaration that the cargo was abandoned
for the failure to file the import entry was
ineffective because notice of proceedings of

abandonment was not given to the consignee.

Evidently, the resolution of this issue is within
the exclusive competence of the District
Collector of Customs, the Commissioner of
Customs and within the appellate jurisdiction of
CTA.
The rule has RTC has no review powers over
such proceedings is anchored upon the policy of
placing un necessary hindrance on the
government drive not only to prevent smuggling
and other frauds upon customs, but more
importantly, to render effective and efficient the
collection of import and export duties due the
State, which enables the government to carry
out the functions it has been instituted to the
perform. The trial court should have dismissed
the complaint without prejudice to the right of
the private respondent to ventilate the issue
before the Commissioner of the Customs and/or
CTA.

Chevron Phils v.Commissioner of Bureau of

Customs,
GR 178759, Aug 11, 2008
FACTS: Effective date of reduction of tariff rate
from 10% to 3% per RA 8180 (Apr 16, 1996)
while importations arrived in the Phils prior to
Apr 16, 1996; Import Entry Declarations [IED]
were filed prior to said later date but the Import
Entry Internal Revenue Declarations [IEIRD]

were filed after said date. Chevron paid customs

duties at 3%. Three years later, an informer
reported the transactions and investigation
conducted. The CBOC declared the importations
abandoned for failure to enter them within 30
days from unloading and issued assessments
for more than P1 Billion. Hence the appeal to
CTA division which ruled that 10% applied per
Sec 204, 205 and 1408; there was fraud but no
abandonment. Both parties went to CTA en
banc, which ruled that there was abandonment
because IEIRD was not filed within 30 days per
Sec 1301 in relation to
Sec 205, thus
abandonment ensued per Sec 1801 and 1802;
notice of abandonment per CMO 15-94 was not
necessary because Chevron had knowledge;
and agreed there was fraud for failure file entry
that was intended to avoid higher rate of duties.
ISSUES:
1. whether entry under Section 1301 in
relation to Section 1801 of the TCC refers to the
IED or the IEIRD?
2. whether fraud was perpetrated by petitioner?
RULING:
1. The filing of the IEIRDs has several important
purposes: to ascertain the value of the imported
articles, collect the correct and final amount of
customs duties and avoid smuggling of goods
into the country. Entry refers to both. They must
be filed within 30 days.

2. Yes there was fraud. Fraud, in its general

sense, is deemed to comprise anything
calculated to deceive, including all acts,
omissions, and concealment involving a breach
of legal or equitable duty, trust or confidence
justly reposed, resulting in the damage to
another, or by which an undue and
unconscionable advantage is taken of another. It
is a question of fact and the circumstances
constituting it must be alleged and proved in
the court below. The finding of the lower court
as to the existence or non-existence of fraud is
final and cannot be reviewed here unless clearly
shown to be erroneous. In this case, fraud was
established by the IPD-CIIS of the BOC. Both the
CTA First Division and en banc agreed
completely with this finding. Chevron bided its
time to avail of lower rate. Hence, due to the
presence of fraud, the one year prescriptive
period of the finality of liquidation under Section
1603 was inapplicable and 3. whether the
importations can be considered abandoned
under Section 1801. Yes, per Sec 1801 as
amended by RA 7651. Notice was not necessary
because BOC learned of fraud after 3 years and
importations had been released. Abandoned
article ipso facto deemed the property of the
government per Sec 1802. This section cannot
be questioned as unconstitutional collaterally.
Besides, there is clear intent to do away with
seizure proceedings in abandonment. Ordered
to pay (P893,781,768.21) plus six percent (6%)
legal interest per annum accruing from the date

of promulgation of this decision until its finality.

Upon finality of this decision, the sum so
awarded shall bear interest at the rate of twelve
percent (12%) per annum until its full
satisfaction.
G.R. Nos. L-31776-78

October 21, 1993

THE
COMMISSIONER
OF
CUSTOMS,
petitioner,
vs.
MANILA
STAR
FERRY,
INC.,
UNITED
NAVIGATION & TRANSPORT CORPORATION,
CEABA SHIPPING AGENCY, INC., and THE
COURT' OF TAX APPEALS, respondents.
QUIASON, J.:
This is a petition for review under Rule 44 of the
Revised
Rules
of
Court
filed
by
the
Commissioner of Customs to set aside the
consolidated Decision dated September 30,
1969 of the Court of Tax Appeals in C.T.A. Cases
Nos. 1836, 1837 and 1839, modifying his
decision by ordering only the payment of a fine,
in lieu of the forfeiture of private respondents
vessels used in the smuggling of foreign-made
cigarettes and other goods.
Private respondents Manila Star Ferry, Inc. and
the United Navigation & Transport Corporation

are domestic corporations engaged in the

lighterage business and are the owners and
operators, respectively, of the tugboat Orestes
and the barge-lighter UN-L-106. Private
respondent Ceaba Shipping Agency, Inc.
(Ceaba) is the local shipping agent of the Chiat
Lee Navigation Trading Co. of Hongkong, the
registered owner and operator of the S/S Argo,
an ocean-going vessel.
On June 12, 1966, the S/S Argo, the Orestes and
the UN-L-106, as well as two wooden bancas of
unknown ownership, were apprehended for
smuggling by a patrol boat of the Philippine
Navy along the Explosives Anchorage Area of
Manila Bay. the patrol boat caught the crew of
the S/S Argo in the act of unloading foreignmade goods onto the UN-L-106, which was
towed by the Orestes and escorted by the two
wooden bancas. The goods of 330 cases of
foreign-made cigarettes, assorted ladies' wear,
clothing material and plastic bags, all of which
were not manifested and declared by the vessel
for discharge in Manila. No proper notice of
arrival of the S/S Argo was given to the local
customs authorities.
Thereafter, seizure and forfeiture proceedings
were separately instituted before the Collector
of Customs for the Port of Manila against the S/S
Argo (Seizure Identification Case No. 10009,
Manila) and its cargo (S.I. No. 10009-C, Manila),
the Orestes (S.I. No. 10009-A, Manila), the UN-L-

106 (S.I. No. 1009-B, Manila) and the two

bancas (S.I. No. 10009-D, Manila), charging
them with violations of Section 2530 (a), (b) and
(c) of the Tariff and Customs Code. Criminal
charges were likewise filed against the officers
and crew of said vessels and watercraft.
In the seizure and forfeiture proceedings, the
Collector of Customs rendered a consolidated
decision dated December 27, 1966, declaring
the forfeiture of said vessels and watercraft in
favor of the Philippine government by virtue of
Section 2530 (a) and (b) of the Tariff and
Customs Code.
All respondents therein, except the owner of the
two wooden bancas, separately appealed the
consolidated decision of the Collector of
Customs for the Port of Manila to the
Commissioner of Customs. In his Decision dated
February 1, 1967, the Acting Commissioner of
Customs found the Collector's decision to be in
order and affirmed the same accordingly.
The same respondents separately elevated the
matter to the Court of Tax Appeals (C.T.A. Cases
Nos. 1836, 1837 and 1839), which in a
consolidated decision dated September 30,
1989, substantially modified the decision of the
Commissioner of Customs, stating thus:
IN VIEW OF THE FOREGOING, the Manila Star
Ferry, Inc., petitioner in C.T.A. Case No. 1836,

and the United Navigation & Transport

Corporation, petitioner in C.T.A. Case No. 1837,
are each hereby ordered to pay a fine of five
thousand pesos (P5,000.00) and Ceaba Shipping
Agency, Inc., petitioner in C.T.A. Case No. 1839,
a fine of ten thousand pesos (P10,000.00),
within thirty days from the date this decision
becomes final (Rollo, p., 100).
It is this decision of the Court of Tax Appeals
that is being questioned by the Commissioner of
Customs before this Court.
On February 7, 1978, petitioner filed a Motion to
Allow Sale of the Vessel (S/S Argo), informing
this Court that the said vessel was deteriorating
and depreciating in value, and was congesting
the Cavite Naval Base where it was berthed.
Petitioner prayed that it be allowed to sell the
S/S Argo at the best possible price. The Court
granted petitioner's motion.
An Urgent Motion for Modification was filed by
respondent Ceaba, praying that it, instead of
petitioner, be allowed to sell the S/S Argo
through a negotiated sale and not a public sale.
In a resolution dated May 12, 1978, this Court
granted respondent Ceaba's motion, ordering it,
however, to first pay the fine of P10,000.00
stated in the decision of the Commissioner of
Customs and then "deposit the proceeds of the
sale with a reputable commercial bank in an
interest bearing account in trust for whosoever

will prevail in the cases at bar" (Rollo, p. 317). A

manager's check in the amount of P10,000.00
was made payable to the Commissioner of
Customs and was delivered y the respondent
Ceaba to the Cashier of the Supreme Court. In
the Resolution of July 9, 1978, this payment was
accepted, subject to the Court's decision in the
case (Rollo, p. 327). The S/S Argo was sold, with
this Court's approval, for P125,000.00 to one
Severino
Caperlac.
The
proceeds
were
subjected to the charging lien of respondent
Ceaba's attorneys in the amount of P315,000.00
(Rollo, p. 402).
The petition for review posits the theory that
the subject vessels and watercraft were
engaged in smuggling, and that the S/S Argo
should be forfeited under Section 2530 (a),
while the barge UN-L-106 and tugboat Orestes
should be forfeited under Section 2530 (c) of
the Tariff and Customs Code.
Section 2530 (a) and (c) of said law reads as
follows:
Sec. 2530.
Property Subject to Forfeiture
under Tariff and Customs Laws. Any vessel or
aircraft, cargo, articles and other objects shall,
under the following conditions, be subject to
forfeiture:
(a) Any vessel or aircraft, including cargo,
which shall, be used unlawfully in the

importation or exportation of articles into or

from any Philippine port or place except a port
of entry; and any vessel which, being of less
than thirty tons capacity shall be used in the
importation of articles into any Philippine port or
place except into a port of the Sulu sea where
importation in such vessel may be authorized
by the Commissioner, with the approval of the
department head.
xxx

xxx xxx

(c) Any vessel or aircraft into which shall be

transferred cargo unladen contrary to law prior
to the arrival of the importing vessel or aircraft
at her port of destination.
The penalty of forfeiture is imposed on any
vessel, engaged in smuggling if the conditions
enumerated
in
Section
2530
(a)
are
compresent.
These conditions are:
(1) The vessel is "used unlawfully in the
importation or exportation of articles into or
from" the Philippines;
(2) The articles are imported or exported into
or from "any Philippine port or place, except a
port of entry;" or

(3) If the vessel has a capacity of less than 30

tons and is "used in the importation of articles
into any Philippine Port or place other than a
port of the Sulu Sea, where importation in such
vessel may be authorized by the Commissioner,
with the approval of the department head."
There is no question that the vessel S/S Argo
was apprehended while unloading goods of
foreign origin onto the barge UN-L-106 and the
tugboat Orestes, without the necessary papers
showing that the goods were entered lawfully
though a port of entry and that taxes and duties
on said goods had been paid. The claim that the
S/S Argo made an emergency call at the Port of
Manila for replacement of crew members and
had to stop at the Explosives Anchorage Area
because it was carrying nitric acid, a dangerous
cargo, cannot be upheld, much less given
credence by this Court. The facts found by the
Court of Tax Appeals are in consonance with the
findings of the Collector of Customs, and the
Commissioner of Customs. Absent a showing of
any irregularity, or arbitrariness, the findings of
fact of quasi-judicial and administrative bodies
are entitled to great weight:, and are conclusive
and binding on this Court. (Feeder International
Line, Pte., Ltd. v. Court of Appeals, 197 SCRA
842 [1991]; Jaculina v. National Police
Commission, 200 SCRA 489 [1991]). Moreover,
the Collector of Customs in S.I. No. 10009-C,
Manila, ordered on July 28, 1966 the forfeiture
of the subject cargo after finding that they were,

in truth and in fact, smuggled articles (Rollo, p.

7). Respondent Ceaba did not appeal from said
order and the same has become final.
In its decision, the Court of Tax Appeals held
that while the S/S Argo was caught unloading
smuggled goods in Manila Bay, the said vessel
and the goods cannot be forfeited in favor of the
government because the Port of Manila is a port
of entry (R.A. 1937, Sec. 701).
The Commissioner of Customs argues that the
phrase "except a port of entry" should mean
"except a port of destination," and inasmuch as
there is no showing that the Port of Manila was
the port of destination of the S/S Argo, its
forfeiture was in order.
We disagree.
Section 2530(a) in unmistakable terms provides
that a vessel engaged in smuggling "in a port of
entry" cannot be forfeited. This is the clear and
plain meaning of the law. It is not within the
province of the Court to inquire into the wisdom
of the law, for indeed, we are bound by the
words of the statute. Neither can we put words
in the mouths of the lawmaker. A verba legis
non est recedendum.
It must be noted that the Revised Administrative
Code of 1917 from which the Tariff and Customs
Code is based, contained in Section 1363(a)

thereof almost exactly the same provision in

Section 2530(a) of the Tariff and Customs Code,
including the phrase "except a port of entry." If
the lawmakers intended the term "port of entry"
to mean "port of destination," they could have
expressed facilely such intention when they
adopted the Tariff and Customs Code in 1957.
Instead on amending the law, Congress
reenacted verbatim the provision of Section
1363(a) of the Revised Administrative Code of
1917. Congress, in the very same Article 2530
of the Tariff and Customs Code, used the term
"port of destination" in subsections (c) and (d)
thereof. This is a clear indication that Congress
is aware of the distinction between the two
wordings.
It was only in 1972, after this case was
instituted, when the questioned exception
("except a port of entry") in Section 2530(a) of
the Tariff and Customs Code was deleted by P.D.
No. 74.
Nevertheless, although the vessel cannot be
forfeited, it is subject to a fine of not more than
P10,000.00 for failure to supply the requisite
manifest for the unloaded cargo under Section
2521 of Code, which reads as follows:
Sec. 2521.
Failure to Supply Requisite
Manifests. If any vessel or aircraft enters or
departs from a port of entry without submitting
the proper manifest to the customs authorities,

or shall enter or depart conveying unmanifested

cargo other than as stated in the next preceding
section hereof, such vessel or aircraft shall be
fined in a sum not exceeding ten thousand
pesos.
xxx

xxx xxx

The barge-lighter UN-L-106 and the tugboat

Orestes, on the other hand, are subject to
forfeiture under paragraph (c) of Section 2530
of the Tariff and Customs Code. The bargelighter and tugboat fall under the term "vessel"
which includes every sort of boat, craft or other
artificial contrivance used, or capable of being
used, as a means of transportation on water
(R.A. No. 1937, Section 3514). Said section 2530
(c) prescribes the forfeiture of' any vessel or
aircraft into which shall be transferred cargo
unladen contrary to law before the arrival of the
vessel or aircraft at her port of destination
Manila was not the port of destination, much
less a port of call of the S/S Argo, the importing
vessel. The S/S Argo left Hongkong and was
bound for Jesselton, North Borneo, Djakarta and
Surabaja, Indonesia; and yet it stopped at the
Port of Manila to unload the smuggled goods
onto the UN-L-106 and the Orestes.
Forfeiture proceedings are proceedings in rem
(Commissioner of Customs v. Court of Tax
Appeals, 138 SCRA 581 [1985] citing Vierneza v.
Commissioner of Customs, 24 SCRA 394 [1968])

and are directed against the res. It is no defense

that the owner of the vessel sought to be
forfeited had no actual knowledge that his
property was used illegally. The absence or lack
of actual knowledge of such use is a defense
personal to the owner himself which cannot in
any way absolve the vessel from the liability of
forfeiture Commissioner of Customs v. Court of
Appeals, supra; U.S. v. Steamship "Rubi.", 32
Phil. 228, 239 [1915]).
WHEREFORE, the consolidated Decision dated
September 30, 1969 of respondent Court of Tax
Appeals in C.T.A. Cases Nos. 1836, I837 and
1839 is MODIFIED as follows: (1) that the S/S
Argo through respondent Ceaba Shipping
Agency, Inc. is ordered to pay a fine of
P10,000.00, to be satisfied from the deposit of
the same amount by respondent Ceaba to the
Cashier of this Court per Resolution of July 9,
1978; (2) that the Cashier of this Court is
ordered to release the said amount for payment
to the Commissioner of Customs, within thirty
(30) days from the date this decision becomes
final; and 3) the tugboat Orestes and the bargelighter UN-L-106 of respondents Manila Star
Ferry, Inc. and the United Navigation &
Transport. Corporation respectively, are ordered
forfeited in favor of the Philippine Government.
SO ORDERED.
SECOND DIVISION

G.R. No. 187425

March 28, 2011

COMMISSIONER OF CUSTOMS, Petitioner,

vs.
AGFHA INCORPORATED, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under
Rule 45 of the Rules of Court assailing the
February 25, 2009 Decision1 of the Court of Tax
Appeals En Banc (CTA-En Banc), in CTA EB Case
No. 136, which affirmed the October 18, 2005
Resolution2 of its Second Division (CTA-Second
Division), in CTA Case No. 5290, finding
petitioner, the Commissioner of Customs
(Commissioner), liable to pay respondent
AGFHA Incorporated (AGFHA) the amount of
US$160,348.08 for the value of the seized
shipment which was lost while in petitioners
custody.
On December 12, 1993, a shipment containing
bales of textile grey cloth arrived at the Manila
International Container Port (MICP). The
Commissioner, however, held the subject
shipment because its owner/consignee was
allegedly fictitious. AGFHA intervened and
alleged that it was the owner and actual
consignee of the subject shipment.

On September 5, 1994, after seizure and

forfeiture proceedings took place, the District
Collector of Customs, MICP, rendered a
decision3 ordering the forfeiture of the subject
shipment in favor of the government.
AGFHA filed an appeal. On August 25, 1995, the
Commissioner rendered a decision4 dismissing
it.
On November 4, 1996, the CTA-Second Division
reversed the Commissioners August 25, 1995
Decision and ordered the immediate release of
the subject shipment to AGFHA. The dispositive
portion of the CTA-Second Division Decision5
reads:
WHEREFORE, in view of the foregoing premises,
the instant Petition for Review is hereby
GRANTED. Accordingly, the decision of the
respondent in Customs Case No. 94-017, dated
August 25, 1995, affirming the decision of the
MICP Collector, dated September 5, 1994, which
decreed the forfeiture of the subject shipments
in favor of the government, is hereby REVERSED
and SET ASIDE. Respondent is hereby ORDERED
to effect the immediate RELEASE of the subject
shipment of goods in favor of the petitioner. No
costs.
SO ORDERED.

On November 27, 1996, the CTA-Second

Division issued an entry of judgment declaring
the above-mentioned decision final and
executory.6
Thereafter, on May 20, 1997, AGFHA filed a
motion for execution.
In its June 4, 1997 Resolution, the CTA-Second
Division held in abeyance its action on AGFHAs
motion for execution in view of the
Commissioners appeal with the Court of
Appeals (CA), docketed as CA-G.R. SP No. 42590
and entitled "Commissioner of Custom v. The
Court of Tax Appeals and AGFHA, Incorporated."
On May 31, 1999, the CA denied due course to
the Commissioners appeal for lack of merit in a
decision,7 the dispositive portion of which
reads:
WHEREFORE, the instant petition is hereby
DENIED DUE COURSE and DISMISSED for lack of
merit. Accordingly, the Commissioner of
Customs is hereby ordered to effect the
immediate release of the shipment of AGFHA,
Incorporated described as "2 x 40" Cont. No.
NYKU-6772906 and NYKU-6632117 STA 197
Bales of Textile Grey Cloth" placed under Hold
Order No. H/CI/01/2293/01 dated 22 January
1993.
No costs.

SO ORDERED.
Thereafter, the Commissioner elevated the
aforesaid CA Decision to this Court via a petition
for review on certiorari, docketed as G.R. No.
139050 and entitled "Republic of the Philippines
represented by the Commissioner of Customs v.
The Court of Tax Appeals and AGFHA, Inc."
On October 2, 2001, the Court dismissed the
petition.8
On January 14, 2002, the Court denied with
finality
the
Commissioners
motion
for
reconsideration of its October 2, 2001 Decision.
On March 18, 2002, the Entry of Judgment was
issued by the Court declaring its aforesaid
decision final and executory as of February 5,
2002.
In view thereof, the CTA-Second Division issued
the Writ of Execution, dated October 16, 2002,
directing the Commissioner and his authorized
subordinate or representative to effect the
immediate release of the subject shipment. It
further ordered the sheriff to see to it that the
writ would be carried out by the Commissioner
and to make a report thereon within thirty (30)
days after receipt of the writ. The writ, however,
was returned unsatisfied.

On July 23, 2003, the CTA-Second Division

received a copy of AGFHAs Motion to Show
Cause dated July 21, 2003.
Acting on the motion, the CTA-Second Division
issued a notice setting it for hearing on August
1, 2003 at 9:00 oclock in the morning.
In its August 13, 2003 Resolution, the CTASecond Division granted AGFHAs motion and
ordered the Commissioner to show cause within
fifteen (15) days from receipt of said resolution
why he should not be disciplinary dealt with for
his failure to comply with the writ of execution.
On September 1, 2003, Commissioners counsel
filed a Manifestation and Motion, dated August
28, 2003, attaching therewith a copy of an
Explanation (With Motion for Clarification) dated
August 11, 2003 stating, inter alia, that despite
diligent efforts to obtain the necessary
information and considering the length of time
that had elapsed since the subject shipment
arrived at the Bureau of Customs, the Chief of
the Auction and Cargo Disposal Division of the
MICP could not determine the status,
whereabouts and disposition of said shipment.
Consequently, AGFHA filed its Motion to Cite
Petitioner in Contempt of Court dated
September 13, 2003. After a series of pleadings,
on November 17, 2003, the CTA-Second Division
denied, among others, AGFHAs motion to cite

petitioner in contempt for lack of merit. It,

however, stressed that the denial was without
prejudice to other legal remedies available to
AGFHA.
On August 13, 2004, the Commissioner received
AGFHAs Motion to Set Case for Hearing, dated
April 12, 2004, allegedly to determine: (1)
whether its shipment was actually lost; (2) the
cause and/or circumstances surrounding the
loss; and (3) the amount the Commissioner
should pay or indemnify AGFHA should the
latters shipment be found to have been
actually lost.
On May 17, 2005, after the parties had
submitted their respective memoranda, the
CTA-Second
Division
adjudged
the
Commissioner liable to AGFHA. Specifically, the
dispositive portion of the resolution reads:
WHEREFORE, premises considered, the Bureau
of Customs is adjudged liable to petitioner
AGFHA, INC. for the value of the subject
shipment in the amount of ONE HUNDERED
SIXTY THOUSAND THREE HUNDRED FORTY
EIGHT
AND
08/100
US
DOLLARS
(US$160,348.08). The Bureau of Customs
liability may be paid in Philippine Currency,
computed at the exchange rate prevailing at the
time of actual payment, with legal interests
thereon at the rate of 6% per annum computed
from February 1993 up to the finality of this

Resolution. In lieu of the 6% interest, the rate of

legal interest shall be 12% per annum upon
finality of this Resolution until the value of the
subject shipment is fully paid.
The payment shall be taken from the sale or
sales of the goods or properties which were
seized or forfeited by the Bureau of Customs in
other cases.
SO ORDERED.9
On June 10, 2005, the Commissioner filed his
Motion for Partial Reconsideration arguing that
(a) the enforcement and satisfaction of
respondents money claim must be pursued and
filed with the Commission on Audit pursuant to
Presidential Decree (P.D.) No. 1445; (b)
respondent is entitled to recover only the value
of the lost shipment based on its acquisition
cost at the time of importation; and (c) taxes
and duties on the subject shipment must be
deducted from the amount recoverable by
respondent.
On the same day, the Commissioner received
AGFHAs Motion for Partial Reconsideration
claiming that the 12% interest rate should be
computed from the time its shipment was lost
on June 15, 1999 considering that from such
date, petitioners obligation to release their
shipment was converted into a payment for a
sum of money.

On October 18, 2005, after the filing of several

pleadings, the CTA-Second Division promulgated
a resolution which reads:
WHEREFORE, premises considered, respondent
Commissioner of Customs "Motion for Partial
Reconsideration" is hereby PARTIALLY GRANTED.
The Resolution dated May 17, 2005 is hereby
MODIFIED but only insofar as the Court did not
impose the payment of the proper duties and
taxes on the subject shipment. Accordingly, the
dispositive portion of Our Resolution, dated May
17, 2005, is hereby MODIFIED to read as
follows:
WHEREFORE, premises considered, the Bureau
of Customs is adjudged liable to petitioner
AGFHA, INC. for the value of the subject
shipment in the amount of ONE HUNDRED SIXTY
THOUSAND THREE HUNDRED FORTY EIGHT AND
08/100 US DOLLARS (US$160,348.08), subject
however, to the payment of the prescribed
taxes and duties, at the time of the importation.
The Bureau of Customs liability may be paid in
Philippine Currency, computed at the exchange
rate prevailing at the time of actual payment,
with legal interests thereon at the rate of 6%
per annum computed from February 1993 up to
the finality of this Resolution. In lieu of the 6%
interest, the rate of legal interest shall be 12%
per annum upon finality of this Resolution until
the value of the subject shipment is fully paid.

The payment shall be taken from the sale or

sales of the goods or properties which were
seized or forfeited by the Bureau of Customs in
other cases.
SO ORDERED.
Petitioner AGFHA, Inc.s "Motion for Partial
Reconsideration" is hereby DENIED for lack of
merit.
SO ORDERED.10
Consequently, the Commissioner elevated the
above-quoted resolution to the CTA-En Banc.
On February 25, 2009, the CTA-En Banc
promulgated the subject decision dismissing the
petition for lack of merit and affirming in toto
the decision of the CTA-Second Division.
On March 18, 2009, the Commissioner filed his
Motion for Reconsideration, but it was denied by
the CTA-En Banc in its April 13, 2009 Resolution.
Hence, this petition.

the subject lost shipment that was in the

custody of the petitioner.
In his petition, the Commissioner basically
argues two (2) points: 1] the respondent is
entitled to recover the value of the lost
shipment based only on its acquisition cost at
the time of importation; and 2] the present
action has been theoretically transformed into a
suit
against
the
State,
hence,
the
enforcement/satisfaction of petitioners claim
must be pursued in another proceeding
consistent with the rule laid down in P.D. No.
1445.
He further argues that the basis for the
exchange rate of its liability lacks basis. Based
on the Memorandum, dated August 27, 2002, of
the Customs Operations Officers, the true value
of the subject shipment is US$160,340.00 based
on its commercial invoices which have been
found to be spurious. The subject shipment
arrived at the MICP on December 12, 1992 and
the peso-dollar exchange rate was P20.00 per
US$1.00. Thus, this conversion rate must be
applied in the computation of the total land cost
of the subject shipment being claimed by
AGFHA or P3,206,961.60 plus interest.

ISSUE
Whether or not the Court of Tax Appeals was
correct in awarding the respondent the amount
of US$160,348.08, as payment for the value of

The Commissioner further contends that based

on Executive Order No. 688 (The 1999 Tariff and
Customs Code of the Philippines), the proceeds
from any legitimate transaction, conveyance or

sale of seized and/or forfeited items for

importations or exportations by the customs
bureau cannot be lawfully disposed of by the
petitioner to satisfy respondents money
judgment. EO 688 mandates that the unclaimed
proceeds from the sale of forfeited goods by the
Bureau of Customs (BOC) will be considered as
customs receipts to be deposited with the
Bureau of Treasury and shall form part of the
general funds of the government. Any
disposition of the said unclaimed proceeds from
the sale of forfeited goods will be violative of
the Constitution, which provides that "No money
shall be paid out of the Treasury except in
pursuance of an appropriation made by law."11
Thus, the Commissioner posits that this case
has been transformed into a suit against the
State because the satisfaction of AGFHAs claim
will have to be taken from the national coffers.
The State may not be sued without its consent.
The BOC enjoys immunity from suit since it is
invested with an inherent power of sovereignty
which is taxation.
To recover the alleged loss of the subject
shipment, AGFHAs remedy here is to file a
money claim with the Commission on Audit
(COA) pursuant to Act No. 3083 (An Act Defining
the Condition under which the Government of
the Philippine Island may be Sued) and
Commonwealth Act No. 327 (An Act Fixing the
Time within which the Auditor General shall

render his Decisions and Prescribing the Manner

of Appeal therefrom, as amended by P.D. No.
1445). Upon the determination of State liability,
the prosecution, enforcement or satisfaction
thereof must still be pursued in accordance with
the rules and procedures laid down in P.D. No.
1445, otherwise known as the Government
Auditing Code of the Philippines.
On the other hand, AGFHA counters that, in line
with prevailing jurisprudence, the applicable
peso-dollar exchange rate should be the one
prevailing at the time of actual payment in
order to preserve the real value of the subject
shipment to the date of its payment. The CTA-En
Banc Decision does not constitute a money
claim against the State. The Commissioners
obligation to return the subject shipment did not
arise from an import-export contract but from a
quasi-contract particularly solutio indebiti under
Article 2154 of the Civil Code. The payment of
the value of the subject lost shipment was in
accordance with Article 2159 of the Civil Code.
The doctrine of governmental immunity from
suit cannot serve as an instrument for
perpetrating an injustice on a citizen. When the
State violates its own laws, it cannot invoke the
doctrine of state immunity to evade liability. The
commission of an unlawful or illegal act on the
part of the State is equivalent to implied
consent.
THE COURTS RULING

The petition lacks merit.

The Court agrees with the ruling of the CTA that
AGFHA is entitled to recover the value of its lost
shipment based on the acquisition cost at the
time of payment.
In the case of C.F. Sharp and Co., Inc. v.
Northwest Airlines, Inc. the Court ruled that the
rate of exchange for the conversion in the peso
equivalent should be the prevailing rate at the
time of payment:
In ruling that the applicable conversion rate of
petitioner's liability is the rate at the time of
payment, the Court of Appeals cited the case of
Zagala v. Jimenez, interpreting the provisions of
Republic Act No. 529, as amended by R.A. No.
4100. Under this law, stipulations on the
satisfaction of obligations in foreign currency
are void. Payments of monetary obligations,
subject to certain exceptions, shall be
discharged in the currency which is the legal
tender in the Philippines. But since R.A. No. 529
does not provide for the rate of exchange for
the payment of foreign currency obligations
incurred after its enactment, the Court held in a
number of cases that the rate of exchange for
the conversion in the peso equivalent should be
the prevailing rate at the time of payment.12
[Emphases supplied]

Likewise, in the case of Republic of the

Philippines represented by the Commissioner of
Customs v. UNIMEX Micro-Electronics GmBH,13
which involved the seizure and detention of a
shipment of computer game items which
disappeared while in the custody of the Bureau
of Customs, the Court upheld the decision of the
CA holding that petitioners liability may be paid
in Philippine currency, computed at the
exchange rate prevailing at the time of actual
payment.
On the issue regarding the state immunity
doctrine, the Commissioner cannot escape
liability for the lost shipment of goods. This was
clearly discussed in the UNIMEX MicroElectronics GmBH decision, where the Court
wrote:
Finally, petitioner argues that a money
judgment or any charge against the government
requires a corresponding appropriation and
cannot be decreed by mere judicial order.
Although it may be gainsaid that the
satisfaction of respondent's demand will
ultimately fall on the government, and that,
under the political doctrine of "state immunity,"
it cannot be held liable for governmental acts
(jus imperii), we still hold that petitioner cannot
escape its liability. The circumstances of this
case warrant its exclusion from the purview of
the state immunity doctrine.

As previously discussed, the Court cannot turn a

blind eye to BOC's ineptitude and gross
negligence in the safekeeping of respondent's
goods. We are not likewise unaware of its
lackadaisical attitude in failing to provide a
cogent
explanation
on
the
goods'
disappearance, considering that they were in its
custody and that they were in fact the subject of
litigation. The situation does not allow us to
reject respondent's claim on the mere
invocation of the doctrine of state immunity.
Succinctly, the doctrine must be fairly observed
and the State should not avail itself of this
prerogative to take undue advantage of parties
that may have legitimate claims against it.
In Department of Health v. C.V. Canchela &
Associates, we enunciated that this Court, as
the staunch guardian of the people's rights and
welfare, cannot sanction an injustice so patent
in its face, and allow itself to be an instrument
in the perpetration thereof. Over time, courts
have
recognized
with
almost
pedantic
adherence that what is inconvenient and
contrary to reason is not allowed in law. Justice
and equity now demand that the State's cloak
of invincibility against suit and liability be
shredded.1awphi1
Accordingly, we agree with the lower courts'
directive that, upon payment of the necessary
customs duties by respondent, petitioner's

"payment shall be taken from the sale or sales

of goods or properties seized or forfeited by the
Bureau of Customs."
WHEREFORE, the assailed decisions of the Court
of Appeals in CA-G.R. SP Nos. 75359 and 75366
are hereby AFFIRMED with MODIFICATION.
Petitioner
Republic
of
the
Philippines,
represented by the Commissioner of the Bureau
of Customs, upon payment of the necessary
customs duties by respondent Unimex MicroElectronics GmBH, is hereby ordered to pay
respondent the value of the subject shipment in
the amount of Euro 669,982.565. Petitioner's
liability may be paid in Philippine currency,
computed at the exchange rate prevailing at the
time of actual payment.
SO ORDERED.14 [Emphases supplied]
In line with the ruling in UNIMEX MicroElectronics GmBH, the Commissioner of
Customs should pay AGFHA the value of the
subject lost shipment in the amount of
US$160,348.08 which liability may be paid in
Philippine currency computed at the exchange
rate prevailing at the time of the actual
payment.
WHEREFORE, the
the Court of Tax
Case No. 136, is
of Customs is

February 25, 2009 Decision of

Appeals En Banc, in CTA EB
AFFIRMED. The Commissioner
hereby ordered to pay, in

accordance with law, the value of the subject

lost shipment in the amount of US$160,348.08,
computed at the exchange rate prevailing at the

time of actual payment after payment of the

necessary customs duties.
SO ORDERED.