I.

INTRODUCTION

This case is all about the dispute between AGFHA Inc. and the Commissioner of Customs.
It all started when the Commissioner of Custom held a shipment of bales of textile gray cloth,
which had arrived at the Manila International Container Port, on the grounds that the
importer/consignee was allegedly fictitious. However, even though AGFHA intervened and
alleged that it was the owner and actually consignee of the subject shipment, a seizure and
forfeiture proceed took place and the District Collector of MICP rendered a decision ordering the
forfeiture of the subject shipment in favor of the government.

Page | 1
II. FACTS OF THE CASE

 On December 12, 1993, a shipment containing bales of textile grey cloth arrived at Manila
International Container Port (MICP). The Commissioner of Customs, however, held the
subject shipment because its owner/consignee was allegedly fictitious.

 AGFHA intervened claiming it was the owner and actual consignee of the shipment.

 On September 5, 1994, after the seizure and forfeiture proceedings, District Collector of
MICP rendered a decision forfeiting the shipment in favor of the government.

 AGFHA filed an appeal but it was dismissed by the Commissioner on August 25, 1995

 The case was elevated on the CTA - 2nd division. On November 4, 1996, the CTA - 2nd
Division reversed and set aside the Commissioner’s decision and ordered the immediate
release of goods.

 On November 27, 1996 the CTA – 2nd Division issued an entry of judgment declaring the
aforesaid decision final and executory.

 AGFHA filed a motion for execution, the action was however held in abeyance by the CTA
2nd Division in view of the Commissioner’s appeal with the Court of Appeals (CA) in its
June 4, 1997 Resolution.

 On May 31, 1999, The Court of Appeals denied the Commissioner’s appeal due to lack of
merit.

Page | 2
 The Commissioner elevated the aforesaid CA decision on the Supreme Court via petition
for review on certiorari. It was however dismissed by the Court on October 2, 2001 and
was denied with finality on January 14, 2002.

 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.

 The CTA-2nd 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 it that the writ would
be carried out by the Commissioner and to make a report within 30 days after the receipt
of the writ. The writ however was returned unsatisfied.

 On July 23, 2003, the CTA-2nd Division received a copy of AGFHA’s Motion to Show Cause
dated July 21, 2003

 Acting on the motion, the CTA-2nd Division issued a notice setting it for hearing on August
1, 2003 at 9:00 o’clock in the morning.

 In its August 13, 2003 Resolution, the CTA-2nd Division granted AGFHA’s 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, Commissioner’s counsel filed a Manifestation and Motion, dated

August 28, 2003, attaching a copy of an Explanation (With Motion for Clarification) dated
August 11, 2003 stating that despite diligent efforts to obtain the necessary information
and considering the length of time that had elapsed since the subject shipment arrived at

Page | 3
 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.

 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-2nd Division denied, among
others, AGFHA’s motion to cite petitioner in contempt for lack of merit.

 On August 13, 2004, the Commissioner received AGFHA’s 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 latter’s shipment be found to
have been actually lost.

 On May 17, 2005, after the parties had submitted their respective memoranda, the CTA-
2nd Division adjudged the Commissioner liable to AGFHA Inc.

 On June 10, 2005, the Commissioner filed his Motion for Partial Reconsideration arguing
that (a) the enforcement and satisfaction of respondent’s 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 AGFHA’s 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, petitioner’s 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-2nd Division
promulgated a decision in which the Commissioner’s Motion for Partial Reconsideration

Page | 4
 is partially granted. The CTA-2nd Division also modified its May 17, 2005 decision, imposing
the payment of the prescribed taxes and duties of the subject shipment at the time of the
importation.

 The Commissioner elevated the CTA-2nd Division 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.

 The Commissioner elevated the case to the Supreme Court docketed as G.R. No. 187425
and entitled “Commissioner of Customs vs. AGFHA, Inc."

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III. ISSUE

The issue of the case was whether or not the Court of Tax appeals was correct in awarding
the AGFHA Inc. the amount of US$160,348.08 as payment for the value of the subject lost
shipment that was in the custody of Bureau of Customs.

Page | 6
IV. DECISIONS

A. DECISICION OF THE BUREAU OF CUSTOMS

After the Commissioner of Customs held the shipment of bales of textile gray cloth
because the owner was allegedly fictitious, the subject shipment underwent seizure and
forfeiture proceedings in which the District Collector of MICP ruled the forfeiture of said
shipment in favor of the government. AGFHA filed an appeal but the Commissioner dismissed it.

B. DECISION OF THE COURT OF TAX APPEALS (CTA) AND SUPREME COURT

AGFHA elevated the case on the Court of Tax Appeals when its appeals was dismissed by
the Commissioner. The Court of Tax Appeals reversed and set aside the Commissioner’s decision
and ordered the immediate release of the goods. Subsequently, the Commissioner of Customs
filed an appeal to the Court of Appeals but it was denied due to lack of merit.

The Commissioner then elevated the case to the Supreme Court via a petition for review
on certiorari, docketed as G.R. No. 139050. But like the ruling of the Court of Appeals, the petition
was dismissed due to lack of merit.

In view thereof, the CTA-Second Division issued the Writ of Execution 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.

Acting on the motion to show cause filed by AGFHA, the CTA-Second Division issued a
notice setting a hearing on August 1, 2003 at 9:00 o’clock in the morning. After the parties had
submitted their respective memoranda, the CTA-Second Division adjudged the Commissioner

Page | 7
liable to AGFHA for the value of the subject shipment in the US$160,348.08. The 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 the Resolution. In lieu of the 6% interest, the rate of legal interest shall be
12% per annum upon finality of the Resolution until the value of the subject shipment is fully
paid.

The Commissioner filed his Motion for Partial Reconsideration. The Motion for Partial
Reconsideration filed by the Commissioner was then partially granted by the CTA. The dispositive
portion of the CTA resolution, dated May 17, 2005, was modified; imposing the payment of the
proper duties and taxes on the subject shipment. The Motion for Partial Reconsideration of
AGFHA was denied however.

Consequently, the Commissioner elevated the aforesaid resolution to the CTA-En Banc. It
was however dismissed due to lack of merit, and the decision of the CTA-2nd Division was affirmed.
The Commissioner filed his Motion for Reconsideration, but it was denied by the CTA-En Banc.

C. DECISION OF THE SUPREME COURT

The case was then elevated to the Supreme Court by the Commissioner via petition for
review on certiorari under Rule 45 of the Rules of Court. It was however denied due to lack of
merit, and the decision of the CTA-En Banc was affirmed and the Commissioner’s petition was
dismissed.

Page | 8
V. CONCLUSION/REACTION

Commissioner posits that the case has been transformed into a suit against the State
because the satisfaction of AGFHA’s claim will have to be taken from the national funds and that
the state cannot be sued, thus the BOC enjoys immunity pursuant to the Doctrine of State
Immunity. However, the Supreme Court contends that it cannot turn blind eye to BOC's
ineptitude and gross negligence in the safekeeping of respondent's goods and that 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. With that, the Supreme Court
dismissed the Commissioner’s petition and affirmed the CTA En-Banc’s decision.

We, as a group, agree to the Supreme Court’s decision. When a shipment is a subject of
litigation and the case is on-going, the Bureau of Customs should safekeep the goods. The
Commissioner should not use and abuse the Doctrine of State Immunity as a prerogative to do
unlawful acts. Likewise, the Commissioner should have not elevated this case to the Supreme
Court too since from CTA-2nd Division, the decision was adverse to the government and now they
have to shoulder more legal expenses.

Page | 9
VI. GLOSSARY

Appeal – a legal proceeding by which a case is brought before a higher court for review of the
decision of a lower court

Certiorari - certiorari is a Latin word meaning "to be informed of, or to be made certain in regard
to". It is also the name given to certain appellate proceedings for re-examination of actions of a
trial court, or inferior appeals court

Consignee - in a contract of carriage, the consignee is the entity who is financially responsible
(the buyer) for the receipt of a shipment

Entry of Judgment - refers to a court order being entered after the judge rules on a case

Fictitious - not real or true; imaginary or fabricated

Forfeiture - the involuntary relinquishment of money or property without compensation as a

consequence of a breach or nonperformance of some legal obligation or the commission of a
crime

Hearing - is a proceeding before a court or other decision-making body or officer, such as a

government agency or a Parliamentary committee

Inter Alia – a Latin word that means “among other things”, a phrase used in pleading to designate
that a particular statute set out therein is only a part of the statute that is relevant to the facts of
the lawsuit and not the entire statute

In Toto – a Latin word that means "completely" or "in total”, referring to the entire thing

Page | 10
Lack of Merit – insufficient evidence

Litigation - the act or process of bringing a lawsuit in and of itself

Manifestation – appearance; the action or fact of showing an abstract idea

Motion - an application for relief other than by a pleading

Motion for Clarification - a request for an explanation from the trial court as to the meaning of
a prior, allegedly unclear, order

Motion for Reconsideration - a legal filing which someone can make to ask a court to review a
decision and consider issuing a new decision in light of the review

Petition – a formal written request to have a legal matter heard and decided by the court.

Posits - assume as a fact; put forward as a basis of argument

Resolution - the determination or decision, in regard to its opinion or intention, of a deliberative

or legislative body, public assembly, town council, board of directors or the like

Seizure - the forcible taking of property by a government law enforcement official from a person
who is suspected of violating, or is known to have violated, the law

Writ of Execution - a legal term that describes a court order that is granted in order to satisfy a
judgment awarded to a plaintiff in a court of law

Page | 11
VII. References

http://www.lawphil.net/judjuris/juri2011/mar2011/gr_187425_2011.html

https://thelawdictionary.org/

https://legal-dictionary.thefreedictionary.com

http://www.lawphil.net/statutes/presdecs/pd1978/pd_1445_1978.html

Page | 12
 Republic of the Philippines
SUPREME COURT
Manila

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 petitioner’s 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.

Page | 13
AGFHA filed an appeal. On August 25, 1995, the Commissioner rendered a decision 4 dismissing
it.

On November 4, 1996, the CTA-Second Division reversed the Commissioner’s 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 AGFHA’s
motion for execution in view of the Commissioner’s 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 Commissioner’s appeal for lack of merit in a
decision,7 the dispositive portion of which reads:

Page | 14
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 Commissioner’s 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.

Page | 15
On July 23, 2003, the CTA-Second Division received a copy of AGFHA’s 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 o’clock in the morning.

In its August 13, 2003 Resolution, the CTA-Second Division granted AGFHA’s 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, Commissioner’s 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, AGFHA’s 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 AGFHA’s 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 latter’s shipment be found to have been actually lost.

Page | 16
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
Custom’s 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 respondent’s 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 AGFHA’s 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, petitioner’s obligation to release their shipment
was converted into a payment for a sum of money.

Page | 17
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
Custom’s 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.

Page | 18
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.

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 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 petitioner’s 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 ₱20.00 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
₱3,206,961.60 plus interest.

Page | 19
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 respondent’s 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 AGFHA’s 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, AGFHA’s 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 Commissioner’s obligation to

Page | 20
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 COURT’S 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]

Page | 21
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 petitioner’s 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 Micro-Electronics
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

Page | 22
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.

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 Micro-Electronics 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 Micro-Electronics 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 February 25, 2009 Decision of the Court of Tax Appeals En Banc, in CTA EB Case
No. 136, is AFFIRMED. The Commissioner of Customs is 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.

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JOSE CATRAL MENDOZA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA LUCAS P. BERSAMIN*

Associate Justice Associate Justice

ROBERTO A. ABAD
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

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 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

* Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per
Raffle dated July 15, 2009.

1 Rollo, pp. 44-63. Penned by Associate Justice Caesar A. Casanova with Associate Justice
Ernesto D. Acosta, Associate Justice Juanito C. Castañeda, Jr., Associate Justice Lovell R.
Bautista, Associate Justice Erlinda P. Uy, and Associate Justice Olga Palanca-Enriquez,
concurring.

2 CTA Records, pp. 532-552.

3 Id. at 90-95.

4 Id. at 96-100.

5 Id. at 110-136.

6 Id. at 138.

7 Id. at 279-296. Penned by Associate Justice B.A. Adefuin-De La Cruz with Associate Justice
Fermin A. Martin, Jr. and Associate Justice Presbitero J. Velasco, Jr. (now with the Supreme
Court), concurring.

8 SC Decision, id. at 462-473.

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9 Id. at 460-461.

10 Id. at 551-552.

11 Section 29 (1), Article VI of the 1987 Philippine Constitution.

12 431 Phil. 11, 18 (2002).

13 G.R. Nos. 166309-10, March 9, 2007, 518 SCRA 19.

14 Id. at 32-34.

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