Commissioner of Customs vs AGFHA Incorporated

GR 187425
March 28, 2011

FACTS

A shipment containing bales of textile grey cloth arrived at Manila International

Container Port.

Customs held the subject shipment because its owner/consignee was allegedly
fictitious.

Later, AGFHA intervened claiming it was the owner and actual consignee of the
shipment

After the seizure and forfeiture proceedings, Collector of Customs ordered the
forfeiture of the shipment in favor of the government affirmed by the Commissioner
of Customs

CTA 2nd Division revered the Customs decision and ordered immediate release of the
shipment to AGFHA

Customs filed an appeal before Court of Appeals so CTA 2nd Division held in abeyance
its action on the motion for execution

Court of Appeals denied the appeal of Customs hence latter elevated it to the
Supreme Court however the SC dismissed the case and the judgment became final

Since the SC judgment became final and executory, CTA 2nd Division issued a Writ of
Execution directing Customs to effect the immediate release of the shipment; BUT the
WRIT WAS RETURNED UNSATISFIED

Customs explained that despite diligent efforts to obtain the necessary information
and the length of time that had elapsed since the shipment arrived at the BOC,
Customs could no longer determine the status, whereabouts and disposition of
said shipment (nagdanghag lang ni ang Customs)

CTA 2nd Division adjudged Customs liable to AGFHA for the value of the shipment
(US$160,348.08) which may be paid in Philippine currency, computed at the exchange
rate prevailing AT THE TIME OF ACTUAL PAYMENT
 Customs filed a Motion for Partial Reconsideration AGFHA is only entitled to recover
the value of the lost shipment BASED on its actual acquisition cost AT THE TIME OF
IMPORTATION

CTA 2nd Division ruled that in favor of AGFHA

Arguments of Customs
- AGFHA is entitled to recover the value of the lost shipment based on its acquisition
cost at the time of importation

- The action has been transformed into a suit against the State therefore satisfaction of
the claim must be pursued in accordance with rule laid down in PD 1445 to recover,
AGFHA would have to filed a money claim with COA

- 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."

Arguments of AGFHA
- 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.

- Doctrine of governmental immunity cannot serve as an instrument to perpetrate

injustice against a citizen

RULING

Topic: LIABILITY FOR LOST SHIPMENT Tariff and Customs Topic

1. WON AGFHA is entitled to recover the value of its lost shipment based on the acquisition
cost AT THE TIME OF ACTUAL PAYMENT or AT THE TIME OF IMPORTATION?

Court held that AGFHA is entitled to recover the value of its lost shipment based on
the acquisition cost AT THE TIME OF PAYMENT - 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.
The rate of exchange for the conversion in the peso equivalent should be the PREVAILING
RATE AT THE TIME OF PAYMENT

The court cited the case of Zagala vs Jimenez, interpreting the provisions of RA 529
stipulations on the satisfaction of obligations arising 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.

Since RA 529 does not provide for the rate of exchange for the payment of foreign currency
obligations incurred after its enactment, Court held in a number of cases that RATE OF
EXCHANGE FOR THE CONVERSION IN THE PESO EQUIVALENT SHOULD BE THE PREVAILING
RATE AT THE TIME OF PAYMENT

Likewise, in the case of Republic of the Philippines represented by the Commissioner of

Customs v. UNIMEX Micro-Electronics 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

Topic: State Immunity Doctrine; Exception

2. Can the Bureau of Customs invoke State Immunity to evade its liability?

NO. Commissioner cannot escape liability for the lost shipment of goods. Doctrine of
State Immunity cannot be used to perpetrate injustice against an ordinary citizen.

Court cannot turn a blind eye to BOC's ineptitude and gross

As previously discussed, the
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.

this Court, as the

In Department of Health v. C.V. Canchela & Associates, we enunciated that
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.