G.R. No. 123263 - People vs. Metropolitan Trial Court of Quezon City, Branch 32

In July 1963, the SS "Toreador" delivered into the custody of the Bureau of Customs one (1) case of compressor parts and two (2) boxes of diesel engine parts.
The shipment was sent from New York and consigned to Bislig Bay Lumber Co.
The Bureau of Customs received the shipment and, in the process of delivery, held one (1) box in bad order.
It was determined that various items within the diesel engine parts box were missing, amounting to a loss of P1,076.43.

For the loss incurred due to the missing items, American Insurance Company paid the consignee the amount of P1,076.43 as per the insurance coverage.
Acting as subrogee to the consignee, American Insurance Company subsequently sought to recover the said amount.

On July 20, 1964, American Insurance Company filed a complaint before the City Court of Manila.
The complaint sought the recovery of P1,076.43, with legal interest accruing from the date of filing.

The City Court of Manila rendered a decision ordering the defendant to pay the sum of P1,076.43 with accompanying legal interest.
Defendants, being the Republic of the Philippines and the Bureau of Customs, appealed the decision.

After the defendants answered and interposed non-suability, and after partial stipulation on the exhibits for the lost parts, the Court of First Instance rendered a decision on January 13, 1966.
The Court of First Instance dismissed the case based on two key grounds:

The Republic of the Philippines may not be sued without its consent.
The Bureau of Customs, being merely an agency of the government, has no capacity to sue or to be sued.

The central legal question raised in the appellate proceedings was: Can the Republic and the Bureau of Customs be sued in this context?

Whether the Republic of the Philippines may be sued without its consent in cases involving governmental functions.

Examination of the principle that the government, as a sovereign entity, requires its consent to be subject to lawsuits.

Whether the Bureau of Customs, as an agency of the government, has the legal capacity to be sued.

Analysis of the agency’s role as a mere instrumentality of the state in performing governmental functions.

The applicability of precedents related to governmental immunity, specifically in the context of operational acts required for taxation and customs administration.

Reference is made to the precedent in Mobil Philippines Explorations, Inc. v. Customs Arrastre Service and Bureau of Customs regarding suit restrictions.