G.R. NO.

187425 March 28, 2011

Comm. Of Customs v. AGFHA Inc.

MAIN TOPIC – Modes of Extinguishment of Obligations (Special Rules on Monetary Obligations)

I. FACTS:
1. On December 12, 1993, a shipment containing bales of textile grey cloth arrived at the Manila International
Container Port (MICP).The Customs Commissioner, however, held the subject shipment because its owner/consignee
was allegedly fictitious.
2. AGFHA intervened and alleged that it was the owner and actual consignee of the subject shipment. Eventually, this
dispute reached the SC, which ended with a Writ of Execution ordering the immediate release of the subject shipment
to AGFHA. Asked to explain its consistent failure to execute the writ, the Commissioner explained, 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.
3. Acting on a complaint by AGFHA, the CTA-Second Division adjudged the Commissioner liable to AGFHA,
ordering the Bureau of Customs to pay AGFHA the value of the lost shipment in the amount of US$160,348.08),
subject to the payment of the prescribed taxes and duties, at the time of the importation, and that the Bureau of
Customs liability may be paid in Philippine Currency, computed at the exchange rate prevailing at the time of actual
payment.
4. The CTA En Banc and the CA affirmed the decision of the CTA Second Division.
5. The Commissioner basically argues that the exchange rate on the amount of payment should be computed not on the
time of payment, but on its acquisition cost at the time of importation; and 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.

II. ISSUE/s
1. Whether or not respondent AGFHA is entitled to recover the value of the lost shipment based only on its acquisition
cost at the time of importation
2. Whether or not the present action has been theoretically transformed into a suit against the State, thus BOC enjoys
immunity from suit since it is invested with an inherent power of sovereignty which is taxation.

III. HELD
1. No. 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. Likewise, in the case of Republic of the Philippines represented by the
Commissioner of Customs v. UNIMEX Micro-Electronics GmBH, 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.
2. No. The Court held that circumstances of this case warrant its exclusion from the purview of 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: "the Court cannot turn a blind eye to BOC's
ineptitude and gross negligence in the safekeeping of respondent's goods. 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.

Ponente: Mendoza, J.

Digest Maker: Balina, Namiel Maverick

 G.R. NO. 187425 March 28, 2011

Comm. Of Customs v. AGFHA Inc.

IV. DISPOSITIVE PORTION

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.

V. DOCTRINE
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.

Ponente: Mendoza, J.

Digest Maker: Balina, Namiel Maverick