Commissioner of Customs v. Unimex Micro-Electronics GmBh

SIXTH DIVISION [CA-G.R. SP Nos. 75359 and 75366. August 30, 2004.] COMMISSIONER OF CUSTOMS , petitioner , vs . UNIMEX MICRO-ELECTRONICS, GmBh , respondent . UNIMEX MICRO-ELECTRONICS, GmBh , petitioner , vs . COMMISSIONER OF CUSTOMS , respondent . D E C I S I O N TRIA TIRONA , J p : Before Us are two (2) consolidated Petitions for Review under Rule 43 of the 1997 Revised Rules of Court. In CA-G.R. SP. No. 75359, petitioner Commissioner of Customs (hereafter Commissioner) seeks to reverse and set aside the Court of Tax Appeals' Decision (hereafter CTA Decision), 1 dated 19 September 2002, ordering the Commissioner to pay Unimex Micro-electronics GmBh (hereafter Unimex) the amount of the P8,675,200.22 representing the commercial value of the shipment at the time of importation. In CA-G.R. SP No. 75366, petitioner Unimex prays for the modification of CTA Decision by changing the basis of the peso-dollar exchange rate to be that prevailing at the time of actual payment instead of at the time of shipment and imposing legal interests thereon. The relevant facts, as found by the Court of Tax Appeals and as culled from the records, are as follows: Sometime in April 1985, Unimex shipped one 40-foot container and 171 cartons containing Atari game computer cartridges, duplicators, expanders, remote controllers, parts and accessories (hereafter subject shipment) to Handyware Phils., Inc. (hereafter Handyware). The subject shipment was transported through Don Tim Shipping Corporation with Evergreen Marine Corporation as shipping agent. The subject shipment arrived at the port of Manila on 09 July 1985. On 11 July 1985, customs agents conducted a spot check where it was discovered that the subject shipment did not tally with the description of the goods in the Inward Foreign Cargo Manifest. Hence, the subject shipment was recommended for seizure and detention. Accordingly, on 03 March 1987, the Bureau of Customs (hereafter BOC) issued a warrant of seizure and detention against the importation, after seizure proceedings had been instituted against Handyware. cEaCTS On 05 June 1987, the Collector of Customs issued an Order of Default against Handyware for its failure to appear in the proceedings before it and, after ex-parte hearing, decreed the forfeiture of the goods in favor of the government. On 15 June 1987, Unimex filed a Motion for Intervention and to Lift Judgment by Default, as shipper and owner of the goods, which was granted in the Collector of Customs' Order, dated 15 December 1987. However, in the Commissioner's 6th Indorsement, he declared that the 05 June 1987 Decision of the Collector of Customs had already become final and executory. Thus, affirming the decree of forfeiture of the subject shipment in favor of the government. Aggrieved by said Indorsement, Unimex filed a Petition for Review before the Court of Tax Appeals (hereafter CTA) on 29 December 1988 which was docketed as CTA Case No. 4317. On 15 June 1992, CTA rendered a Decision (hereafter Original Decision), 2 reversing the decree of forfeiture and ordering the release of the subject shipment to Unimex upon compliance with certain conditions. Said decision became final and executory on 20 July 1992. 3 Unfortunately, Unimex's previous counsel failed to secure the necessary Writ of Execution to enforce the Original Decision, but instead went after the shipper, Don Tim Shipping Corporation and Evergreen Marine Corporation, by filing a. separate case against them. However, Unimex lost said case. Hence, on 05 September 2001, Unimex timely filed a Petition 4 for the Revival of the Original Decision. Unimex prayed for the immediate release of the subject shipment or payment of the subject shipment's value with damages and interests thereon, in the alternative. On 10 October 2001, the Commissioner filed a Motion for Extension of Time to File Answer, 5 which was denied in CTA's Order, 6 dated 16 October 2001, for belated filing. Consequently, Unimex filed its Motion to Declare Respondent in Default and for Petitioner to Submit Evidence Ex-Parte , 7 dated 05 November 2001, which was granted in CTA's Resolution, 8 dated 03 January 2002. During the ex-parte reception of Unimex's evidence, it presented Atty. Ronnie C. Silvestre (hereafter Silvestre), Chief of Law Division of Port of Manila, Bureau of Customs and Fidel B. Villanueva IV (hereafter Villanueva) Assistant Chief of the Auction and Cargo Division, Port of Manila, as witnesses. Silvestre testified that when he received the subpoena issued by the CTA, he immediately referred the matter to the Auction Cargo Dispose Division of the Port of Manila. He was informed that the subject shipment could no longer be found in BOC's warehouse. 9 On the other hand, Villanueva confirmed Silvestre's testimony, testifying that at present; there are only two (2) BOC warehouses and that the subject shipment cannot be found in either warehouse. 10 On 19 September 2002, CTA rendered its assailed Decision, finding that the Original Decision sought to be revived can no longer be executed due to the loss of the subject shipment. Thus, it ordered the Commissioner to pay Unimex the commercial value of the subject shipment at the time of its importation with the prevailing exchange rate at that the time, subject to the payment of the proper taxes, duties, fees and other charges thereon. TaDCEc On 09 October 2002, the Commissioner filed a Motion for Reconsideration 11 arguing that CTA's Decision varied the Original Decision by converting it from an action for specific performance into a money judgment. On 18 October 2002 Unimex, likewise filed its Motion for Reconsideration, 12 contending that the exchange rate to be applied must be that prevailing at the time of actual payment and not at the time of importation. Moreover, Unimex claims that the CTA erred in not imposing legal interests. On 16 January 2003, CTA issued a Resolution, 13 denying both motions for reconsideration. From said CTA Decision and Resolution, the Commissioner filed a Petition for Review 14 before Us on 05 February 2003 docketed as CA-G.R. SP No. 75359 and raffled to the 14th Division of this Court. Unimex, likewise, filed a separate Petition for Review 15 before Us on 06 February 2003 docketed as CA-G.R. SP No. 75366 and raffled to the 10th Division. On 03 June 2004, Unimex filed an Urgent Motion for Consolidation, 16 praying that the two petitions be consolidated since they arose from the same set of facts. The Special 8th Division of this Court granted the same in its Resolution, 17 dated 12 July 2004, and the two petitions were accordingly consolidated before the 6th Division. In CA-G.R. SP No. 75359, the Commissioner assigns the following errors allegedly committed by CTA, to wit: "I. THE COURT OF TAX APPEALS ERRED IN VARYING THE ORIGINAL DECISION. II. THE COURT OF TAX APPEALS ERRED IN NOT FINDING THAT RESPONDENT UNIMEX'S ACTION IS ALREADY BARRED BY LACHES. III. THE COURT OF TAX APPEALS ERRED IN NOT DISMISSING THE PETITION." On the other hand, Unimex, in-CA-G.R. SP No. 75366, raises the following errors committed by CTA, thus: "I. THE HONORABLE COURT OF TAX APPEALS ERRED WHEN IT BASED THE AWARD ON THE PESO-DOLLAR EXCHANGE RATE PREVAILING IN 1985 OR AT THE TIME WHEN THE GOODS WERE UNLAWFULLY WITHHELD BY THE RESPONDENT COMMISSIONER FROM THE PETITIONER; II. THE HONORABLE COURT OF TAX APPEALS ERRED WHEN IT DID NOT AWARD INTEREST AT THE RATE OF SIX PERCENT (6%) PER ANNUM FROM THE TIME WHEN THE GOODS OF THE PETITIONER WERE UNLAWFULLY WITHHELD BY THE RESPONDENT IN 1985 UP TO THE TIME OF FINALITY OF JUDGMENT; III. THE HONORABLE COURT OF TAX APPEALS ERRED WHEN IT DID NOT AWARD INTEREST AT THE RATE OF TWELVE (12%) PER ANNUM FROM THE TIME THE JUDGMENT HAS BECOME FINAL AND UNTIL AT THE TIME WHEN FULL PAYMENT HAS BEEN MADE BY THE RESPONDENT." CA-G.R. SP No. 75359 The Commissioner points out that the CTA erred in varying the Original Decision sought to be revived. Petitioner argues that since Unimex's petition is for the revival of the original judgment, a favorable judgment on said petition could only decree such relief as awarded in the original judgment. Hence, considering that the original judgment ordered the release of the subject shipment, CTA could only order a similar relief in Unimex's petition. IECcAT Harping on the same argument he raised before the CTA, the Commissioner contends that Unimex's action is already barred by laches considering that Unimex slept on its right when it brought the suit for revival only on 05 September 2001 or more than nine (9) years after the original decision had attained finality. Finally, the Commissioner claims that the CTA erred in ordering the payment of the subject shipment's commercial value from the proceeds of sales of goods or properties seized or forfeited by the BOC. According to the Commissioner, this cannot be done since any charge against the government requires a corresponding appropriation and, therefore, cannot simply be decreed by judicial order to be satisfied out of the proceeds of forfeited goods being sold by BOC. We are not persuaded. Indeed, the general rule is that once a decision becomes final, even the Court which rendered it cannot lawfully alter or modify the same, especially where the alteration or modification is material and substantial. 18 However, this principle admits of exceptions. One exception is where facts and/or events transpire after a decision has become executory, which facts and/or events present a supervening cause or reason, which renders the final and executory decision no longer enforceable. Under the law, that court may modify or alter a judgment even after the same has become executory whenever circumstances transpire rendering its execution unjust and inequitable, as where certain facts and circumstances justifying or requiring such modification or alteration transpired after the judgment has become final and executory. 19 In that instant case, it is beyond dispute that after the Original Decision became final and executory, the subject shipment was unexplainably lost while in the custody of the BOC. Undoubtedly, this fact constitutes a supervening event, warranting the modification of the Original Decision since it is now beyond the capability of the Commissioner to release the subject shipment to Unimex in compliance with the Original Decision's decree. Therefore, the CTA correctly modified the Original Decision in order to harmonize the disposition with the prevailing circumstances. With respect to the Commissioner's argument that Unimex's action is already barred by laches. We find the same bereft of merit. As aptly ruled by the CTA, "there was never negligence or omission to assert its (Unimex) right within a reasonable period on the part of the petitioner. In fact, from the moment it intervened in the proceedings before the Bureau of Customs up to the present time, petitioner is diligently trying to fight for what it believes is right. Petitioner may have failed to secure a writ of execution with this court when the decision in CTA Case No. 4317 became final and executory due to wrong legal advice, yet it does not mean that it was sleeping on its right for it filed a case against the shipping agent and/or sub-agent. Therefore, there never was an occasion wherein petitioner abandoned or declined to assert its right." 20 As regards the Commissioner's third assigned error, suffice it to state that, as correctly declared by the CTA, "with the existence of circumstances unique and peculiar in this case and in the interest of justice and fair play, the rule on immunity from suit of the Bureau of Customs should not apply. For it is glaringly evident that the goods were lost while in its custody to the great detriment of herein petitioner. In the case of Mison vs. Commission on Audit (187 SCRA 445), the Supreme Court upheld the decision of the Commissioner who ordered the Bureau of Customs to pay a vessel owner the value of the vessel which had been taken under illegal custody by the Bureau and sank while under its custody. Moreover, no less than the Constitution mandates that all public officers and employees should serve with responsibility, integrity and efficiency. Were it not for the negligence of the Bureau's officers and employees, the goods would still be in its warehouse." 21 As admitted by the officers of the BOC, they were not able to find the subject shipment in their warehouse. Worse, they cannot even trace what happened to the subject shipment through papers because there were no transition records involving the same. It was not even included in its inventory list. 22 As it is, the subject shipment mysteriously vanished under the very nose of the responsible government agency, which is supposed to be its committed custodian. Such gross and unacceptable negligence should not and must not be countenanced. Relevantly, in the case of EPG Construction Co. vs. Vigilar . 23 the Supreme Court disregarded the doctrine of state immunity and held the State liable, thus: "Thus, in Amigable vs. Cuenca , 24 this Court, in effect, shred the protective shroud which shields the State from suit, reiterating our decree in the landmark case of Ministerio vs. CFI of Cebu 25 that " the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen ." It is just as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained. 26 Although the Amigable and Ministerio cases generously tackled the issue of the State's immunity from suit vis a vis the payment of just compensation for expropriated property, this Court nonetheless finds the doctrine enunciated in the aforementioned cases applicable to the instant controversy, considering that the ends of justice would be subverted if we were to uphold, in this particular instance, the State's immunity from suit. aSECAD To be sure, this Court as the staunch guardian of the citizens' rights and welfare cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the perpetration thereof . Justice and equity sternly demand that the State's cloak of invincibility against suit be shred in this particular instance, and that petitioners-contractors be duly compensated on the basis of quantum meruit for construction done on the public works housing project." (Emphasis Ours) CA-G.R. SP No. 75366 Unimex avers that the prohibition under RA 529 27 does not apply to import-export and other international banking, financial investment and industrial transactions. Considering that the importation of the subject shipment is a transaction covered by the exemption under RA 4100, 28 the CTA erred in using the prevailing peso-dollar exchange rate at the time of importation instead of the prevailing rate at the time of actual payment pursuant to RA 4100. Unimex likewise posits that it is entitled to 6% and 12% interest on the monetary award. Contrary to the ruling of CTA that Unimex is not entitled to interests since the case does not involve a monetary obligation or a loan or forbearance of money, Unimex cited the case of Eastern Shipping Line, Inc. vs. C.A ., 29 where the Supreme Court ruled, thus: "2. When an obligation, NOT CONSTITUTING A LOAN OR FORBEARANCE OF MONEY, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum . No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount of finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit." (Emphasis ours) Unimex argues that the CTA ignored the above-cited guidelines in denying the imposition of the appropriate interests on the monetary award. Unimex further claims that it is entitled to the 6% interest from July 1985, the time when it allegedly made an extra-judicial demand for the release of the subject shipment, until judgment becomes final. The petition is impressed with merit. At the outset, it bears stressing that BOC's obligation to return the subject shipment did not arise from an import-export contract, but from a quasi-contract, particularly solutio indebiti, enshrined in Article 2154 of the Civil Code, which provides: "Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises." The appropriate penalty for misdeclaration of cargoes is merely a fine equivalent to P10,000.00. 30 Thus, BOC acted in bad faith when it erroneously seized the subject shipment. Consequently, when the subject shipment was lost under the custody of BOC the CTA correctly ordered the Commissioner to compensate Unimex of its loss by paying the subject shipment's value in accordance with Article 2159 of the Civil Code, to wit: "Art. 2159. Whoever in bad faith accepts an undue payment, shall pay legal interest if a sum of money is involved, or shall be liable for fruits received or which should have been received if the thing produces fruits. caEIDA He shall furthermore be answerable for any loss or impairment of the thing from any cause, and for damages to the person who delivered the thing, until it is recovered." Verily, this gave rise to a foreign currency-incurred obligation since BOC's obligation to return the value of the subject shipment is payable in foreign currency. In fact, the CTA determined the value of the subject shipment in the amount of DM 1,310,372.00, which it converted to its dollar equivalent in the amount of $466,882.54. 31 However, in converting BOC's foreign currency-incurred obligation in Philippine currency, CTA used the peso-dollar exchange rate prevailing at the time of its importation. The CTA stressed that BOC's obligation did not arise from an import-export transaction nor did the government enter into a contractual obligation with Unimex. Thus, the CTA concluded that the case does not involved enforcement of one's right arising from an import-export transaction in order that Section 1 of RA 4100 can be availed of to justify the application of the peso-dollar exchange rate at the time of payment. We do not agree. Under RA 529, 32 stipulations on the satisfaction of obligations in foreign currency are void. 33 Subsequently, to encourage foreign investments and to cope with the requirements of international trade and banking transactions, RA 4100 34 was enacted amending RA 529 by exempting the following transactions from the prohibition contained under RA 529, to wit: "a) transactions where the funds involved are the proceeds of loans or investments made directly or indirectly, through bona fide intermediaries or agents, by foreign governments, their agencies and instrumentalities, and international financial banking institutions so long as the funds are identifiable, as having emanated from the sources enumerated above; b) transactions affecting high-priority economic projects for agricultural, industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds; c) forward exchange transactions entered into between banks or between banks and individuals or juridical persons; d) import-export and other international banking, financial investment and industrial transactions." 35 However, on 11 June 1996, RA 8183 was enacted, expressly repealing RA 529 as amended, thus: "SEC. 2. Republic Act Numbered Five Hundred and Twenty-Nine (R.A. No. 529), as amended, entitled "An Act to Assure the Uniform Value of Philippine Coin and Currency" is hereby repealed." As the law now stands, the prohibition on payment of domestic incurred obligations in foreign currency is effectively lifted. Nonetheless, RA 8183 did not provide for the applicable rate of exchange for the conversion of foreign currency-incurred obligations in their peso equivalent. Thus, the Supreme Court in the case of C.F. Sharp & Co. vs. Northwest Airlines, Inc. , 36 enunciated: "The repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition on the stipulation of currency other than Philippines currency, such that obligations or transactions may now be paid in the currency agreed upon by the parties. Just like R.A. No. 529, however, the new law does not provide for the applicable rate of exchange for the conversion of foreign currency-incurred obligations in their peso equivalent. It follows, therefore, that the jurisprudence established in R.A. No. 529 regarding the rate of conversion remains applicable. Thus, in Asia World Recruitment, Inc. v. National Labor-Relations Commission , 37 the Court, applying R.A. 8183, sustained the ruling of the NLRC that obligations in foreign currency may be discharged in Philippine currency based on the prevailing rate at the time of payment. The wisdom on which the jurisprudence interpreting R.A. No. 529 is based equally holds true with R.A. 8183. Verily, it is just and fair to preserve the real value of the foreign exchange-incurred obligation to the date of its payment." (Emphasis Ours) Hence, it is now a settled rule that foreign currency-incurred obligations may be discharged in Philippine currency based on the prevailing rate at the time of payment in order to preserve its real value to the date of its payment. Consequently, in line with the prevailing jurisprudence on the matter and considering that the government's obligation was incurred after the enactment of RA 529, the applicable peso-dollar exchange rate should be that prevailing at the time of actual payment in order to preserve the value of the subject shipment. Thus, Unimex is entitled to actual damages pertaining to the value of the subject shipment in the amount of $466,885.54 to be converted at the peso-dollar exchange rate prevailing at the time of actual payment. CTA likewise erred in not applying the guidelines articulated by the Supreme Court in the case of Eastern Shipping Line, Inc. vs. C.A. 38 While it is true that the monetary award did not involve a loan or forbearance of money, it does not preclude the court from imposing legal interests thereon since legal interests may be imposed upon an obligation , NOT CONSTITUTING A LOAN OR FORBEARANCE OF MONEY, which was breached , as extant in the instant case. Considering that the BOC was grossly negligent in handling the subject shipment, this Court finds Unimex entitled to legal interests. Accordingly, the actual damages thus awarded shall be subject to 6% interest per annum . Be that as it may, such interest shall accrue only from the date of the CTA Decision on 19 September 2002 since it is from this time that the quantification of Unimex's damages have been reasonably ascertained. Contrary to Unimex's claim that it made an extra-judicial demand for the delivery of the goods sometime in July 1985, there is nothing on the records substantiating the same. Moreover, the CTA already ruled, which We quote with approval, thus: "We did not consider the request of Handyware to verify the subject goods as an extra-judicial demand on the respondent to deliver the goods." Finally, Unimex is likewise entitled to 12% interest per annum in lieu of 6% per annum from the time this Decision becomes final and executory until fully paid, inasmuch as the interim period is equivalent to a forbearance of credit. IcESaA WHEREFORE, the appealed Decision, dated 19 September 2002, is hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is adjudged liable to Unimex for the value of the subject shipment in the amount of $466,885.54. 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 from 19 September 2002 up to its finality. Upon finality of this Decision, the rate of legal interest shall be 12% per annum until the value of the subject shipment is fully paid. SO ORDERED. Reyes and Reyes, Jr . , JJ . , concur. Footnotes 1. Records, p. 148. 2. Records, p. 6. 3. Entry of Judgment, date 20 July 1992. Records, p. 58. 4. Records, p. 1. 5. Ibid , p. 34. 6. Ibid , p. 37. 7. Ibid , p. 38. 8. Ibid, p. 46. 9. TSN, 30 January 2002, pp. 1112. 10. Ibid, pp. 2123. 11. Records, p. 165. 12. Ibid, p. 171. 13. Records, p. 229. 14. CA-G.R. SP No. 75359 Rollo , p. 1. 15. CA-G.R. SP No. 75366 Rollo, p. 2. 16. Ibid, p.160. 17. Ibid, p. 165. 18. Samson vs. Montejo , 9 SCRA 419 (1963). 19. Galindez vs. Rural Bank of Llanera, Inc., 175 SCRA 132 (1989); Aboitiz Shipping Employees Association v. Trajano, 278 SCRA 387 (1997); David vs. CA, 316 SCRA 710(1999); Pacific Mills, Inc. vs. Padolina, 346 SCRA 559 (2000); Abalos vs. Philex Mining, Corp., 393 SCRA 134 (2002); Megaworld Properties and Holdings, Inc., vs. Cobarde G.R. No. 156200, 31 March 2004. 20. CTA's Resolution, dated 16 January 2003, p. 3. Records, p. 231. 21. CTA Decision, dated 19 September 2002, pp. 78. Records, pp., 154155. 22. TSN, dated 30 January 2002, pp. 2225. 23. 354 SCRA 566 (2001). 24. 43 SCRA 360 (1972); De los Santos vs. Intermediate Appellate Court, 223 SCRA 11 (1993). 25. 40 SCRA 464 (1971). 26. Ibid. 27. Any Act to Assure Uniform Value to Philippine Coin and Currency. 28. An Act to Amend Section One of Republic Act Numbered Five Hundred Twenty-Nine, Entitled "An Act to Assure The Uniform Value of Philippine Coin and Currency." 29. 234 SCRA 78 (1994). 30. Republic Act No. 1937 "An Act to Revise and Codify the Tariff and Customs Laws of the Philippines," Section 2521. "SECTION 2521. Failure to Supply Requisite Manifests . If any vessel or aircraft enters or departs from a port of entry without submitting the proper manifests 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. The same fine shall be imposed upon any arriving or departing vessel or aircraft if the master or pilot in command shall fail to deliver or mail to the Auditor General a true copy of the manifest of the incoming or outgoing cargo, as required by law." 31. DM 1,310,372.00 x .3563 US$ = US$466,885.54 32. "Any Act To Assure Uniform Value To Philippine Coin and Currency", approved on 16 June 1960. 33. Section 1, RA 529. 34. Approved on 19 June 1969. 35. Section 1, RA 4100. 36. 381 SCRA 314 (2002); citing Asia World Recruitment, Inc. vs. National Labor-Relations Commission , 313 SCRA 1 (1999); reiterated in the recent case of Bank of the Philippine Islands vs. Leobrera , G.R. No. 137147, 18 November 2003. 37. Supra . 38. Supra, note 31.