CTA Case No. 5057 (Decision)

-- REPUBLIC (F nE PHILIPPUES COURT o= TAX APPEALS at.EZON CITY ENGIIEER FRANKLIN POLICRRPIO., C.T.A. CASE NO. 5057 Pet it ioner1 versus - HON. LICERIO C. EVANGELISTA in his capacity as DEPUTY CI�>MISSIONER OF CUSTOMS., Respondent. H- - - - - - - - --- ---------- X DECISION This is an appeal instituted by petitioner fro� the decision of the Deputy Co��issioner of Customs acting under ~he authority of the Commissioner of Custo�s affirming the order of forfeiture handed down by the District Collector of Custo�s of Batangas on several pieces of �achinery more particularly described as follows: a. Special Circular Saw for vertical and horizontal cutting of strips Model Block Tailor BK-1200 with switch gear and contactor control and reinforced main motor, and Sawing Machine, Model TBS soon, b. including switch gear cabinet with contactor for all motors. The facts of this case as gathered fro� the customs records and the stipulation of facts agreed upon by both b30

DECISION - C.T.A. CASE NO. 5057 �:::0 - r;. - parties show that on Apri 1 10, 1987, petitioner participated in an auction sale conducted by the Bureau of Customs and was later on adjudged as the highest bidder of Lot 15 advertised in the Notice of Sale as "15 tons more or less �arble processing �achine, rusty and in junk condition and grinding machine stored at the Mina A�apola Compound, Taguig Metro Manila with a floor price of PG1, 23.4. 35". Petitioner paid the total amount of PG1,250.00 for the said lot <Annex A of the Stipulation of Facts, page 232 of the CTA .records> and as per procedure was issued Gate Pass No. 513G to enable hi� to withdraw the articles that were part of lot 15 fro� customs custody Csee page 241 of Custo�s records). The petition alleges that lot 15 was not co�pletely delivered to hi� as two ite�s were missing from the lot. In reaction to this inco�plete delivery, petitioner wrote a letter) dated April 21, 1987, to the then Collector of Customs Guiller�o Orbos informing the latter that two items supposed to be part of lot 15 awarded to hi� were �issing (page 23G of Custo�s records). In that sa�e letter, petitioner apprised the collector that upon investigation conducted by him he found out that the missing ite�s can be found at the compound of the Carrara Marble Philippines, Inc. in Lipa City, Batangas. In response to the letter, the Collector of Customs b3i.

DECISION - C.T.A. CASE NO. 5057 - 3- Guiller�o Orbos issued a directive ordering several CIID agents and their representatives to proceed to Carrara Marble Philippines, Inc. to verify whether or not petitioner's statements are true. Upon investigation, these agents assigned to go to Marble Phi 1 ippines, Inc. concluded that the machineries found installed in the compound of Carrara Marble were the very sa�e items �issing fro� lot 15, however they were already painted with a different color (page 233 Customs records). It was also revealed in the investigation that representatives of Carrara Marble were not able to produce any proof of payment of duties and ta>ees for the subject �achineries and as a consequence a warrant of seizure and detention was issued by Rolando Yebes, District Collector of Custo�s. Shortly thereafter, seizure proceedings were instituted against these machineries) pursuant to Section 253& and 2530(e) of the Tariff and Customs Code) with Carrara Marble as owner/claimant and petitioner herein as clai�ant/intel"Venor because he clai�s that the subject of the seizure case are part of lot 15 that was awarded to hi� by virtue of the auction sale. In a decision, dated June 24, 1992, the Collector of Custo�s decreed the forfeiture of the subject articles in faYOl" of the government. Petitioner �ade his appeal to the r.. -.� r. u0h..

DECISION - C.T.A. CASE NO. 5057 - 4- Com�issioner of Custo�s who later affir�ed the decree of forfeiture in a decision, dated July 28, 1993. Petitioner then sought reconsideration of the aforesaid decision but this was denied in a letter received on Dece�ber 13, 1993. Petitioner subsequently filed a petition for review with this Court on January 12, 1994 praying for the setting aside of the decision of the Com�issioner and for the delivery of the subject articles to him. In an a�ended petition for review, petit i onel.. also asked for actual and moral damages in the total amount of PSOO,OOO.OO because he alleged that the decision of the Co��issioner was issued with grave abuse of discretion, without or in excess of jurisdiction, and in a manner contrary to law. Respondent initially filed a Motion to Dismiss on the ground of petitioner's lack of cause of action but this Court denied the motion as the arguments raised therein are better passed upon in connection with the �erit of the case. ln answer to the petition, respondent on the wordings of the ter�s and conditions of the sale conducted by the Bureau of Custo�s where petitioner was awarded lot 15, thus: �TERMS AND CONDITIONS "10. Unless otherwise indicated, the articles shall be offered for '!iale 'AS IS, WHERE IS' and the Bureau of Customs gives no b30

DECISION - C.T.A. CASE NO. 5057 - 5- warranty as to their condition. th.aantity, nu�bers, weight or measurement of the articles listed in Notice of Sale is subiect to exact determination before deliyery; in case any excess is discovered, a corresponding increase of bid price will be required, otherwise the excess will be withheld fro� the delivery; Qn the other hand, should a shortage be discovered' a proportionate refund will be made." By its ter�s, respondent maintains that the Bureau of Custo�s gives no warranty as to the condition, quantity, nuaber, weight or �easurement of the articles listed in the notice of sale and that the exact determination of the same is to be deter�ined before deli very. In effect, respondent contends that if the buyer di.scovers that only 7 tons instead of 15 tons as advertised were delivered to him then his remedy would be to file a claim for refund corresponding to the value of the undelivered portion of lot 15 instead of praying fol~ the retrieval of the missing items. Respondent also took issue with the prayer of petitioner for actual and moral damages on the ground that he cannot be aade liable for such as this would be tantaaount to instituting a suit against the State and it is com�on knowledge that the State cannot be sued without its consent. The issue that calls for determination in this case is whether or not the decision of the Coaaissioner of Customs affirming the decree of forfeiture is founded on sound legal and factual grounds to withstand judicial

DECISION - C.T.A. CASE NO. 5057 - &- scrutiny. Intertwined with this issue is the purely factual dete�..�ination of whethel.. or not the s-.abject �achineries earlier described and forfeited in favor of the govern�ent for� part of lot 15 earlier awarded to petit i one,.. as the highest bidder in the auction sale cond-.acted on Rp,.. i 1 10, 1987. It is i�poJ..tant to note at this point that the ve,..y is also the subject of an appeal filed in this Cou,..t on 4, 1993 i nst i t-.ated by Philippines, Inc., the other clai�ant of the sa�e subject �achineries1 and this case is entitled Carrara Marble Philippines, Inc. No. 5039. Such being the case, in the CarraJ�a l'laJ.. ble case was borrowed fo�� use in for�ulating the decision in the instant petition as these Custo�s records contain the sa�e docu�ents utilized in for�ulating the i�pugned decision of the Co��issioner of Petitioner in the instant case is fir� in his conviction that the �issing ite�s later on found in the fo�..� part of 1ot 15 that was eventually sold to hi� via an auction sale conducted by the Bureau of Custo�s. During the hearings

DEC[S[ON - C.T.R. CASE NO. SOS7 - 7- conducteod on theo seoi :zu..~eo proceoeodi ngs of Custo�s Caseo 92- 29 eontitleod Reopublic of theo Philippineos vs. Speocial Circular Saw for veortical and hol~i:zontal c ..ttting of strips �odeol block tailor BK-1200 with switch geoar, contactor control and Reo-eonforceo�eont �ain �otor, eotc.; Carra....a Marbleo Philippineos, lnc. (owneors/clai�ants>; F�..ankl in (Clai�ant/lnteorveonor>, peotitioneor heoreoin phot og�..aphs alleogeodly takeon by hi� on MaJ..ch 28, 1987 showing that theo two iteo�s now �issing WI!'J.. I!' pa....t of lot 15 prior to theo auction saleo (Exhibits "H", "H-1", "H-2", "H-3'', pageo 1987. Peotitioneor Carl Meoyeo�.. Trading, PTE, Ltd., a Singaporeo, atteosting to theo fact that theoir co�pany deoliYI!'J..I!'d only oneo such �achineo �odeol BK 1200 to theo Philippineos on R..,g ..tst 22, 1978 which is theo �achineory beoing clai�eod by theo peotitioneor. Rppareontly, this ceo�..t i ficateo was p�..oduceod to show that theoJ..I!' is only of lot 15 is theo sa�eo �achineo found installeod in theo Theo deocJ..I!'I!' of Phils., lnc., could show no eovideonceo of pay�eont of

DECISION - C.T.R. CRSE NO. 5057 - 8- lnc.. in the sa�e p�~oceeding asseJ~ted the defense that i t could not be held liable for i�port duties as they bought the 2 pieces of �achinery locally fro� Jaina Perez evidenced by two Deeds of Absolute Sale executed on December 20, 1985 and on October 28, 1986 in the total amount of P300,000.00.. The Collector of Custo�s belittled this line of defense because during the seizure proceedings, claiaant Carrara Marble could not produce the seller Further inquiries conducted by the Bureau of C-.tsto�s revealed that no s-.tch Jaina Perez resided in the place and address stated in the deeds of absol -..te sale leading the Collector to conclude that the alleged seller, Jaina Perez, is fictitious .. As to the clai� of herein petitioner, the Collector of Custo�s went on to conclude that such pieces of �achinery were no longer paJ~t of lot lS when it was advertised for sale and that "it was cl andest i nel y reaoved by \tnScJ~up\tl o-.ts el e�ent s during the pre-bidding stage" .. The foregoing theory pJ~opo-.mded by the Collector is suppoJ~ted by the fact that the flooJ~ price of lot lS as advertised was too low to include the alleged �issing pieces of �achinery. lt was the opinion of the Collecto�~ that the p�~evail:ing p�~ice of these two �issing articles would certainly be �ore than the aao-.mt of P&l,234.3S, :its floor p�~:ice as advertised ..

DECISION - C.T.A. CASE NO. 5057 - 9- Moreover., the Collector considers the pl~ice paid by herein petitioner was unrealistically low considering that one of the aissing iteas was "studded with We find the decision of the Coaaissioner of Custoas affiraing the decree of forfeiture and disallowing the claia of petitioner ordered. by the Collector of Custoas inconsistent with the facts as gathered from the Customs and CTA records. We likewise find the decision of the Collector of Customs which becaae the basis of the appealed decision of the Co11aissioner as being incoapat.ible with his earlier admissions and inconsistent with the facts as they occurred, as borne out by the records and the evidence presented during the seizure proceedings. The decision of the Collector, as affiraed by the respondent, maintains that the subject pieces of machinery forfeited in favor of the government were not part of lot 15 so that when petitioner becaae the highest bidder, he becaae entitled only to what was part of lot 15 at the tiae of delivery ainus the two iteas alleged to be ai ssing. The above theory pl~oposed by the Col l ectol~ is haJ~d to believe because froa the start of the investigation in the adainistJ~ative level which led to the eventual uvu I . ,-' -

DECISION - C.T.R. CASE NO. SOS7 - 1() - seizure of the subject articles, several personnel of the Bureau of Custo�s involved in said inquiry and even the Collector hi�self were one in concluding that the pieces of �ach i nery found instal 1 ed in the P�..e�i ses of CaJ..raJ..a Marble Phil., Inc. were part of lot 15 awarded to petitioner in the auction sale held on April 10, 1987. In an order dated February 13, 1992, the Collector of Customs, Luciano Morabe, in a declaration justifying the assumption of jurisdiction of the Bureau of Custo�s over the subject machineries, pronounced,. thus: Acting on the Motion to Dismiss, this Office, after a thorough and careful study of the records, is convinced that the instant �otion has no leg to stand on considering the following legal and factual grounds: 1) The pJ..osec"at ion has presented the evidence that the aJ..ticle "mde�.. q"aestion aJ.. e pa,..t and paJ..cel of lot No. 15 of the auction sale conducted by the Auction & Cargo Disposal Division, port of Manila, on Ap�.. il 10, 1987, and that the sa�e aJ..ticle was awaJ..ded to the winning bidder, Engr. Franklin Policarpio. The prosec"ation also S'-�b�itted evidence which tends to show that as shown in the SwoJ..n State�ent of the COA repJ..esentat i ve that O'-at of 15 tons of S'-tCh bidded aJ..ticles, only about 7 tons thereof were delivered to the highest bidder. As established by docu�entary evidence, subject items were re�oved between the pre-bid inspection on March 1987 and at the time of delivery, in clear violation of Sec. 2530 par. (e) of the Tariff and Custo�s Code of the Philippines. <page 377, Customs records>

DECISION - C.T.A. CASE NO. 5057 - 11 - The CliO agents that were tasked to investigate the allegations of herein petitioner that the missing items can be located at Carrara Marble Phil., Inc. in Batangas, �ade a repo.,..t which confir�ed the Sll.lspicions of herein petitioner when they wrote, thus: Please be info�..��d that as pe.,.. physical inspection made by the undersigned together with the NCP CBatangas Unit> as well as with the cooperation of the Officer-In-Charge of the Carrara l'laJ..ble, the cutting �achine �entioned by the winning bidde�� Mr. Fl..anklin Polical..pio in his attached letter a.,... the ve.,..y sa�� goods found in the vicinity of the Carrara compounds. legal officer, Ms. Esther Villas- Guanzon, after studying the facts of the case to deter�ine whether or not assu�ption of jurisdiction of the Bureau of Custo�s is proper in the case, made the following recommendations to Deputy Commissioner Licerio Evangelista, thus: 1. there is no showing whatsoever that there had been an intervening transaction of whatever nature between the Bureau of Customs and Jaina Perez concerning subject machineries that would have relinquished ownership of the same in favor of the latter; 2. the ACDD would not have advertised subject items for public auction for the lOth time knowing that ownership of the same had already passed to a third person; 3. the actual physical condition of the said machine as shown by the attached pictures taken prior to the bidding indicates that the

DECISION - C.T.R. CRSE NO. 5057 - 12 - sa�e were already greatly depreciated thus co��anding a relatively low floor price; 4. there is a great possibility that subject items were pilfered at a ti�e between the pre-bid inspection made by Engr. Franklin Policarpio in March, 1987 and the ti�e he was to take delivery thereof; 5. the ada�ance of the CARRARA people to show pl..oof of legiti�ate ownel..ship Ol.. legal title to the questioned ite�s gives rise to the suspicion that they have indeed no evidence to show and that the s~tpposed Deed of Sale is a fake and the supposed seller, non-existent; &. ~t~h~e~~o~b~l~~~�~g~a~t~i~o~n~--~o~f--~t~h~e--~B~~:�r~e~a~~~�--~t~o deliver what has been awarded by it to Engr. Policarpio bv �eans of public auction sale is an actionable co��itment which must be dutifullY fulfilled. <Underscoring supplied> (page 261 Customs records) Even the Co�missioner of Customs as respondent in the instant case has ad�itted by way of Stipulation of Facts agreed upon by both parties; that the subject articles are part of lot 15 awarded to petitioner, thus: Proposed Stipulation of Facts by petitioner: Question - S. Will counsel agree/ad�it that said �issing articles found at the Carrara co�pound are the very sa�e articles subject �atter of this case. Sa�e finds support in RnneKes uB" and "Cu aforestated. Question - 6. Will counsel agree/ad�it that even the Collector of Custo�s of Batangas is convinced that the articles in question are part and par~cel of said Lot No. lS, and that they were awarded to petitioner as the highest and winning bidder thereof, in b4..;,_

DECISION - C.T.A. CASE NO. 5057 13 - Custo�s Auction Sale held on April 10, 1987, in f'lani la, of which fact~~otal evidence was utilized by the said Collector i n h i s OrdeJ~ dated F ebJ~~~oaaJ~y 13, 1992, i f only to ,~esolve/dispose "CARRARA J'laJ~ble, lnc.:: f'lotion to Oi5�i55 in batanga5 S.I. No. 03- 91. Sa�e is supported by copy of said Collecto��'s OrdeJ~, heJ~eto attached as Annex ''D" heJ..eof. Answer of Respondent to Petit i one�..' s pl..oposed Stipulation of Facts:: 4. ln connection with Questions - 4 and 5, Counsel so stipulates as to the existence of the docu�ents �entioned therein, the sa�e being part of the ,~ecords and off eJ.. s no objection to the contents thereof. 5. With regard to Question - &, Counsel so stipulated as to the existence of the Order of the Batangas Collector of Custo�s attached as Annex "D" to the Proposed Judicial Stipulation/Ad�ission of Facts/Documents, the sa�e for�ing part of the records and admits the contents thereof. <Underscoring supplied) Finally, in the Answer filed by respondent Co��issioner in the CTA Case entitled Carrara Marble Phil., Inc. vs. CTA Case No. 5039, an appeal instituted against the sa�e decision rendered by hi� regarding the sa�e pieces of �achinery, he following affir�ative defense in justifying the assu�ption of jurisdiction, thus: "The abandoned shipment beca�e lot 15 which was awarded in a public auction�sale at P61,250.00 to Engr. Franklin Policarpio on April 10, 1987. b42

DECISION - C.T.A. CASE NO. 5057 - 14 Photographs taken by Engr. Policarpio showed the subject pieces of �achinery na�ely: 1) Special Circular Saw, Block Tailor BK 1200 2) Dia�ond Sewing Machine Model TBS 50() were a�ong the ite�s covered by lot 15. Howeve,.., on the date of deli very, Ap,.. i l 21, 1987, the �achineJ.. ies we,..e no longe,.. in the Mina-A�apola CY-CFS and were subsequently located at the premises of petitioner" <petitioner referred to is Carrara Marble Phi 1s. , J nc. >� Although the aforequoted ad�ission �ade by the Co��issioner was made in another. case, appropriate to utilize it in the instant case to prove an i�poJ..tant point. entitled Vda. de Alvarez vs. Court of Appeals, 231 SCRA "An ad�ission in a pleading in one action �ay be ad�itted in evidence against the pleader or his successor-in-interest at the subsequent trial of the sa�e suit or in another action involving the sa�e issue or in which the ad�ission is pertinent to the iss11.1es." It is therefore clear that the subject �achineries forfeited in favor of the government were part of lot 15 awarded to petitioner in the public auction sale held on Apri 1 10, 1987, being the highest bidder. As a consequence, the Bureau of Customs as seller has an actionable com�it�ent to deliver these subject articles

DECISION - C.T.A. CASE NO. 5057 - 15 - to petitioner pursuant to Article 1458 of the Civil Code of the Philippines which provides, thus: ARTICLE 1458. By the contract of sale one of the contracting parties obligates hi�self to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in �oney or its equivalent. Having sold lot 15 including the subject two (;2) ite�s by way of a public auction sale and having received a corJ-esponding the petitioner, these �achineries should not be forfeited but should be delivered to the buyer, petitioner herein, as part of the seller's legal obligation under the contract of sale. To forfeit the very sa�e ite�s earlier sold by way of a public auction sale is tanta�ount to a double recovery on the part of the govern�ent. The relatively low pJ-ice of the subject ite�s can be eHplained by a cm..so�-y look at the photog�..aphs taken of the �issing articles (page 259, show that these �achine�-ies have ah-eady dep�-eciated and as correctly advertised in the Notice of Sale a�-e in "rusty and in junk condition". The conclusion of the Collecto,.. that the Dia�ond Sawing Machine is "studded studded". b 4�:t

DEClS[ON - C.T.A. CASE NO. SOS7 - l& - The contention of respondent that petitioner should have asked for a J"'ef,und when he di scoveJ"'ed that only 7 tons out of 15 tons were delivered is without aerit. We agree with the petitioner that this refund theOJ"'Y proposed by J"'espondent applies only in a situation wheJ"'e the �issing articles can no longer be found. ln the instant case, the aissing items had already been located at the pre�ises of the Carrara Marble Phil., Jnc. as pointed out by the petitioner and as established by the records of this case, hence it is the legal commitment of the Bureau of Customs to retrieve these items fro� Carrara Marble and deliver it to petitioner. Anything short of this obligation would be contrary to law and equity. However, the claia of petitioner for actual and the Coaaissioner of Custoas cannot lie as this liability will ultiaately fall 'Upon the govern�ent which would in effect be a suit against the State and the Constitution of the Philippines provides that the State cannot be sued without its consent. The Supreae Court in the case entitled Syquia vs. Alaeda Lopez, 84 Phi l � 312, ruled thus: "However, and this is important, where the judg�ent in such a case would result not only in the recovery of possession of the property b45

DECISION - C.T.R. CASE NO. 5057 - 17 in favor of said citizen but also in a charge against or financial liability to the Govern�ent, then the suit should be regarded as one against the government itself, and consequently, it cannot prosper or be validly entertained by the courts except with the consent of said government." WI-EREFORE, in view of the foregoing, the decision of the Commissioner of Custo�s affirming the decree of forfeiture of the 2 pieces of �achinery �ore particularly described as follows: a. Special Circular Saw for vertical and horizontal cutting of strips Model Block Tailor BK-1200 with switch gear and contactor control and reinforced main motoJ~, and b. Dia�ond Sawing �achine, Model TBS 5000, including switch gear cabinet with contactor for all motors. is hereby REVERSED. Respondent Co��issioner is ordered to deliver the above-described ite�s to petitioner being the highest bidder of said ite�s in the public auction sale held on April 10, 1987. SO ORDERED. IE CONCUR: ~~~ ERNESTO D. ACOSTA Judge tl4G

DECISION - C.T.A. CASE NO. 5057 - 18 - CERTIFICATION I hereby certify that this decision was reached after due consultation among the �e�bers of the Court of TaM Appeals in accordance with Section 13, Article VIII of the Constitution. ~--Q--~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals