Carrara Marble Philippines, Inc. v. Commissioner of Customs
REITERATIONFacts
The Antecedents: The Collector of Customs conducted a public auction sale of abandoned articles, including Lot 15, described as "15 tons more or less, of marble processing machine and grinding machine, rusty and in junk condition." Lot 15 was awarded to Engr. Franklin G. Policarpio as the highest bidder. After taking delivery, Engr. Policarpio discovered that a Special Circular Saw and a Diamond Sawing Machine, supposed to be part of Lot 15, were missing. These missing machineries were later found installed in the compound of petitioner Carrara Marble Philippines, Inc. Consequently, the machineries were seized for alleged violations of Section 2536 (non-payment of duties and taxes) and Section 2530(e) (illegal removal of articles from warehouse) of the Tariff and Customs Code (TCC). Procedural History: During the seizure and forfeiture proceedings, Carrara Marble Philippines, Inc. failed to present evidence of payment of duties and taxes, claiming local purchase from Jaina Perez via deeds of sale. Engr. Policarpio intervened, claiming ownership as the highest bidder. The Collector of Customs declared the machineries forfeited in favor of the government. The Commissioner of Customs affirmed this decision. Carrara Marble Philippines, Inc. appealed to the Court of Tax Appeals (CTA), as did Engr. Policarpio. The CTA dismissed Carrara Marble's petition, affirmed the Commissioner's authority, and ordered the delivery of the articles to Policarpio. The Court of Appeals sustained the CTA, holding that the contract of sale with Policarpio allowed for a refund in case of short-delivery, implying duties remained unpaid, thus authorizing seizure. The Court of Appeals also noted that Carrara Marble's claim of good faith conflicted with Policarpio's ownership claim and that its deeds of sale were merely prima facie evidence, with the burden of proof under Section 2535 of the TCC resting on the claimant. Carrara Marble's motion for reconsideration of the Court of Appeals' decision was denied for failure to state material dates. The Petition: Petitioner Carrara Marble Philippines, Inc. filed a petition for review on certiorari, arguing that the Court of Appeals erred in dismissing its motion for reconsideration and in affirming the forfeiture proceedings. Petitioner contended that the Bureau of Customs lacked jurisdiction as importation had terminated, that it had a prior right as a buyer in good faith, that there was no probable cause for seizure, and that compromise should have been allowed.
Issue(s)
Whether the Court of Appeals correctly dismissed the petition for failure to comply with the material dates rule under Section 1, Rule 9 of its Revised Internal Rules of Procedure. Whether the forfeiture of articles in the possession of a third party after a public auction sale was proper, and whether the importation of the subject machineries had been terminated. Who has the right to retain possession over the machineries. Whether a compromise offer is allowable when the subject machineries have already been awarded to the highest bidder in a public auction sale.
Ruling
The petition is dismissed for lack of merit, and the challenged decision of the Court of Appeals is affirmed.
Ratio Decidendi
On the dismissal of the motion for reconsideration: The Court held that petitioner Carrara Marble Philippines, Inc. could not find fault with the denial of its motion for reconsideration. The Court found that petitioner admitted non-compliance with the requisites of Section 1, Rule 9 of the Revised Internal Rules of Procedure of the Court of Appeals, as nothing in the motion indicated that it was filed on time. The Court emphasized that the rule was designed to save the Court of Appeals from reviewing the record to determine whether the motion was indeed filed on time, and the anterior Compliance filed by petitioner did not cure the defect. On the propriety of forfeiture, the right to possession, and the termination of importation: The Court affirmed that the Tariff and Customs law subjects to forfeiture any article removed contrary to law from any public or private warehouse under customs supervision, or released irregularly from Customs custody. Before forfeiture proceedings, the law requires probable cause, after which the burden of proof shifts to the claimant. The Court found that the subject machineries were liable to forfeiture under customs law because petitioner failed to present evidence of payment of duties and taxes. Despite ample opportunity, petitioner failed to prove its claim over the machineries, as the supposed seller, Jaina Perez, never appeared, nor did the notaries public. Furthermore, there was no intervening transaction between Perez and the Bureau of Customs that would have transferred ownership to Perez and subsequently to petitioner. The Court found it legally untenable that the goods were allegedly sold to petitioner in 1985 and 1986 while they were still under Customs custody and prior to the auction sale. The Court disagreed with the CTA's rationale that importation was terminated upon Policarpio's signing of the Gate Pass. The Court clarified that importation is deemed terminated upon payment of duties, taxes, and other charges, or upon the grant of a legal permit for withdrawal. However, the forfeiture of the subject machineries was not dependent on whether importation was terminated but was premised on the illegal withdrawal of goods from Customs custody. Thus, regardless of the termination of importation, Customs authorities may validly seize goods that still belong to the government, as forfeiture takes effect immediately upon the commission of the offense and retroacts to the date of illegal withdrawal. The government's right to recover property illegally withdrawn can be asserted no matter into whose hands the property may have come, and condemnation avoids all intermediate alienations. On the petitioner's claim of good faith and prior right: The Court found petitioner's contention of being a buyer in good faith and for value with a prior right untenable. Petitioner allegedly derived its right through deeds of sale from Jaina Perez prior to the auction sale. However, the machineries were part of Lot 15, sold at auction to satisfy unpaid taxes, duties, and charges, having been imported and later abandoned by Filipinas Marble. The Court noted that the subject machineries were part of Customs property stored in a warehouse, and Bureau of Customs records indicated no transactions concerning them except abandonment and auction sale to Policarpio. The Court concluded that the sale to petitioner by Jaina Perez was ineffective because the government never dealt with Perez, who therefore had no right to transfer ownership to petitioner. The Court also noted that the forfeiture proceedings were based on the government's right to recover property illegally withdrawn, while Policarpio's right stemmed from the government's contractual obligation as a buyer in good faith at the auction sale. On the compromise offer: The Court agreed with the Collector of Customs that compromise could not be allowed anymore since the subject machineries had already been awarded to Policarpio as the highest bidder in the public auction sale conducted by the Bureau of Customs. Settlement of seizure cases is not allowed under Section 2307 of the TCC where the importation is absolutely prohibited or the release of the property is contrary to law.
Main Doctrine
Forfeiture proceedings under the Tariff and Customs Code are premised on the illegal withdrawal of goods from Customs custody, and such forfeiture takes effect immediately upon the commission of the offense, retroacting to the date of illegal withdrawal, regardless of the termination of importation. The government's right to recover property illegally withdrawn can be asserted regardless of who possesses it, and condemnation avoids all intermediate alienations.