PHIL. TOBACO BANK v.
PABLO (Ram) agreement, agreed that Phil Tobacco "shall redry, pack and keep in
August 8, 1975 | Concepcion Jr., J. | Purpose of Necessary Bond
PETITIONER-APPELLEE: Philippine Tobaco Flue Curing and Redrying
Corporation
RESPONDENT-APPELLANT: Rizalino Pablo (Director of the Bureau of
Commerce)
SUMMARY: On February 2, 1959, Phil Tobacco and ACCFA had a
memorandum agreement wherein Phil Tobacco "shall redry, pack and keep in
storage all Virginia leaf tobacco delivered by ACCFA to the Phil Tobaccos
redrying and repacking plant, the same to be done according to standard
procedure and usages of the trade, including fumigation of stored tobacco to
prevent damage by pests." ACCFA in turn will pay Phil Tobacco per kilo
and a monthly warehousing fee. ACCFA also asked Phil Tobacco to file a
bond to guarantee faithful performance and answer for any damages that
may be suffered by ACCFA. On February 26, 1960, DOC required Phil
Tobacco to file an additional bond pursuant to the General Bonded
Warehouse Act. Phil Tobacco denied this contending that it is not engaged
in warehousing and storage and therefore not subject to the provisions of the
Warehouse Act. On May 19, 1960, Phil Tobacco and ACCFA entered into a
new memorandum agreement. Phil Tobacco received another letter from
DOC requiring it to pay an additional bond, which Phil Tobacco still refused
to pay. The issue in this case is WoN Phil Tobacco should post an additional
bond, as required by the DOC. The SC held that Phil Tobacco should not file
an additional bond. ACCFA had insured its tobacco with the GSIS and Phil
Tobacco had been required by ACCFA to file a performance bond, which
may be increased at the option of ACCFA as the amount and value of
tobacco delivered to the plant or warehouse of Phil Tobacco increases,
conditioned upon the performance of the agreement and to answer for any
damage suffered by ACCFA while the tobacco was in the plant or
warehouse of Phil Tobacco. It is evident that the ACCFA is amply
protected. It would be unreasonable and oppressive to compel Phil Tobacco
to further put up a bond and subject it to unnecessary burden of the premium
incident to such bond.
DOCTRINE: The main intention of the lawmaker, in requiring the millers
to post the necessary bond, "is to give protection to the owner of the
commodity against possible abuses (and we might add negligence) of the
person to whom the physical control of his properties is delivered.
FACTS:
1. February 2, 1959: The Philippine Tobacco Flue Curing and Redrying
Corporation (Phil Tobacco) and the Agricultural Credit and
Cooperative Financing Administration (ACCFA), by a memorandum
storage all Virginia leaf tobacco delivered by ACCFA to the Phil
Tobaccos redrying and repacking plant, the same to be done
according to standard procedure and usages of the trade, including
fumigation of stored tobacco to prevent damage by pests."
a. ACCFA, in turn, agreed to pay the Phil Tobacco P0.18 per
kilo for the redrying and packing of the tobacco and a
monthly warehousing fee of P2.20 per hogshead.
b. To guarantee the faithful performance of the agreement, and
to answer for any damage that may be suffered by ACCFA
while the tobacco is in the plant or warehouse of the
corporation, Phil Tobacco agreed to file a bond in the amount
of P200,000.00, which amount "may be increased at the
option of the ACCFA as the amount and value of the tobacco
delivered to the plant or warehouse of the corporation
increases.
c. This agreement shall be in effect for a period of 3 years
counting from March 1, 1959 and extendible from year to
year thereafter, upon mutual agreement of the parties.
2. February 26, 1960: the Director of Commerce (DOC), through the
Bureaus Chief Commission Agent, required Phil Tobacco to file an
additional bond of P11,033,334, later on increased to P12,366,667.22,
pursuant to the General Bonded Warehouse Act (Warehouse Act).
a. Upon investigation, Phil Tobacco had allegedly received for
storage 50,000 hogsheads of Virginia tobacco valued at
P40,000,000 and their records show that Phil Tobacco is only
authorized to receive for storage at any one time not more
than 4,000 hogsheads of tobacco equivalent to P2,300,000
3. March 12, 1960: Phil Tobacco informed the DOC that the former was
not engaged in warehousing and storage and therefore not subject to
the provisions of the Warehouse Act.
a. This was rejected by the DOC hence Phil Tobacco appealed
to the Secretary of Commerce and Industry (SCI).
b. May 12, 1960: SCI rejected Phil Tobaccos appeal and
enjoining it to file the bond required by the DOC.
4. May 19, 1960: Phil Tobacco and ACCFA entered into a new
memorandum agreement
a. ACCFA agreed to deliver 75% of the tobacco to the premises
of Phil Tobacco, for the latter to perform all the services
required for the curing and the treatment of the tobacco until
they are ready for the manufacture of cigarettes at a fee of
P2.20 per hogshead.
b. As security for performance, Phil Tobacco shall post a surety
bond of P700,000 in favor of ACCFA.
c. The old memorandum agreement (Feb. 2, 1959) was declared
extinguished and superseded by the new memorandum
 agreement.
5. June 1, 1960: Phil Tobacco received a letter from the DOC requiring
them to file an additional bond of P24,905,579.63 within 2 days from
the receipt thereof.
a. Phil Tobacco filed with the CFI of Manila a petition for
prohibition with a writ of preliminary injunction against the
DOC, claiming that the DOC acted with grave abuse of
discretion and disregard of the law and his jurisdiction.
6. CFI judgement:
a. Phil Tobacco was not engaged in the business of
warehousing within the meaning of the Warehouse Law as
far as the ACCFAA tobacco is concerned and should not be
obliged to file the bond;
b. Declared the order of the DOC requiring Phil Tobacco to file
a bond null and void;
c. Making the writ of preliminary injunction permanent
ISSUES:
1. WoN Phil Tobacco should post an additional bond, as required by the
DOC, pursuant to the provisions of Secs. 4 and 5 of Act No. 3893, as
amended, otherwise known as the General Bonded Warehouse Act.
RULING: UPON THE FOREGOING, the appeal should be, as it is hereby,
DISMISSED, without costs.
RATIO:
1. Phil Tobacco claims that the contract with ACCFA is one of services
and therefore not within the purview of the Warehouse Act.
2. The DOC maintains that Phil Tobacco is a warehouseman and
should comply with the provisions of the General Warehouse Act by
putting up the additional bond.
3. Sec 4 of the Warehouse Act: "bond shall be so conditioned as to
respond for the market value of the rice actually delivered and
received at any time the warehouseman is unable to return the rice or
to pay its value."
a. The main intention of the lawmaker, in requiring the
millers to post the necessary bond, "is to give protection to
the owner of the commodity against possible abuses (and we
might add negligence) of the person to whom the physical
control of his properties is delivered.
4. In the case at bar, ACCFA had insured its tobacco with the GSIS and
Phil Tobacco had been required by ACCFA to file a performance
bond, which may be increased at the option of ACCFA as the
amount and value of tobacco delivered to the plant or warehouse of
Phil Tobacco increases, conditioned upon the performance of the
agreement and to answer for any damage suffered by ACCFA while
the tobacco was in the plant or warehouse of Phil Tobacco.
a. It is evident that the ACCFA is amply protected. It would
be unreasonable and oppressive to compel Phil Tobacco to
further put up a bond and subject it to unnecessary burden of
the premium incident to such bond.
5. The ACCFA is now defunct and its functions have been taken over by
the Agricultural Credit Administration.
a. This controversy involves the keeping of tobacco, harvested
in 1959, for curing and ageing by Phil Tobacco, which was
contracted more than 15 years ago.
b. Witnesses testified that the ageing process takes from 18 to
24 months before the tobacco is sold to the cigarette
manufacturers.
c. The commodity kept in the premises of Phil Tobacco for
curing and ageing have already been withdrawn and
disposed of by the ACCFA, in which case the filing of an
additional bond by Phil Tobacco ceases to be controversial.
d. In other words, wala ng case since ACCFA is not anymore
responsible for keeping the leaf tobacco of Phil Tobacco.
ADDITIONAL NOTES:
1. Warehouseman defined.A warehouseman has been defined as one who
receives and stores goods of another for compensation. For one to be
considered engaged in the ware-housing business, therefore, it is sufficient
that he receives goods owned by another for storage, and collects fees in
connection with the same.
2. In fact, Section 2 of the General Bonded Warehouse Act, as amended,
defines a warehouseman as a person engaged in the business of receiving
commodity for storage.