PHIL. TOBACO BANK v. PABLO (Ram) August 8, 1975 | Concepcion Jr., J. | Purpose of Ne cessary 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 Tobacco’s redrying and repacking plant, the same to be done according to standard procedure and usa ges of the tra de, incl uding fumigation of stored tobacco to prevent damage by pests." ACCFA in turn will pay Phil Tobacco per kilo and a monthly warehousing warehousing fee. ACCFA also asked Phil Tobacco 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 requi red by the D OC. The SC held that Ph il Tobacco should n ot 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 wh om the physi cal control o f his properti es is delivered.” FACTS:
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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
agreement, agreed that Phil Tobacco "shall redry, pack and keep in storage all Virginia leaf tobacco delivered by ACCFA to the Phil To bacco’s 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 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, thereafter, upon mutual agreement of the parties. 2. February 26, 1960: the Director of Commerce (DOC), through the Bureau’s Chief Commission Commissio n 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 Wareh ouse Act (Wareh ouse 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 Tobacco’s Tobacco’s 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 tobac co 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 P70 0,000 in fa vor of ACCFA. c. The old memorandum agreement (Feb. 2, 1959) was declared extinguished and superseded by the new memorandum
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agreement. 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 prohibitio n with a writ of preliminary injuncti on against the DOC, claiming that the DOC acted with grave abuse of discretion and disregard of the law and his jurisdiction. 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:
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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 additi onal b ond. 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
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the tobacco was in the plant or warehouse of Phil Tobacco. a. It is evident that the ACCFA is amply protected. It would be unreasonabl e 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. The ACCFA is now defunct and its functions have been taken over by the Agricultural Credit Administration. a.
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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. Witnesses testified that the ageing process takes from 18 to 24 months before the tobacco is sold to the cigarette manufacturers. 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. 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.”
