11/10/2019 WEEK 12: DOCUMENTS OF TITLE; GENERAL BONDED WAREHOUSE ACT - Google Docs 11/10/2019 WEEK 12: DOCUMENTS
11/10/2019 WEEK 12: DOCUMENTS OF TITLE; GENERAL BONDED WAREHOUSE ACT - Google Docs
t WEEK 12: DOCUMENTS OF TITLE; GENERAL BONDED WAREHOUSE ACT
PEOPLE vs. VERSOLA
VERSOLA operated a rice mill in Cotabato without a license. He was asked to secure a license as
provided by Act 3893. However, Versola contends that he only mill palay and does not store them.
Issue: WON there is a need to secure a license when you are only milling rice and not storing them?
(YES)
The SC ruled that the storing of rice/palay is a necessary consequence of milling them. Especially
during the harvest season, when customers cannot be immediately accommodated, it would be
impractical to haul them out of the milling facility and place them there again.
Facts
● Dionisio VERSOLA is an owner and operator of a rice mill, enclosed within a structure or “camarin” 6x8
meters in Cotabato.
● VERSOLA accepted and milled palay in his camarin, charging Php0.50[ Php 0.80 per cavan, without
securing license as provided in Act 3893 from the Bureau of Commerce.
● VERSOLA refused to obtain license,
● He contends (he uses his warehouse as milling and not for storing rice/palay)
○ he only used the structure for milling purposes only and not for storage and deposit of rice
and palay,
○ His customers bring small quantities of palay, ranging from one petroleum can to a sack, hence,
palay milled do not stay longer than an hour.
Issue: WON the mandatory license applies only to warehouses actually used for storage of rice and not for
milling exclusively? NO, it also applies to milling of rice
Ratio
Applicable law:
“Sec 2 of Act 3839 provides:
For the purpose of this Act, the business of receiving rice for storage shall include xxx 2. any contract
or transaction
wherein rice delivered is to be milled for and on account of owner”
SC: VERSOLA’s business falls under the applicable rule
● the law explicitly applies to any mill enclosed in a structure where palay is received mainly for milling
● the business of VERSOLA cannot be accomplished without keeping the palay for some time in
the mill, and, hence, without storing therein said commodity.
● During harvest and milling seasons, the milling house of VERSOLA is bound to be heavily pressed by
the demands of its customers during the milling season. As a consequence, not all palay brought
to the mill could always be hulled immediately, much less removed therefrom within one hour.
● Moreover, the customers would need to cultivate more than a can of petroleum or sack of palay in order
to support their family
● When a cavan cannot be milled immediately, he would need to leave it in the “camarin“, for it would be
inconvenient and impractical for him to take the grains back to his place, not only because of the
time consumed, the trouble taken, and the expenses incurred in bringing the cereals to the mill, but
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also, because he would have to haul the palay once more to the mill, either the next day or at some
other time, without any assurance that others might not be ahead of him.
● In other words, it is generally more advantageous for said customer to leave in the “camarin” the
palay above referred to, for hulling when its turn should come.
● Hence: whenever a rice mill, engaged in the business of hulling palay for others, is housed in
a”camarin”, the keeping of palay or rice therein follows as a necessary consequence.
DOCTRINE
The rice mill operator is responsible for the palay or rice, while the same is in his possession, and public
policy or public interest demands that the rights of the owners of commodity – which is our main staple – be
duly protected. Hence, the need of securing the license prescribed in Act No. 3893, in order that the Director
of Commerce could determine the conditions under which the mill may be authorized to operate, conformably
with the objective of said legislation, and the amount of the bond to be required for the protection of the people
who avail themselves of its services.
POSSIBLE “trick” questions
- Versola’s camarin used to be 6x6 m, he modified to become 6x8 m
- Fine imposed to him was 10php
- Lower court cannot order Versola to pay license and filling of bond, not part of penalty prescribed by
law, but within the administrative jurisdiction of Director of Commerce.
VIRGINIA I. VDA. DE LIMJOCO vs. THE DIRECTOR OF COMMERCE
Virginia I. De Limjoco operates a rice mill commonly called "kiskisan" and is engaged in the business of
milling palay belonging to customers for the purpose of removing its hull and converting it into rice. The
facilities of the rice mill are open to the public in the sense that anybody who wants his palay to be milled and
converted into rice may deliver the same to the rice mill paying P0.40 per cavan of palay for the services of
the petitioner in milling it. The mill is within a building which the petitioner calls a "camalig". There were
occasions when her customers brought more palay than could be milled in one day, whereupon they would
leave the palay in the custody of Virginia, piled inside the "camalig" to await its turn to be milled. Virginia did
not charge the customers for keeping the palay. Since the time the license expired, Virginia refused to renew
such from the Bureau of Commerce claiming that her business does not fall within the provisions of Act 3893
as amended by Republic Act 247. The Director of Commerce ruled that Virginia’s rice milling business falls
under Section 2 of the General Bonded Warehousing Act, required her to secure the corresponding renewal
license and started steps for her prosecution in view of her refusal to do so. The move, it seems, was
subsequently held in abeyance upon the filing of the petition herein.The trial court upheld the ruling of the
Director of Commerce.
Issue: Whether Virginia’s rice milling business falls under Section 2 of the General Bonded Warehousing Act,
consequently requiring her to secure the corresponding renewal license. (YES)
● It is enough that the palay is delivered, even if only to have it milled. Delivery connotes transfer of
physical possession or custody; and it may indeed be seriously doubted if the concept of "storage"
under the law would cover a situation where one merely utilizes the services of the mill but keeps the
palay under his physical control all steps of the way.
● The main intention of the lawmaker 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."
● Whenever a rice mill engaged in the business of hulling palay for others, is housed in a "camarin", the
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keeping of palay or rice follows as a necessary consequence. This is true, even if the grains were
received therein exclusively for milling purposes. Hence, one way or the other, there is a form of
storage, the duration of which may vary, depending upon circumstances. In any event, the ricemill
operator is responsible for the palay or rice, while the same is in his possession, and public policy or
public interest demands that the rights of the owners of the commodity [which is our main staple] be
duly protected.
● Hence, the need of securing the license in order that the Director of Commerce could determine
1. the conditions under which the mill may be authorized to operate; and
2. the amount of the bond to be required for the protection of the people who avail themselves of
its services.
This case, filed as a petition for declaratory relief in the CFI of Manila, involves the interpretation of Section 2 of
the General Bonded Warehousing Act (Act No. 3893 as amended by RA No. 247), specifically in relation to the
rice milling business of petitioner-appellant Vda. De Limjoco.
Facts
● It appears that sometime prior to March 22, 1950, petitioner Virginia I. De Limjoco and her husband, the
late Bonifacio T. Limjoco, were the owners of a rice mill commonly called "kiskisan" and were engaged
in the business of milling palay belonging to their customers for the purpose of removing its hull and
converting it into rice.
● On July 31, 1952 Bonifacio T. Limjoco died, leaving the milling business in the hands of his surviving
spouse, Virginia.
● Virginia continued the business, which prior to the death of her husband, was managed by the latter
without, however, renewing the license which expired on December 31, 1950.
● Since then and up to the present, Virginia refused to secure a license from the Bureau of Commerce
claiming that her business does not fall within the provisions of Act 3893 as amended by Republic Act
247.
● It appears that Virginia owns a rice mill of the semicono type. The facilities of the rice mill are open to
the public in the sense that anybody who wants his palay to be milled and converted into rice may
deliver the same to the rice mill paying P0.40 per cavan of palay for the services of the Limjoco in
milling it. The mill itself is within a building which the Limjoco calls a "camalig" about 10m long, 8m wide
and 5m high. The "camalig" is totally enclosed partly by steel matting, partly by wood and partly by
galvanized iron sheets.
● There were occasions when her customers brought more palay than could be milled in one day,
whereupon they would leave the palay in the custody of Virginia, piled inside the "camalig" to await its
turn to be milled.
○ Sometimes the palay left in her possession amounted to as much as 100 cavans, and at other
times as little as 10 cavans
○ Virginia did not charge the customers for keeping the palay. The arrangement being, in
accordance with the customs of the place, a favor done to the customers
● This arrangement also benefited Virginia because unless she acceded thereto the customers might
take their palay for milling to her competitors.
● The Director of Commerce ruled that Virginia’s rice milling business falls under Section 2 of the General
Bonded Warehousing Act, required her to secure the corresponding renewal license and started steps
for her prosecution in view of her refusal to do so. The move, it seems, was subsequently held in
abeyance upon the filing of the petition herein.
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● The trial court upheld the Director of Commerce and ruled that the law in question is applicable in this
case.
Issue: Whether Virginia’s rice milling business falls under Section 2 of the General Bonded Warehousing Act,
consequently requiring her to secure the corresponding renewal license (YES, Decision appealed from
affirmed)
Ratio
Section 2 of the General Bonded Warehousing Act provides:
● As used in this Act, the term "Warehouse" shall be deemed to mean every building, structure, or other
protected inclosure in which rice is kept for storage. The term "rice" shall be deemed to mean either
palay, in bundles, or in grains, or clean rice, or both. "Person" includes a corporation or partnership or
two or more persons having a joint or common interest; "warehouseman" means a person engaged in
the business of receiving rice for storage; and "receipt" means any receipt issued by a warehouseman
for rice delivered to him.
● For the purpose of this Act, the business of receiving rice for storage shall include
○ (1) any contract or transaction wherein the warehouseman is obligated to return the very same
rice delivered to him or pay its value;
○ (2) any contract or transaction wherein the rice delivered is to be milled for and on account of
the owner thereof;
○ (3) any contract or transaction wherein the rice delivered is commingled with rice delivered by or
belonging to other persons, and the warehouseman is obligated to return rice of the same kind
or pay its value.
● Virginia submits that the test to determine the applicability of Act No. 3893 as amended is whether or
not she is engaged in the business of receiving palay for storage; that the clause in section 2 thereof
which refers to "any contract or transaction wherein the rice, delivered is to be milled for and on account
of the owners" must be understood in relation to the subject matter of the statute as expressed in its
title, namely, "An Act to Regulate the Business of Receiving Commodity for Storage"; and that since her
business is the milling of palay, the delivery thereof to her is merely incidental to such business and
does not constitute storage within the meaning of the statute.
● Section 2, however, is too clear to permit of any exercise in construction or semantics. It does not stop
at the bare use of the word "storage," but expressly provides that any contract or transaction wherein
the palay delivered is to be milled for and on account of the owner shall be deemed included in the
business of receiving rice for storage for the purpose of the Act.
● In other words, it is enough that the palay is delivered, even if only to have it milled. Delivery connotes
transfer of physical possession or custody; and it may indeed be seriously doubted if the concept of
"storage" under the law would cover a situation where one merely utilizes the services of the mill but
keeps the palay under his physical control all steps of the way. But in this case it is a fact that palay is
delivered to Limjoco and sometimes piled inside her "camalig" in appreciable quantities, to wait for its
turn in the milling process. This is precisely the situation covered by the statute.
● We agree with the trial Judge, when he said: "There is a reason for the inclusion of the business within
the operation of the law. The main intention of the lawmaker 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."
● People vs. Versola: At any rate, whenever a rice mill engaged in the business of hulling palay for
others, is housed in a "camarin" like that of Limjoco’s, the keeping of palay or rice therein follows as a
necessary consequence. This is true, even if the grains were received therein exclusively for milling
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purposes. Hence, one way or the other, there is a form of storage, the duration of which may vary,
depending upon circumstances. In any event, the rice mill operator is responsible for the palay or rice,
while the same is in his possession, and public policy or public interest demands that the rights of the
owners of the commodity be duly protected. Hence, the need of securing the license prescribed in Act
No. 3893, in order that the Director of Commerce could determine the conditions under which the mill
may be authorized to operate, conformably with the objectives of said legislation, and the amount of the
bond to be required for the protection of the people who avail themselves of its services.
● Virginia also contends that the inclusion of the business of milling palay in Act No. 3893 infringes the
constitutional mandate that no law shall embrace more than one subject which shall be expressed in
the title thereof.
○ We believe the subject matter of said Act as expressed in its title, namely, the regulation of the
business of receiving commodity for storage, is sufficiently broad to cover the business of milling
palay where the palay is delivered to the mill operator and kept in a construction which serves
the purpose of a warehouse, as in this case.
● Virginia says her "camalig" is neither adequate nor suitable for storage.
○ But the inadequacy of the construction insofar as the safety of the palay is concerned is not a
valid reason to remove it from the operation of the statute, for otherwise the very fact of
non-compliance with the legal requirements in this respect would be its own excuse from the
liabilities imposed.
Philippine Tobacco vs. Rizalino Pablo, Director of Commerce
Phil Tobacco and ACCFA entered into a memorandum agreement wherein the former agreed to redry,
pack and keep in storage all Virginia leaf tobacco delivered by the latter. To guarantee the faithful
performance of the agreement and to answer for any damage that may be suffered by ACCFA, Phil
Tobacco agreed to file a bond which may be increased under given circumstances. The DOC required Phil
Tobacco an additional bond based on the provision of the General Bonded Warehouse Act. Phil Tobacco
filed a petition for prohibition with a writ of preliminary injunction against the DOC.
Issue: WoN Phil Tobacco should file the bond. (NO)
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. ACCFA’s tobacco is insured with the GSIS. In
addition, the agreement between Phil Tobacco and ACCFA already required the former to post a
performance bond. 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.
Facts
● 02/02/1959: 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 Tobacco’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."
○ 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.
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○ 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.
○ This agreement shall be in effect for a period of 3 years counting from 03/01/1959, and
extendible from year to year thereafter, upon mutual agreement of the parties.
● 02/26/1960: the Director of Commerce (DOC), through the Bureau’s 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).
○ 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
● 03/12/1960: 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.
○ This was rejected by the DOC hence Phil Tobacco appealed to the Secretary of Commerce and
Industry (SCI).
○ 05/12/1960: SCI rejected Phil Tobacco’s appeal and enjoining it to file the bond required by the
DOC.
○ 05/19/1960: Phil Tobacco and ACCFA entered into a new memorandum agreement
○ 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.
○ As security for performance, Phil Tobacco shall post a surety bond of P700,000 in favor of
ACCFA.
○ The old memorandum agreement (02/02/1959) was declared extinguished and superseded by
the new memorandum agreement.
● 06/01/1960: 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.
● 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.
● CFI judgement: 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; declared the order of the DOC requiring Phil Tobacco to file a bond null and void; making the writ
of preliminary injunction permanent
Issue: 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.
(NO, Tobacco withdrawn so case dismissed)
Ratio
● Phil Tobacco claims that the contract with ACCFA is one of services and therefore not within the
purview of the Warehouse Act.
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● 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.
● 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."
○ 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.”
● 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.
○ 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.
● The ACCFA is now defunct and its functions have been taken over by the Agricultural Credit
Administration.
○ 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.
UPON THE FOREGOING, the appeal should be, as it is hereby, DISMISSED, without costs.
LEE BOG & COMPANY vs. THE HANOVER FIRE INSURANCE COMPANY OF THE CITY OF NEW YORK,
ET AL.
HANOVER ET AL appealed a decision from the CFI of Pangasinan, holding it liable for the face value of
fire insurance policies issued by HANOVER. One of the assigned errors raised by HANOVER is that the
CFI erred when it considered the claims arising from the bonded palay (belonging to depositors)
separately and independently from the claims arising from the unbonded palay (belonging to LEE BOG).
The SC affirmed the CFI and held that its treatment of the bonded and unbonded palay was proper.
Bonded palay and unbonded palay, deposited in the warehouse of a rice mill are treated separately for
insurance purposes. They are distinct from one another and thus should be treated as such.
Facts
● An appeal from a decision of the CFI of Pangasinan holding HANOVER FIRE INSURANCE COMPANY
OF THE CITY OF NEW YORK ET AL (HANOVER) liable for the face value of the fire insurance
policies issued respectively by them.
○ The “ET AL” here refers to other insurance companies.
● The assured in these policies is plaintiff-appellee Lee Bog & Company (BOG).
● Insurance covered “stock of rice and palay (loose and/or in sacks), the property of the assured or held
by him in trust, on commission or on joint account with others and/or for which he is responsible in case
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of loss”, while contained during the currency of the policies in the building of the assured in Binalonan,
Pangasinan, otherwise known as the Binalonan, Pangasinan Rice Mill.
● There was a common “simple loss payable clause” in favor of the Bureau of Commerce in all the
policies issued by except Policy No. 1016373, issued by the Hanover Fire Insurance Company, which
also contained a “simple loss payable clause” but in favor of the People’s Surety & Insurance Co., Inc.
Issue: WON the lower court erred in considering the claims on the bonded palay belonging to depositors
separately and independently from the claim on the unbonded palay belonging to BOG (NO)
● [REASON WHY THIS IS AN ISSUE] HANOVER: because the policies sued upon were concurrent and
each and all of them covered, in their entirety, inseparably and indivisibly, the stock of rice and palay
kept in the insured’s warehouse, whether belonging to the insured or to its depositors. Other issues
omitted.
Held: The decision appealed from is hereby affirmed with costs against appellants. HANOVER ET AL LOST
Ratio
● As there is, however, a difference between bonded and unbonded palay and one is distinct from the
other, each subject must really be treated separately.
● The palay insured by HANOVER ET AL under the aforesaid ten policies included no more than such of
the palay as the warehouse received as deposits.
○ The palay insured by HANOVER ET AL payable to the Bureau of Commerce in case of loss
covered only the palay that was received as deposits.
● This is the object of the requirement of law that every person licensed under this Act1, to engage in the
business of receiving rice for storage shall insure the rice as received and stored against fire.
○ This is the very reason why BOG insured said palay.
● HANOVER cannot pretend that they and BOG were not aware of the fact that the subject matter of the
insurance policies upon which REPUBLIC OF THE PH (PH) is suing was solely the palay covered by
the Bonded Warehouse Act.
● Upon the other hand, policy No. 1016373 issued by the Hanover Fire Insurance Company, which does
not contain a clause common to the aforementioned ten policies, referred only to the unbonded
deposits of the appellee.
DOCTRINE
● Bonded palay and unbonded palay, deposited in the warehouse of a rice mill are treated
separately for insurance purposes. The law required that bonded palay belonging to third persons
should be insured against fire. IN case of loss, the value therein is payable to the Bureau of Commerce.
The warehouse receipts may prove the deposit of bonded palay. Unbonded palay may be determined
from the records of purchase of palay and sales of milled rice.
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