H. WAREHOUSE RECEIPTS LAW

Where the court ordered the manager of the bonded warehouse to deliver the deposited palay to certain specified parties, and the person ordered to present the original warehouse

receipts failed to do so because they were allegedly lost in a fire, the court may order said manager to release the palay to the proper parties upon their issuing a receipt therefore without

necessity of producing and surrendering the original receipts.

Estrada vs. Court of Agrarian Relations2 SCRA 986 (1961)

Facts: Respondent Faustino Galvan refuses to release the palay, which were the subject matter of herein case. The manager of the Moncada Bonded Warehouse also refused to release the palay notwithstanding the resolution issued by the Supreme Court to release the same to the petitioners. Such refusal was anchored on the fact that the petitioners were not able to present the original receipt corresponding to the palay deposited. On the part of the petitioners, their failure to surrender the original receipt was due to the fire that destroyed such document.

Issue/s: Whether the warehouseman could release the palay even without the surrender of the original

Ruling: The excuses respectively offered by the manager of the Moncada and Galvan are not without some merits. However, such incidents do not constitute a valid excuse to evade compliance with the order of this Court that the palay in question be delivered to the petitioners, and, considering that the petitioners, according to the manifestation filed by their counsel under date of August 3, 1961, are in dire need of said palay for their subsistence, our order must be carried out in the meantime that this cases have not been finally decided in order to ameliorate the precarious situation in which said petitioners find themselves.

It is hereby ordered that the manager or the owner of the Moncada Bonded Warehouse in Moncada, Tarlac, and respondent Faustino F. Galvan release and deliver to the petitioners the portion still remaining to be delivered to them or their shares in the palay involved in these cases.

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A warehouseman has no cause of action for repossession and damages against a person to whom it delivered deposited articles on the basis of an alleged falsified delivery permit where the real parties interested in the questioned articles have not yet sued the warehouseman for damages on account of

said wrongful delivery.

Consolidated Terminals vs. Artex Development Co.63 SCRA 46 (1975)

Facts: CTI was the operator of a customs bonded warehouse located at Port Area, Manila. It received on deposit of 193 bales of high density compressed raw cotton. It was understood that CTI would keep the cotton in behalf of Luzon Brokerage Corporation until the consignee thereof, Paramount Textile Mills, Inc., had opened the corresponding letter of credit in favor of shipper.

Allegedly by virtue of a forged permit to deliver imported goods, purportedly issued by the Bureau of Customs, Artex was able to obtain delivery of the bales of cotton on after paying CTI P15,000 as storage and handling charges. At the time the merchandise was released to Artex, the letter of credit had not yet been opened and the customs duties and taxes due on the shipment had not been paid.

CTI, in its original complaint, sought to recover possession of the cotton by means of a writ of replevin. The writ could not be executed. CTI then filed an amended complaint by transforming its

original complaint into an action for the recovery from Artex of P99,609.76 as compensatory damages, P10,000 as nominal and exemplary damages and P20,000 as attorney's fees

It should be clarified that CTI alleged that Artex acquired the cotton from Paramount Textile Mills, Inc., the consignee. Artex alleged in its motion to dismiss that it was not shown in the delivery permit that Artex was the entity that presented that document to the CTI. Artex further averred that it returned the cotton to Paramount Textile Mills, Inc. when the contract of sale between them was rescinded because the cotton did not conform to the stipulated specifications as to quality.

Issue/s: Whether CTI has a cause of action against Artex

Ruling: CTI in this appeal contends that, as warehouseman, it was entitled to the repossession of the bales of cotton; that Artex acted wrongfully in depriving CTI of the possession of the merchandise because Artex presented a falsified delivery permit, and that Artex should pay damages to CTI.

The only statutory rule cited by CTI is section 10 of the Warehouse Receipts Law which provides that "where a warehouseman delivers the goods to one who is not in fact lawfully entitled to the possession of them, the warehouseman shall be liable as for conversion to all having a right of property or possession in the goods ...".

We hold that CTI's appeal has not merit. Its amended complaint does not clearly show that, as warehouseman, it has a cause of action for damages against Artex. The real parties interested in the bales of cotton were Luzon Brokerage Corporation as depositor, Paramount Textile Mills, Inc. as consignee, Adolph Hanslik Cotton as shipper and the Commissioners of Customs and Internal Revenue with respect to the duties and taxes. These parties have not sued CTI for damages or for recovery of the bales of cotton or the corresponding taxes and duties.

The case might have been different if it was alleged in the amended complaint that the depositor, consignee and shipper had required CTI to pay damages, or that the Commissioners of Customs and Internal Revenue had held CTI liable for the duties and taxes. In such a case, CTI might logically and sensibly go after Artex for having wrongfully obtained custody of the merchandise.

But that eventuality has not arisen in this case. So, CTI's basic action to recover the value of the merchandise seems to be untenable. It was not the owner of the cotton. How could it be entitled to claim the value of the shipment?

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The negotiation of the warehouse receipt by the buyer of goods purchased from and deposited to the warehouse is valid even if the warehouseman who issued a negotiable warehouse receipt was not the buyer. The validity of the negotiation cannot be impaired by the fact that the owner/warehouseman

was deprived of the possession of the same by fraud, mistake or conversion.

Philippine National Bank vs. Noah’s Ark Sugar Refinery226 SCRA 36 (1993)

Facts: In accordance with Act No. 2137, the Warehouse Receipts Law, Noah's Ark Sugar Refinery issued on several dates warehouse receipts (quedans). The receipts are substantially in the form, and contain the terms, prescribed for negotiable warehouse receipts by Section 2 of the law.

Subsequently, warehouse receipts, covering sugar deposited by RNS Merchandising, were negotiated and indorsed to Luis T. Ramos; and receipts corresponding to the sugar of St. Therese Merchandising, of sugar of RNS Merchandising, and of sugar of Rosa Sy were negotiated and indorsed to Cresencia

K. Zoleta. Zoleta and Ramos then used the quedans as security for loans obtained by them from the Philippine National Bank (PNB). These quedans they indorsed to the bank.

Both Zoleta and Ramos failed to pay their loans upon maturity. Consequently, PNB wrote to Noah's Ark Sugar Refinery (Noah's Ark) demanding delivery of the sugar covered by the  quedans indorsed to it by Zoleta and Ramos. When Noah's Ark refused to comply with the demand, PNB filed with the Trial Court a verified complaint for "Specific Performance with Damages and Application for Writ of Attachment" against Noah's Ark, Alberto T. Looyuko, Jimmy T. Go, and Wilson T. Go, the last three being identified as "the Sole Proprietor, Managing Partner and Executive Vice President of Noah's Ark, respectively." Issue/s: Whether PNB acquired ownership over the quedans.

Ruling: The validity of the negotiation by RNS Merchandising and St. Therese Merchandising to Ramos and Zoleta, and by the latter to PNB to secure a loan cannot be impaired by the fact that the negotiation between Noah's Ark and RNS Merchandising and St. Therese Merchandising was in breach of faith on the part of the merchandising firms or by the fact that the owner (Noah's Ark) was deprived of the possession of the same by fraud, mistake or conversion of the person to whom the warehouse receipt/quedan was subsequently negotiated if (PNB) paid value therefore in good faith without notice of such breach of duty, fraud, mistake or conversion. (See Article 1518, New Civil Code).

And the creditor (PNB) whose debtor was the owner of the negotiable document of title (warehouse receipt) shall be entitled to such aid from the court of appropriate jurisdiction attaching such document or in satisfying the claim by means as is allowed by law or in equity in regard to property which cannot be readily attached or levied upon by ordinary process. (See Art. 1520, New Civil Code). If the quedans were negotiable in form and duly indorsed to PNB (the creditor), the delivery of the quedans to PNB makes the PNB the owner of the property covered by said quedans and on deposit with Noah's Ark, the warehouseman.

In the case at bar, We found that the factual bases underlying the defendant's affirmative defenses (upon which PNB has moved for summary judgment) are not disputed and have been stipulated by the parties and therefore do not require presentation of evidence. PNB's right to enforce the obligation of Noah's Ark as a warehouseman, to deliver the sugar stock to PNB as holder of the quedans, does not depend on the outcome of the third-party complaint because the validity of the negotiation transferring title to the goods to PNB as holder of the quedans is not affected by an act of RNS Merchandising and St. Therese Merchandising, in breach of trust, fraud or conversion against Noah's Ark.

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In PNB vs. Noah's Ark Sugar Refinery (supra), the Supreme Court ruled that PNB is entitled to the stocks of sugar as the endorsee of the quedans. In this case, the Supreme Court clarified that while PNB is entitled to the stocks of sugar, delivery to it shall effected only upon payment of the storage

fees. Imperative is the right of the warehouseman to demand payment of his lien because in according with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon the goods by

surrendering possession thereof.

Philippine National Bank vs. Se, Jr.63 SCRA 380 (1996)

Facts: This case is the continuation of PNB v. Noah's Ark Sugar Refinery. The respondent herein is Benito Se Jr., presiding judge of the court to which said case was raffled and which denied the application for preliminary attachment.

Noah’s Ark and its co-defendants filed an Answer with Counterclaim and Third-Party Complaint in which they claimed that they are the owners of the subject quedans and the sugar represented therein. The Answer incorporated a Third-Party Complaint by Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, doing business under the trade name and style Noah’s Ark Sugar Refinery against Rosa Ng Sy and Teresita Ng, praying that the latter be ordered to deliver or return to them the quedans (previously endorsed to PNB and the subject of the suit) and pay damages and litigation expenses.

The Answer of Rosa Ng Sy and Teresita Ng, one of avoidance, is essentially to the effect that the transaction between them, on the one hand, and Jimmy T. Go, on the other, concerning the quedans and the sugar stocks covered by them was merely a simulated one being part of the latter’s complex banking schemes and financial maneuvers, and thus, they are not answerable in damages to him.

On January 31, 1991, the Philippine National Bank filed a Motion for Summary Judgment in favor of the plaintiff as against the defendants for the reliefs prayed for in the complaint.

On May 2, 1991, the Regional Trial Court issued an order denying the Motion for Summary Judgment. Thereupon, the Philippine National Bank filed a Petition for Certiorari with the Court of Appeals.

Issue/s: Whether PNB should pay the lien that is due to Noah’s Ark as a warehouseman

Ruling: Accordingly, petitioner PNB is legally bound to stand by the express terms and conditions on the face of the Warehouse Receipts as to the payment of storage fees. Even in the absence of such a provision, law and equity dictate the payment of the warehouseman’ s lien pursuant to Sections 27 and 31 of the Warehouse Receipts Law (R.A. 2137), to wit:

“SECTION 27. What claims are included in the warehouseman’s lien. – Subject to the provisions of section thirty, a warehouseman shall have lien on goods deposited or on the proceeds thereof in his hands, for all lawful charges for storage and preservation of the goods; also for all lawful claims for money advanced, interest, insurance, transportation, labor, weighing coopering and other charges and expenses in relation to such goods; also for all reasonable charges and expenses for notice, and advertisement of sale, and for sale of the goods where default has been made in satisfying the warehouseman’s lien.

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SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a lien valid against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied.”

After being declared not the owner, but the warehouseman, by the Court of Appeals on  December 13, 1991 in CA-G.R. SP. No. 25938, the decision having been affirmed by us on December 1, 1993, private respondents cannot legally be deprived of their right to enforce their claim for warehouseman’s lien, for reasonable storage fees and preservation expenses. Pursuant to Section 31 which we quote hereunder, the goods under storage may not be delivered until said lien is satisfied.

“SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a lien valid against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied.”

Considering that petitioner does not deny the existence, validity and genuineness of the Warehouse Receipts on which it anchors its claim for payment against private respondents, it cannot disclaim liability for the payment of the storage fees stipulated therein. As contracts, the receipts must be respected by authority of Article 1159 of the Civil Code, to wit:

“ART. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.”

Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents as warehouseman while claiming to be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. The unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the provisions of the Warehouse Receipts Law (R.A. 2137) carried with it the admission of the existence and validity of the terms, conditions and stipulations written on the face of the Warehouse Receipts, including the unqualified recognition of the payment of warehouseman’s lien for storage fees and preservation expenses. Petitioner may not now retrieve the sugar stocks without paying the lien due private respondents as warehouseman.

In view of the foregoing, the rule may be simplified thus: While the PNB is entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only upon payment of the storage fees.

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The remedies available to a warehouseman to enforce his warehouseman's lien are: (1) to refuse to deliver the goods until his lien is satisfied, pursuant to Section 31 of the Warehouse Receipts Law; (2) to sell the goods and apply the proceeds thereof to the value of the lien pursuant to Sections 33 and 34

of the warehouse Receipts Law; and (3) by other means allowed by law to a creditor against his debtor, for the collection from the depositor of all charges and advances which the depositor

expressly or impliedly contracted with the warehouseman to pay under Section 32 of the Warehouse Receipts Law; or such remedies allowed by law for the enforcement of a lien against personal

property under Section 35 of said law. Even in the absence of a provision in the warehouse receipts, law and equity dictate the payment of the warehouseman's lien pursuant to Section 27 and 31 of the Warehouse Receipts Law. The refusal of the warehouseman who previously owned the sugar stored

with it, to deliver the sugar to the endorsee of the quedans on the ground that it was still the owner of the sugar because it had not been paid by the buyer, is not a valid excuse. The loss of the

warehouseman's lien, however, does not necessarily mean the extinguishment of the obligation to pay the warehouseman fees and charges which continues to be a personal liability of the owners, i.e., the pledgors, not the pledgee, in this case. But even as to the owners pledgors, the warehouseman fees and charges have ceased to accrue from the date of the rejection by the warehouseman to heed the

lawful demand by the endorsee of the quedan for the release of the goods.

A warehouseman's lien should in no event go beyond the value of the credit in favor of the pledge. It is based on the foreclosures that the buyer does not assume the obligations of the pledgor to his other

creditors even while such buyer acquires title over the goods less any existing preferred lien thereon.

Reasons which a warehouseman may invoke to legally refuse to effect delivery of the goods covered by the quedans: (1) That the holder of the receipt does not satisfy the conditions prescribed in Section 8 of the Act. (Sec. 8, Act No. 2137); (2) That the warehouseman has legal title in himself on the goods,

such title or right being derived directly or indirectly from a transfer made by the depositor at the time of or subsequent to the deposit for storage, or from the warehouseman's lien. (3) That the

warehouseman has legally set up the title or right of third persons as lawful defense for non-delivery of the goods as follows: x x x (4) That the warehouseman having a lien valid against the person

demanding the goods refuses to deliver the goods to him until the lien is satisfied. (Sec. 31, Act No. 2137); (5) That the failure was not due to any fault on the part of the warehouseman, as by showing

that, prior top demand for delivery and refusal, the goods were stolen or destroyed by fire, flood, etc., without any negligence on his part, unless he has contracted so as to be liable in such case, or that

the goods have been taken by mistake of a third person without the knowledge or implied assent of the warehouseman, or some other justifiable grounds for non-delivery.

Adverse claim of ownership as a basis by a warehouseman for refusing to deliver the goods covered by warehouse receipts is not a valid legal excuse.

Philippine National Bank vs. Sayo, Jr.292 SCRA 202 (1998)

Facts: Noah’s Ark Sugar Refinery issued several warehouse receipts covering sugar deposited by RNS Merchandising and St. Therese Merchandising.  Subsequently, these same receipts were endorsed to Ramos and Zoleta.  The latter then used the receipts as security for two loan agreements with PNB, thus endorsing them with said bank.  When Ramos and Zoleta could not pay their loan to the bank, PNB demanded delivery of the sugar stocks covered by the receipts from Noah’s Ark Sugar Refinery.

Noah refused to comply with the demand alleging ownership of the sugar. It alleged that the owner of Noah, Looyuko, entered into an agreement with RNS and St. Therese Merchandising to sell the sugar indicated in the warehouse receipts stored in Noah for an amount of P63,000,000.  Checks were issued but they were dishonored for being drawn against insufficient funds.

Hence, PNB filed a complaint with the RTC.  RTC dismissed said complaint.  On appeal to the SC via petition for review on certiorari, the Supreme Court ordered Noah and its owner, Looyuko, to deliver to PNB the sugar stocks covered by the warehouse receipts in controversy.

However, Noah filed an Omnibus Motion seeking deferment of the judgment until it was heard on its warehouseman’s lien. RTC granted the order and evidence was received in support thereof.  RTC adjudged that there existed a valid lien in favor of Noah, and accordingly, execution of the judgment against Noah should be stayed until the full amount of Noah’s lien shall have been satisfied.  PNB then filed certiorari proceedings before the Supreme Court. 

The Supreme Court held that while PNB was entitled to the sugar stocks as endorsee of the receipts, delivery to it shall only be effected upon payment of the storage fees. The Supreme Court further ruled that imperative is the right of the warehouseman to demand payment of his lien because he loses his lien upon goods by surrendering possession thereof.

RTC Judge Sayo, Jr. allowed a writ of execution in favor of Noah to collect on its warehouseman’s lien against PNB.  Hence, this certiorari proceeding before the Supreme Court.

Issue/s: Whether or not PNB is liable for storage fees.If yes, what is the duration of time the right of PNB over the goods may be subject to the lien?

Ruling: YES.  PNB contends that it was a mere pledgee as the receipts were used to secure two loans it granted.  The Supreme Court agreed with this and held that the indorsement and delivery of the receipts by Ramos and Zoleta to PNB was not to convey title to or ownership of the goods but to secure the loans by way of pledge.  The indorsement of the receipts to perfect the pledge merely constituted a symbolical or constructive delivery of the possession of the thing thus encumbered.  The creditor, in a contract of real security, like pledge, cannot appropriate without foreclosure the things given by way of pledge.  Any stipulation to the contrary is null and void for being pactum commissorio.  The law requires foreclosure in order to allow a transfer of title of the goods given by way of security from its pledgor, and before any such foreclosure, the pledgor, not the pledgee, is the owner of the goods.

However, the Supreme Court held that the warehouseman nevertheless is entitled to his lien that attaches to the goods invokable against anyone who claims a right of possession thereon.

(2) The Supreme Court held that where a valid demand by the lawful holder of the receipts for the delivery of the goods is refused by the warehouseman, despite the absence of a lawful excuse

provided by the law itself, the warehouseman’s lien is thereafter concomitantly lost.   As to what the law deems a valid demand, Section 8 of the Warehouse Receipts Law enumerates what must accompany a demand.

The Supreme Court held that regrettably, the factual settings do not sufficiently indicate whether the demand to obtain possession of the goods complied with Sec. 8. The presumption, nevertheless, would be that the law was complied with.  On the other hand, it would appear that the refusal of Noah to deliver the goods was not anchored on a valid excuse, i.e., non-satisfaction of the lien over the goods, but on an adverse claim of ownership.  Under the circumstances, this hardly qualified as a valid, legal excuse.  The loss of the lien, however, does not necessarily mean the extinguishment of the obligation to pay the warehousing fees and charges which continues to be a personal liability of the owners, i.e., the pledgors, not the pledgee, in this case.  But even as to the owners-pledgors, the warehouseman fees and charges have ceased to accrue from the date of the rejection by Noah to heed the lawful demand by PNB for the release of the goods.

Hence, the time from which the fees and charges should be made payable is from the time Noah refused to heed PNB’s demand for delivery of the sugar stocks and in no event beyond the value of the credit in favor of the pledgee since it is basic that, in foreclosures, the buyer does not assume the obligations of the pledgor to his other creditors even while such buyer acquires title over the goods less any existing preferred lien thereover.

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