Negotiable Instruments - Atty.
Ampil
AY 2017 - 2018 - Term 1
Garcia, Pernes, Tagacay, Villasanta
01 People v Versola ● The Director of Commerce ruled that appellant's rice milling business falls
Facts: under the law just quoted, required her to secure the renewal license. Trial
● Dionisio Versola, owner and operator of a rice mill in Cotabato was court ruled in favor of Director of Commerce.
convicted for operating a rice mil without a license therefor, in violation of
sec.3 of The General Bonded Warehouse Act. Issue: WON petitioner should secure license - YES
● It was alleged that he accepted and milled palay for the price of 0.50 to 0.80
per cavan, without securing the necessary permit from the Bureau of Held: Trial court ruling affirmed.
Commerce. 1. Sec. 2 does not stop at the bare use of the word "storage," but expressly
o He also refused to do so even a representative of the said bureau provides that any contract or transaction wherein the palay delivered is to be
told him to do so. milled for and on account of the owner shall be deemed included in the
● Versola contended that provisions Sec. 3, 4 & 5 of the General Bonded business of receiving rice for storage for the purpose of the Act. In other
Warehouse Act is only applicable to rice storages and he is engaged in the words, it is enough that the palay is delivered, even if only to have it milled.
milling of rice. 2. Delivery connotes transfer of physical possession or custody but in this case
it is a fact that palay is delivered to appellant and sometimes piled inside her
Issue: WON Sec. 3 4 & 5 of The General Bonded Warehouse Act is applicable to rice "camalig" in appreciable quantities, to wait for its turn in the milling process.
milling as well. YES. This is precisely the situation covered by the statute.
3. One way or the other, there is a form of storage, the duration of which may
Held: At first glance Sec. 3, 4 & 5 only applies to rice storages, however as stated in vary, depending upon circumstances. In any event, the ricemill operator is
sec.2 of the Act. responsible for the palay or rice, while the same is in his possession,
“The business of receiving rice for storage shall include (2) Any contract or and public policy or public interest demands that the rights of the
transaction wherein the rice delivered is to be milled for and on account of owners of the commodity — which is our main staple — be duly
the owner thereof.” protected.
4. Hence, the need of securing the license prescribed in Act No. 3893, in order
In addition, in the ordinary course of business, this purpose of milling cannot be that the Director of Commerce could determine the conditions under which
accomplished without keeping the palay for some time in the mill, and hence, without the mill may be authorized to operate, conformably with the objectives of
storing therein said commodity. said legislation, and the amount of the bond to be required for the protection
of the people who avail themselves of its services.
Notes: 5. The main intention of the lawmaker is to give protection to the owner of the
1. Versolas Milling is only one of the two rice mills within a perimeter of 3 commodity against possible abuses (and we might add negligence) of the
barrios, hence, he has to store said cavans of palay before milling due to person to whom the physical control of his properties is delivered.
large amount of inventory. He also had to expand his “camarin” in order to
accommodate more cavans. This move implied that he was storing palay Notes:
cavans of his clients to be milled subsequently. (1) Petitioner owns a rice mill of the semicono type. The facilities of the rice mill
are open to the public in (anybody who wants his palay to be milled and
converted into rice may deliver the same to the rice mill paying P0.40 per
02 Vda. De Limjoco v Director of Commerce G.R. No. L-17640 cavan of palay for the services of the petitioner in milling it). The mill itself is
November 29, 1965 within a building which the petitioner calls a "camalig" (10 meters long, 8
meters wide, 5 meters high) The "camalig" is totally enclosed partly by
Facts: Petitioner and her husband, the late Bonifacio T. Limjoco, were the owners of steelmatting, partly by wood and partly by galvanized iron sheets.
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 (2) As used in this Act, the term "Warehouse" shall be deemed to mean every
it into rice. Bonifacio died, leaving business to petitioner. building, structure, or other protected inclosure in which rice is kept for
● Deceased husband was not able to renew the license of the business. storage. The term "rice" shall be deemed to mean either palay, in bundles,
Petitioner refused to secure a license from the Bureau of Commerce or in grains, or clean rice, or both. "Person" includes a corporation or
claiming that her business does not fall within the provisions of Act 3893 as partnership or two or more persons having a joint or common interest;
amended by Republic Act 247, section 2* of R.A. 247 specifically. "warehouseman" means a person engaged in the business of receiving rice
According to petitioner, there were occasions when her customers brought more for storage; and "receipt" means any receipt issued by a warehouseman for
palay than could be milled in one day, whereupon they would leave the same in the rice delivered to him. For the purpose of this Act, the business of receiving
custody of appellant, piled inside the "camalig" to await its turn to be milled. rice for storage shall include (1) any contract or transaction wherein the
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
Garcia, Pernes, Tagacay, Villasanta
warehouseman is obligated to return the very same rice delivered to him or HELD: NO. It would be unreasonable and oppressive to compel the
pay its value; (2) any contract or transaction wherein the rice delivered is to petitioner-appellee to further put up a bond and subject it to the unnecessary burden
be milled for and on account of the owner thereof; (3) any contract or of the premium incident to such bond.
transaction wherein the rice delivered is commingled with rice delivered by
or belonging to other persons, and the warehouseman is obligated to return The Supreme Court ruled that since the main intention of the lawmaker in requiring
rice of the same kind or pay its value. the miller to post the necessary bond under Section 4 of the General Bonded
Warehouse Law is to protect the owner of the commodity, and that ACCFA has
insured its tobacco with GSIS while PTFCRC had been required to file a bond of
03. Phil Tobacco vs Pablo P700,000.00, ACCFA is already amply protected; hence, it would be
DOCTRINE: unreasonable and oppressive to compel the posting of an additional bond.
Section 4 of the General Bonded Warehouse Act, Section 4: Purpose - The main Moreover, since the commodity for curing and ageing had already been
intention of the lawmaker in requiring the millers to post the necessary bond," "is to withdrawn considering that the contract was made 15 years ago, the appeal
give protection to the owner of the commodity against possible abuse of the person to should be dismissed.
whom the physical control of his properties is delivered."
1. In the case at bar, the ACCFA insured its tobacco with the GSIS, and the FALLO: UPON THE FOREGOING, the appeal should be, as it is hereby,
PTFCRC had been required by the ACCFA to file a performance bond in the DISMISSED, without costs.
amount of P700, 000.00 conditioned upon the faithful performance of the
agreement and two answer for any damage that may be suffered by the
ACCFA while the tobacco is in the plant or warehouse of the 04 LEE BOG & COMPANY v. THE HANOVER FIRE INSURANCE COMPANY OF
petitioner-appellee. THE CITY OF NEW YORK, ET AL., REPUBLIC OF THE PHILIPPINES, ET AL.
2. It is, therefore, evident that ACCFA is already amply protected. It would Facts: 1. This is an appeal from the CFI decision holding Hanover liable for the face
be unreasonable and oppressive to compel the PTFCRC to further put value of the fire insurance policies (11) issued by them.
up a bond and subject it to the unnecessary burden of the premium ● The assured in these policies is Lee Bog & Co.
incident to such bond. 2. The insurance covered "stock of rice and palay (loose and/or sacks), the property
of the assured or held by him in trust, on commission or on joint account with others
FACTS: and/or for which he is responsible in case of loss", while contained during the
- The Philippine Tobacco Flue Curing and Redrying Corporation (PTFCRC) entered currency of the policies in the building of the assured in Binalonan, Pangasinan Rice
into an agreement with the Agricultural Credit and Financing Administration (ACCFA) Mill.
for the curing and treatment of all Virginia leaf tobacco delivered by the latter. ● There was a common "simple loss payable clause" in favor of the Bureau of
- ACCFA, in turn, agreed to pay the PTFCRC eighteen (P0.18) Centavos per kilo for Commerce in all the policies issued by Hanover, except for one (1) Policy
the redrying and packing of the tobacco and a monthly warehousing fee of Two issued by Hanover, which also contained a "simple loss payable clause" but
Pesos and Twenty Centavos (P2.20) per hogshead. in favor of the People's Surety & Insurance Co., Inc. Said clause provides
- As security for the faithful performance of the undertaking, the PTFRC shall post that
and maintain a surety bond in the amount of PHP700,000.00 in favor of the ACCFA. ○ "loss, if any, under this policy, is payable to BoC as its interest may
- The Director of Commerce, however, required an additional bond of appear, subject to the terms, conditions, clauses, and warranties of
P24,905.579.63. this policy."
- Hence, PTFCRC filed with the Court of First Instance of Manila a petition for 3. Lee Bog argues:
prohibition with a writ preliminary injunction on the ground that, in requiring an ● that the CFI erred in considering the claims on the bonded palay belonging
additional bond, the Director of Commerce acted with grave abuse of discretion. to depositors separately and independently from the claim on the unbonded
- The trial court ruled that PTFCRC is not engaged in the business of warehousing as palay belonging to the Lee Bog because
contemplated in the General Bonded Warehouse Law; hence, the order of the ● the policies sued upon were concurrent and each and all of them covered, in
Director Commerce requiring the filing of additional bonds is null and void. The their entirely, inseparably and indivisibly, the stock of rice and palay kept in
Director of Commerce appealed. the insured's warehouse, whether belonging to the insured or to its
depositors.
ISSUE: Whether or not the PTFCRC should post an additional bond, as required by ● As there is, however, a difference between bonded and unbonded palay and
the. Director of Commerce, pursuant to the provisions of sections 4 and 5 of Act No. one is distinct from the other, each subject must really be treated separately.
3893, as amended, otherwise known as the General Bonded Warehouse Act?
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
Garcia, Pernes, Tagacay, Villasanta
Issue: Should Hanover be liable for the insurance policies it issued? - YES.
Held: CFI ruling affirmed.
● Hanover is liable for the face value of the fire insurance policies it issued.
● The palay insured by the Lee Bog under the aforesaid 10 policies included
no more than such of the palay as the warehouse received as deposits. The
palay insured by the Lee Bog 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 Act, 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 Lee Bog insured said palay.
● Hanover cannot pretend that they and Lee Bog were not aware of the fact
that the subject matter of the insurance policies was solely the palay covered
by the Bonded Warehouse Act.
● Upon the other hand, the one (1) Policy issued by Hanover, which does not
contain a clause common to the aforementioned 10 policies, referred only to
the unbonded deposits of Lee Bog.
Doctrine: The insurance companies cannot pretend that they and insured were not
aware of the fact that the subject matter of the insurance policies upon the
government is issuing was solely the palay covered by the Bonded Warehouse Act.
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
(quedans) may prove the deposit of bonded palay. The unbonded palay may be
determined from the records of purchase of palay and sales of milled rice.
