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 Relations

2 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.

-o-

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?

-o-

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 Refinery

226 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.
-o-

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.
xxx xxx xxx

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.
-o-

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.

Lua Kian vs. Manila Railroad Co., et al., 19 SCRA 5, No. L-23033, January 05, 1967

G.R. No. L-23033 January 5, 1967

LUA KIAN, plaintiff and appellee,
vs.
MANILA RAILROAD COMPANY and MANILA PORT SERVICE, defendants and appellants.
D. F. Macaranas and S. V. Pampolina Jr. for defendants and appellants.
San Juan, Laig and Associates for plaintiff and appellee.
BENGZON, J. P., J.:
The present suit was filed by Lua Kian against the Manila Railroad Co. and Manila Port Service for the
recovery of the invoice value of imported evaporated "Carnation" milk alleged to have been
undelivered. The following stipulation of facts was made:
1. They admit each other's legal personality, and that during the time material to this action,
defendant Manila Port Service as a subsidiary of defendant Manila Railroad Company operated the
arrastre service at the Port of Manila under and pursuant to the Management Contract entered into
by and between the Bureau of Customs and defendant Manila Port Service on February 29, 1956;
2. On December 31, 1959, plaintiff Lua Kian imported 2,000 cases of Carnation Milk from the
Carnation Company of San Francisco, California, and shipped on Board SS "GOLDEN BEAR" per Bill of
Lading No. 17;
3. Out of the aforesaid shipment of 2,000 cases of Carnation Milk per Bill of Lading No. 17, only 1,829
cases marked `LUA KIAN 1458' were discharged from the vessel SS `GOLDEN BEAR' and received by
defendant Manila Port Service per pertinent tally sheets issued by the said carrying vessel, on
January 24, 1960;
4. Discharged from the same vessel on the same date unto the custody of defendant Manila Port
Service were 3,171 cases of Carnation Milk marked "CEBU UNITED 4860-PH-MANILA" consigned to
Cebu United Enterprises, per Bill of Lading No. 18, and on this shipment, Cebu United Enterprises has
a pending claim for short-delivery against defendant Manila Port Service;
5. Defendant Manila Port Service delivered to the plaintiff thru its broker, Ildefonso Tionloc, Inc.
1,913 cases of Carnation Milk marked "LUA KIAN 1458" per pertinent gate passes and broker's
delivery receipts;
6. A provisional claim was filed by the consignee's broker for and in behalf of the plaintiff on January
19, 1960, with defendant Manila Port Service;
7. The invoice value of the 87 cases of Carnation Milk claimed by the plaintiff to have been short-
delivered by defendant Manila Port Service is P1,183.11 while the invoice value of the 87 cases of
Carnation Milk claimed by the defendant Manila Port Service to have been over-delivered by it to
plaintiff is P1,130.65;
8. The 1,913 cases of Carnation mentioned in paragraph 5 hereof were taken by the broker at Pier
13, Shed 3, sometime in February, 1960, where at the time, there were stored therein, aside from
the shipment involved herein, 1000 cases of Carnation Milk bearing the same marks and also
consigned to plaintiff Lua Kian but had been discharged from SS `STEEL ADVOCATE' and covered by
Bill of Lading No. 11;
9. Of the shipment of 1000 cases of Carnation Milk which also came from the Carnation Company,
San Francisco, California, U.S.A. and bearing the same marks as the shipment herein but had been
discharged from S/S "STEEL ADVOCATE" and covered by Bill of Lading No. 11, Lua Kian as consignee
thereof filed a claim for short-delivery against defendant Manila Port Service, and said defendant
Manila Port Service paid Lua Kian plaintiff herein, P750.00 in settlement of its claim;
10. They reserve the right to submit documentary evidence;
11. They submit the matter of attorney's fees and costs to the sound discretion of the Court.
On these facts and documentary evidence subsequently presented, the Court of First Instance of
Manila ruled that 1,829 cases marked Lua Kian (171 cases less than the 2,000 cases indicated in the
bill of lading and 3,171 cases marked "Cebu United" (171 cases overthe 3,000 cases in the bill of
lading were discharged to the Manila Port Service. Considering that Lua Kian and Cebu United
Enterprises were the only consignees of the shipment of 5,000 cases of "Carnation" milk, it found
that of the 3,171 cases marked "Cebu United", 171 should have been delivered to Lua Kian.
Inasmuch as the defendant Manila Port Service actually delivered 1,913 cases to plaintiff, 1 which is
only 87 cases short of 2,000 cases as per bill of lading the former was ordered to pay Lua Kian the
sum of P1,183.11 representing such shortage of 87 cases, with legal interest from the date of the
suit, plus P500 as attorney's fees.
Defendants appealed to Us and contend that they should not be made to answer for the undelivered
cases of milk, insisting that Manila Port Service was bound to deliver only 1,829 cases to Lua Kian and
that it had there before in fact over-delivered to the latter.
The bill of lading in favor of Cebu United Enterprises indicated that only 3,000 cases were due to said
consignee, although 3,171 cases were marked in its favor. Accordingly, the excess 171 cases marked
"Cebu United" placed the defendant arrastre operator in a dilemma, for should it deliver them to Lua
Kian the goods could be claimed by the consignee Cebu United Enterprises whose markings they
bore, and should it deliver according to markings, to Cebu United Enterprises, it might be sued by the
consignee, Lua Kian whose bill of lading indicated that it should receive 171 cases more. The
dilemma itself, however, offered the solution. The legal relationship between an arrastre operator
and the consignee is akin to that of a depositor and warehouseman. 2 As custodian of the goods
discharged from the vessel, it was defendant arrastre operator's duty, like that of any ordinary
depositary, to take good care of the goods and to turn them over to the party entitled to their
possession.3 Under this particular set of circumstances, said defendant should have withheld delivery
because of the discrepancy between the bill of lading and the markings and conducted its own
investigation, not unlike that under Section 18 of the Warehouse Receipts Law, or called upon the
parties, to interplead, such as in a case under Section 17 of the same law, in order to determine the
rightful owner of the goods.
It is true that Section 12 of the Management Contract exempts the arrastre operator from
responsibility for misdelivery or non-delivery due to improper or insufficient marking. We cannot
however excuse the aforestated defendant from liability in this case before Us now because the bill
of lading showed that only 3,000 cases were consigned to Cebu United Enterprises. The fact that the
excess of 171 cases were marked for Cebu United Enterprises and that the consignment to Lua Kian
was 171 cases less than the 2,000 in the bill of lading, should have been sufficient reason for the
defendant Manila Port Service to withhold the goods pending determination of their rightful
ownership.
We therefore find the defendants liable, without prejudice to their taking whatever proper legal
steps they may consider worthwhile to recover the excess delivered to Cebu United Enterprises.
With respect to the attorney's fees awarded below, this Court notices that the same is about 50 per
cent of the litigated amount of P1,183.11. We therefore deem it reasonable to decrease the
attorney's fees to P300.00.
Wherefore, with the aforesaid reservation, and with the modification that the attorney's fee is
reduced to P300.00, the judgment appealed from is affirmed, with costs against appellants. So
ordered.