TRADERS ROYAL BANK V.

CA 269 SCRA 15 FACTS: Filriters through a Detached Agreement transferred ownership to Philfinance a Central Bank Certificate of Indebtedness. It was only through one of its officers by which the CBCI was conveyed without authorization from the company. Petitioner and Philfinance later entered into a Repurchase agreement, on which petitioner bought the CBCI from Philfinance. The latter agreed to repurchase the CBCI but failed to do so. When the petitioner tried to have it registered in its name in the CB, the latter didn't want to recognize the transfer. HELD: The CBCI is not a negotiable instrument. The instrument provides for a promise to pay the registered owner Filriters. Very clearly, the instrument was only payable to Filriters. It lacked the words of negotiability which should have served as an expression of the consent that the instrument may be transferred by negotiation. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection, which the law throws around a holder in due course. This freedom in negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum of money to a specified person or entity for a period of time. The transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the negotiable instruments law. The pertinent question then iswas the transfer of the CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI registered in its name with the Central Bank? Clearly shown in the record is the fact that Philfinances title over CBCI is defective since it acquired the instrument from Filriters fictitiously. Although the deed of assignment stated that the transfer was for value received, there was really no consideration involved. What happened was Philfinance merely borrowed CBCI from Filriters, a sister corporation. Thus, for lack of any consideration, the assignment made is a complete nullity. Furthermore, the transfer wasn't in conformity with the regulations set by the CB. Giving more credence to rule that there was no valid transfer or assignment to petitioner. Negotiable Instruments Case Digest: Philippine National Bank v. Erlando Rodriguez (2008) Labels: 2008, Case Digest, G.R. No. 170325, Juris Doctor, Negotiable Instruments Case Digest,Negotiable Instruments Law G.R. No. 170325 September 26, 2008 Lessons Applicable: Fictitious Persons (Negotiable Instruments Law)

FACTS: Spouses Erlando and Norma Rodriguez were engaged in the informal lending business and had a discounting arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees

The association maintained current and savings accounts with Philippine National Bank (PNB)

PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members whenever the association was short of funds.

As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the members.

It was PEMSLAs policy not to approve applications for loans of members with outstanding debts.

To subvert this policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan accounts.

They took out loans in the names of unknowing members, without the knowledge or consent of the latter.

The officers carried this out by forging the indorsement of the named payees in the checks

Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named payees.

This was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch.

this became the usual practice for the parties.

November 1998-February 1999: spouses issued 69 checks totalling to P2,345,804. These were payable to 47 individual payees who were all members of PEMSLA

PNB eventually found out about these fraudulent acts

To put a stop to this scheme, PNB closed the current account of PEMSLA.

As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason Account Closed.

The amounts were duly debited from the Rodriguez account

Spouses filed a civil complaint for damages against PEMSLA, the Multi-Purpose Cooperative of Philnabankers (MCP), and PNB.

PNB credited the checks to the PEMSLA account even without indorsements = PNB violated its contractual obligation to them as depositors - so PNB should bear the losses

RTC: favored Rodriguez

makers, actually did not intend for the named payees to receive the proceeds of the checks = fictitious payees (under the Negotiable Instruments Law) = negotiable by mere delivery

CA: Affirmed - checks were obviously meant by the spouses to be really paid to PEMSLA = payable to order

ISSUE: W/N the 69 checks are payable to order for not being issued to fictitious persons thereby dismissing PNB from liability

HELD: NO. CA Affirmed GR: when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer instrument (Sections 8 and 9 of the NIL)

EX: However, there is a commercial bad faith exception to the fictitious-payee rule. A showing of commercial bad faith on the part of the drawee bank, or any transferee of the check for that matter, will work to strip it of this defense. The exception will cause it to bear the loss.

The distinction between bearer and order instruments lies in their manner of negotiation

order instrument - requires an indorsement from the payee or holder before it may be validly negotiated

bearer instrument - mere delivery

US jurisprudence: fictitious if the maker of the check did not intend for the payee to in fact receive the proceeds of the check

In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss

When faced with a check payable to a fictitious payee, it is treated as a bearer instrument that can be negotiated by delivery

underlying theory: one cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon

lack of knowledge on the part of the payees, however, was not tantamount to a lack of intention on the part of respondents-spouses that the payees would not receive the checks proceeds

PNB did not obey the instructions of the drawers when it accepted absent indorsement, forged or otherwise. It was negligent in the selection and supervision of its employees

Negotiable Instruments Case Digest: Moran v. CA and Citytrust Bank (1994) Labels: 1994, Case Digest, G.R. No. 105836, Juris Doctor, Negotiable Instruments Case Digest,Negotiable Instruments Law G.R. No. 105836 March 7, 1994 Lessons Applicable: Promissory notes and checks

FACTS: Spouses George and Librada Moran are the owners of the Wack-Wack Petron gasoline station located at Shaw Boulevard, corner Old Wack-Wack Road, Mandaluyong, Metro Manila. They regularly purchased bulk fuel and other related products from Petrophil Corporation on cash on delivery (COD) basis. Orders for bulk fuel and other related products were made by telephone and payments were effected by personal checks upon delivery. Petitioners maintained 3 joint accounts, namely 1 current account and 2 savings accounts with the Shaw Boulevard branch of Citytrust Banking Corporation. o As a special privilege to the Morans, whom it considered as valued clients, the bank allowed them to maintain a zero balance in their current account.

Transfers from Saving Account to their current account could be made only with their prior authorization but they gave written authority to Citytrust to automatically transfer funds from their Savings Account to their Current Account at any time whenever the funds in their current account were insufficient to meet withdrawals from said current account = pre-authorized transfer (PAT) agreement

December 12, 1983: Librada Moran drew a check for P50,576.00 payable to Petrophil Corporation

December 13, 1983: Librada Moran, issued another check in the amount of P56,090.00 in favor of the same corporation

December 14, 1983: Petrophil Corporation deposited the 2 checks to its account with the Pandacan branch of the Philippine National Bank (PNB), the collecting bank. o PNB presented them for clearing with the Philippine Clearing House Corporation in the afternoon of the same day o Records shows: Current Account had a zero balance Savings Account had an available balance of P26,104.30 and Savings Account had an available balance of P43,268.39

December 15, 1983 10 a.m.: George Moran went to the bank, as was his regular practice, to personally oversee their daily transactions with the bank o o deposited in their Savings Account the amounts of P10,874.58 and P6,754.25 deposited in their Savings Account No. 1037001372 the amounts of P5,900.00, P35,100.00 and 30.00 o P40,000.00 was then transferred by him from Saving Account No. 1037002387 to their current account by means of a pro forma withdrawal form (a debit memorandum), which was provided by the bank, authorizing the latter to make the necessary transfer. o P66,666.00 was transferred from Savings Account No. 1037001372 to the same current account through the pre-authorized transfer (PAT) agreement.

December 15 or 16, 1983: George Moran was informed by his wife Librada, that Petrophil refused to deliver their orders on a credit basis because the 2 checks they

had previously issued were dishonored upon presentment for payment due to "insufficiency of funds." o The non-delivery of gasoline forced them to temporarily stop business operations, allegedly causing them to suffer loss of earnings. o In addition, Petrophil cancelled their credit accommodation, forcing them to pay for their purchases in cash. George Moran, furious and upset, demanded an explanation from Raul Diaz, the branch manager. Failing to get a sufficient explanation, he talked to a certain Villareal, a bank officer, who allegedly told him that Amy Belen Ragodo, the customer service officer, had committed a "grave error". December 16 or 17, 1983: Diaz went to the Moran residence to get the signatures of the petitioners on an application for a manager's check so that the dishonored checks could be redeemed. o Diaz then went to Petrophil to personally present the checks in payment for the 2 dishonored checks. May or June, 1984: George Moran learned from Constancio Magno, credit manager of Petrophil, that the he received on January 4, 1984 from Citytrust, through Diaz, a letter dated December 16, 1983, notifying them that the 2 checks were "inadvertently dishonored . . . due to operational error." July 24, 1984: Moran, through counsel, wrote Citytrust claiming that the bank's dishonor of the checks caused them besmirched business and personal reputation, shame and anxiety, hence they were contemplating the filing of the necessary legal actions unless the bank issued a certification clearing their name and paid them P1,000,000.00 as moral damages CA affirmed RTC's dismissal

W/N: Spouses Moran can sue Citytrust for damages for negligence

HELD: NO. Affirmed Spouses Moran had no reason to complain, for they alone were at fault. o A drawer must remember his responsibilities every time he issues a check. He must personally keep track of his available balance in the bank and not rely

on the bank to notify him of the necessity to fund certain check she previously issued A bank is under no obligation to make part payment on a check actions taken by the bank after the incident clearly show that there was neither malice nor bad faith, but rather a clear intent to mollify an obviously agitated client letter was sent by respondent bank to Petrophil explaining that the dishonor of the checks was due to "operational error." - NOT an admission of guilt bank may not be held responsible for such damages in the absence of fraud, bad faith, malice, or wanton attitude Severino v Severino [G.R. No. 34642, September 24, 1931] STREET, J.

FACTS: Melecio Severino upon his death, left considerable properties. To end litigation among heirs, a compromise was effected where defendant Guillermo (son of MS) took over the property of deceased and agreed to pay installment of 100K to plaintiff (wife of MS) payable first in 40K cash upon execution of document in 3 equal installments. Enrique Echauz became guarantor. Upon failure to pay the balance, plaintiff filed and action against the defendant and Echauz. Enchauz contends that he received nothing from affixing his signature in the document and the contract lacked the consideration as to him. ISSUE: WON there is a consideration for the guaranty? HELD: The proof shows that the money claimed in this action has never been paid and is still owing to the plaintiff; and the only defense worth noting in this decision is the assertion on the part of Enrique Echaus that he received nothing for affixing his signature as guarantor to the contract which is the subject of suit and that in effect the contract was lacking in consideration as to him. The guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. The compromise and dismissal of a lawsuit is recognized in law as a valuable consideration; and the dismissal of the action which Felicitas Villanueva and Fabiola Severino had instituted against Guillermo Severino was an adequate consideration to support the promise on the part of Guillermo Severino to pay the sum of money stipulated in the contract which is the subject of this action. The promise of the appellant Echaus as guarantor therefore binding. It is neither necessary that guarantor or surety should receive any part of the benefit, if such there be accruing to his principal. Thus, judgment affirmed. Case Digest on PNB v. Judge Benito C. Se, Jr.(256 SCRA 380) A prior judgment holding that a party is a warehouseman obligated to deliver sugar stocks covered by the warehouse receipts does not necessarily carry with it a denial of its lien over the same sugar stocks. Thus where the judgment creditor (in this case PNB) makes an unconditional presentment of warehouse receipts for delivery of sugar stocks against the warehouseman (Noahs Ark), it thereby admits 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 warehousemans lien for storage fees and preservation expenses. Thus, PNB may not retrieve the sugar stocks without paying the warehousemans lien. The warehouseman need not file a separate action to enforce payment of storage fees. He may enforce his lien before delivering the sugar stocks covered by the warehouse receipts.

case Digest on PNB v. Judge Benito C. Se, Jr.(256 SCRA 380) A prior judgment holding that a party is a warehouseman obligated to deliver sugar stocks covered by the warehouse receipts does not necessarily carry with it a denial of its lien over the same sugar stocks. Thus where the judgment creditor (in this case PNB) makes an unconditional presentment of warehouse receipts for delivery of sugar stocks against the warehouseman (Noahs Ark), it thereby admits 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 warehousemans lien for storage fees and preservation expenses. Thus, PNB may not retrieve the sugar stocks without paying the warehousemans lien. The warehouseman need not file a separate action to enforce payment of storage fees. He may enforce his lien before delivering the sugar stocks covered by the warehouse receipts. PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO C. SE, JR., RTC, BR. 45, MANILA; NOAHS ARK SUGAR REFINERY; ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T. GO, respondents. G.R. No. 119231. April 18, 1996 FACTS: In accordance with Act No. 2137, the Warehouse Receipts Law, Noahs Ark Sugar Refinery issued on several dates, 5 Warehouse Receipts (Quedans). They were endorsed and negotiated to Ramos and Zoleta. They failed to pay their loans upon maturity. So, PNB wrote to Noahs Ark Sugar Refinery demanding delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos. Noahs Ark Sugar Refinery refused. So, PNB filed a complaint for Specific Performance with Damages and Application for Writ of Attachment. Respondent Judge Benito C. Se, Jr., in whose sala the case was raffled, denied the Application for Preliminary Attachment. HELD: Under the subject Warehouse Receipts provision, storage fees are chargeable. 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 warehousemans 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 warehousemans 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 warehousemans lien. 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 as the warehouseman, PRs cannot legally be deprived of their right to enforce their claim for warehousemans lien, for reasonable storage fees and preservation expenses. Pursuant to Section 31 which we quote earlier, the goods under storage may not be delivered until said lien is satisfied. Considering that PNB does not deny the existence, validity and genuineness of the Warehouse Receipts on which it anchors its claim for payment against PRs, it cannot disclaim liability for the payment of the

storage fees stipulated therein. PNB is in estoppel in disclaiming liability for the payment of storage fees due the PRs 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 PNB for payment against PRs 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 warehousemans lien for storage fees and preservation expenses. PNB may not now retrieve the sugar stocks without paying the lien due PRs as warehouseman. RULE: 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. Imperative is the right of the warehouseman to demand payment of his lien at this juncture, because, in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods by surrendering possession thereof. In other words, the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien, because a warehousemans lien is possessory in nature. WHEREFORE, the petition should be, as it is, hereby dismissed for lack of merit. Castellvi de Higgins & Higgins vs. Sellner [G.R. No. L-158025, November 5, 1920] MALCOLM, J. Facts: Sellner (defendant) wrote a letter to Mcleod (Castellvis agent) saying that he would bound himself to pay the promissory note of Mining, Clarke and Maye amounting 10K + interest if not fully paid at maturity, upon the surrender 3k shares of Keystone Mining Company. Plaintiffs contend that he is a surety; defendant contends that he is a guarantor. Plaintiffs also admit that if defendant is a guarantor, articles 1830, 1831, and 1834 of the Civil Code govern. Issue: WON Sellner is a guarantor or surety? Held: Sellner is a GUARANTOR. The letter of Mr. Sellner recites that if the promissory note is not paid at maturity, then, within fifteen days after notice of such default and upon surrender to him of the three thousand shares of Keystone Mining Company stock, he will assume responsibility. Sellner was not bound with Castellvi by the same instrument executed at the time and the same consideration, but his responsibility was secondary, one founded on an independent collateral agreement. Neither was he jointly and severally liable with Castellvi. In the original Spanish of the Civil Code now in force in the Philippine Islands, Title XIV of Book IV is entitled "De la Fianza." The Spanish word "fianza" is translated in the Washington and Walton editions of the Civil Code as "security." "Fianza" appears in the Fisher translation as "suretyship." The Spanish world "fiador" is found in all of the English translations of the Civil Code as "surety." The law of guaranty is not related of by that name in the Civil Code, although indirect reference to the same is made in the Code of Commerce. In terminology at least, no distinction is made in the Civil Code between the obligation of a surety and that of a guarantor. A surety and a guarantor are alike in that each promises to answer for the debt or default of another. A surety and a guarantor are unlike in that the surety assumes liability as a regular party to the undertaking, while the liability as a regular party to upon an independent agreement to pay the obligation if the primary pay or fails to do so. A surety is charged as an original promissory; the engagement of the guarantor is a collateral undertaking. The obligation of the surety is primary; the obligation of the guarantor is secondary.

The civil law suretyship is, accordingly, nearly synonymous with the common law guaranty; and the civil law relationship existing between codebtors liable in solidum is similar to the common law suretyship. Martinez vs. PNB (GR No. L-4080, Sept.21, 1953)the estate of Pedro Rodriguez was indebted to the defendantPhilippine National Bankwhich represented the balance of the crop loan obtained by the estate.Amparo R. Martinez, late administratrix of the estate upon request of the defendant bankendorsed and delivered to the said bank two (2) quedans according toplaintiff-appellant issued by the Bogo-Medellin Milling Co. where thesugar was storedalthough according to the defendant-appellee, only one quedancovering 1,071.04 piculs of sugar was endorsed and delivered. Duringthe last Pacific war, sometime in 1943, the sugar covered by thequedan or quedans was lost while in the warehouse of the Bogo-Medellin Milling Co. In the year 1948, the indebtedness of the estateincluding interest was paid to the bank, according to the appellant,upon the insistence of and pressure brought to bear by the bankwhen the invasion by the Japanese Armed Forces was imminent, theadministratrix of the estate asked the bank to release the sugar so thatit could be sold at a good price to avoid its possible loss due to theinvasion, but that the bank refusedvalue of said sugar was lost, the present action was brought againstthe defendant bank to recover said amount. dismissed the complaintthe loss of said sugar should be borne by the plaintiff-appellant.Administrator Jose R. Martinez is now appealing from that decision.It had never been sold to the bank, one of the essential elements of thecontract of sale, namely, consideration was not present. what was theprice? We do not knowSecond, the bank by its charter is not authorized to engage in thebusiness of buying and selling sugar.accepts sugar as security for payment of its crop loans. , it sells saidsugar for them, or the planters find buyers and direct them to the bank.According to law, the mortgagee or pledgee cannot become the owner of or convert and appropriate to himself the property mortgaged or pledgedThe only remedy of pledgee is to have said property sold at publicauction and the proceeds of the sale applied to the payment of theobligation secured by the mortgage or pledgeand claim of plaintiff-appellant is rather inconsistent and confusing.First, he contends that the endorsement and delivery of the quedan or quedans to the bank transferred the ownership of the sugar to saidbank so that as owner, the bank should suffer the loss of the sugar onthe principle that "a thing perishes for its owner But plaintiff-appellant in the next breath contends that had the bankreleased the sugar in February 1942, plaintiff could have sold it for P54,952.75. This second theory presupposes that despite the endorsement of thequedan, plaintiff still retained ownership of the sugar, a position thatruns counter to the first theory of transfer of ownership to the bank.It is obvious that where the transaction involved in the transfer of awarehouse receipt or quedan is not a sale but pledge or security, thetransferee or endorsee does not become the owner of the goods butthat he may only have the property sold and then satisfy the obligationfrom the proceeds of the sale.Plaintiff's complaint failed to make any allegation regarding negligencein the preservation of this sugar. In the second place, it is a fact thatthe sugar was lost in the possession of the warehouse selected by theappellant to which it had originally delivered and stored it, and for causes beyond the bank's control, namely, the war request for release was not made to the bank itself but directly to theofficial of the warehouse.the bank was not aware of any such request. the bank through itsofficials offered the sugar for sale but that there were no buyersbut he merely retains the right to keep and with the consent of theowner to sell them so as to satisfy the obligation from the proceeds of the sale, this for the simple reason that the transaction involved is not asale but only a mortgage or pledge, and that if the property covered bythe quedans or warehouse receipts is lost without the fault or negligence of the mortgagee or pledgee or the transferee or endorseeof the warehouse receipt or quedan, then said goods are to beregarded as lost on account of the real owner, mortgagor or pledgor.CA decision affirmed PNB vs. Judge Benito Se, Jr., et.al. (GR No. 119231, April 18, 1996) Noahs Ark Sugar Refinery issued on several dates (Quedans):negotiated and endorsed to Luis T. Ramos and to Cresencia K. Zoleta.Ramos and Zoleta then used the quedans as security for two loanagreementsLuis T. Ramos and Cresencia K. Zoleta failed to pay their loans uponmaturityPhilippine National Bank wrote to Noahs Ark Sugar Refinerydemanding delivery of the sugar stocks covered by the quedansendorsed to it by Zoleta and Ramos.refused to comply

with the demand alleging ownershipthe Philippine National Bank filed a Motion for Summary Judgment infavor of the plaintiff as against the defendants. Denied. Petition for certiorari. trial judges decision , is reversed and set aside. Priv. respondents moved for reconsideration. Denied.thereupon filed before the trial court an Omnibus Motion seekingamong others the deferment of the proceedings until privaterespondents are heard on their claim for warehousemans lien.Granted.The issues presented before us in this petition revolve around thelegality of the questioned orders of respondent judge, issued as theywere after we had denied with finality private respondents contentionthat the PNB could not compel them to deliver the stocks of sugar intheir warehouse covered by the endorsed quedans or pay the value of the said stocks of sugar.ISSUE: Can the warehouseman enforce his warehousemans lienbefore delivering the sugar stocks as ordered by the Court of Appealsor need he file a separate action to enforce payment of storage fees? we could not contemplate the matter of warehousemans lien becausethe issue to be finally resolved then was the claim of privaterespondents for retaining ownership of the stocks of sugar covered bythe endorsed quedans.there was no point in taking up the issue of warehousemans lien sincethe matter of ownership was as yet being determined. Neither couldstorage fees be due then while no one has been declared the owner of the sugar stocks in questionAfter being declared not the owner, but the warehouseman, private respondents cannot legally be deprived of their right toenforce their claim for warehousemans lien, for reasonable storagefees and preservation expensesThe unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the provisionsof the Warehouse Receipts Law (R.A. 2137) carried with it theadmission of the existence and validity of the terms, conditions andstipulations written on the face of the Warehouse Receipts, includingthe unqualified recognition of the payment of warehousemans lien for storage fees and preservation expenses. Petitioner may not nowretrieve the sugar stocks without paying the lien due privaterespondents as warehouseman.While the PNB is entitled to the stocks of sugar as the endorsee of thequedans, delivery to it shall be effected only upon payment of thestorage fees.Imperative is the right of the warehouseman to demand payment of hislien at this juncture, because, in accordance with Section 29 of theWarehouse Receipts Law, the warehouseman loses his lien upongoods by surrendering possession thereof. In other words, the lien maybe lost where the warehouseman surrenders the possession of thegoods without requiring payment of his lien, because awarehousemans lien is possessory in nature.SC uphold and sustain the validity of the assailed orders of publicrespondent, in issuing the questioned orders which recognized thelegitimate right of Noahs Ark, after being declared as warehouseman,to recover storage fees before it would release to the PNB sugar stocks covered by the five (5) Warehouse Receipts.petition dismissed for lack of merit. Limjoco vs. Director of Commerce (G.R. No. L-17640, November 29, 1965)petitioner and her husband, , were the owners of a rice mill commonlycalled "kiskisan" and were engaged in the business of milling palaybelonging to their customers for the purpose of removing its hull andconverting it into rice. Limjoco died, leaving the milling business in the hands of hissurviving spouse, the petitioner petitioner continued in the business, which prior to the death of her husband, was managed by the latter without, however, renewing thelicensethe petitioner refused to secure a license from the Bureau of Commerce claiming that her business does not fall within theprovisions of Act 3893 as amended by Republic Act 247.The facilities of the rice mill are open to the public in the sense thatanybody who wants his palay to be milled and converted into rice maydeliver the same to the rice mill paying P0.40 per cavan of palay for theservices of the petitioner in milling it. The mill itself is within a buildingwhich the petitioner calls a "camalig" about ten meters long, eightmeters wide and five meters high. The "camalig" is totally enclosedpartly by steelmatting, partly by wood and partly by galvanized ironsheets.Director of Commerce ruled that appellant's rice milling business fallsunder the law just quoted, required her to secure the correspondingrenewal license and started steps for her prosecution in view of her refusal to do so.In other words, it is enough that the palay is delivered, even if only tohave 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

merelyutilizes the services of the mill but keeps the palay under his physicalcontrol all steps of the way. But in this case it is a fact that palay isdelivered to appellant and sometimes piled inside her "camalig" inappreciable quantities, to wait for its turn in the milling process. This isprecisely the situation covered by the statute."There is a reason for the inclusion of the business of the petitioner within the operation of Act 3893 as amended by Republic Act 247. Themain intention of the lawmaker is to give protection to the owner of thecommodity against possible abuses (and we might add negligence) of the person to whom the physical control of his properties is delivered."Appellant 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 theoperation of the statute, for otherwise the very fact of noncompliancewith the legal requirements in this respect would be its own excusefrom the liabilities imposeddecision appealed affirmed Gonzales vs. Go Tiong, et.al. (GR No.L-11776, August 30, 1958) Go Tiong owned a rice mill and warehouse, located at Mabini,Urdaneta, Pangasinanhe obtained a license to engage in the business of a bondedwarehouseman, to secure performance obtained Luzon Surety Co.executed Guaranty Bond conditioned particularly on the fulfillment byGo Tiong of his duty or obligation to deliver to the depositors in hisstorage warehouse, the palay received by him for storage, at any timedemand is made, or to pay the market value thereof, in case he wasunable to return the sameBut prior to the issuance of the license, he had on several occasionsreceived palay for deposit from plaintiff Gonzalesplaintiff demanded from Go Tiong the value of his depositsbut he was told to return after two days, which he did, but Go Tiongagain told him to come back. A few days later, the warehouse burnedto the groundAfter the burning of the warehouse, the depositors of palay, includingplaintiff, filed their claims with the Bureau of Commerce, and it wouldappear that with the proceeds of the insurance policy, the Bureau of Commerce paid off some of the claim. Plaintiff's counsel later withdrewhis claim with the Bureau of Commerce, according to Go Tiong,because his claim was denied by the Bureau, but according to thedecision of the trial court, because nothing came from plaintiff's effortsto have his claim paid. Gonzales filed the present action.

Gonzales and Go Tiong entered into a contract of amicable settlementto the effect that upon the settlement of all accounts due to him by GoTiong, he, Gonzales, would have all actions pending against Go Tiongdismissed. Inasmuch as Go Tiong failed to settle the accounts,Gonzales prosecuted his court action..Act No. 3893 as amended is a special law regulating the business of receiving commodities for storage and defining the rights andobligations of a bonded warehouseman and those transactingbusiness with him.SECTION 1. Persons who may issue receipts. Warehouse receiptsmay be issued by any warehouseman.,and the Bonded Warebouse Act as amended permits thewarehouseman to issue any receipt, thus:. . . . "receipt" as any receipt issued by a warehouseman for commoditydelivered to himas far as Go Tiong was concerned, the fact that the receipts issued byhim were not "quedans" is no valid ground for defense because he wasthe principal obligor As to the contention that the deposits made by the plaintiff were freebecause he paid no fees therefor, it would appear that Go Tionginduced plaintiff to deposit his palay in the warehouse free of charge inorder to promote his business and to attract other depositorsThe defense that the palay was destroyed by fire neither does theCourt consider to be good for while the contract was in the nature of adeposit and the loss of the thing would exempt the obligor in a contractof deposit to return the goods, this exemption from the responsibility for the damages must be conditioned in his proof that the loss was byforce majeure, and without his fault, the fact that he exceeded the limit of the authorized deposit musthave increased the risk and would militate against his defense of non-liability., the defendant violated the terms of his license by accepting for deposit palay in excess of the limit authorized by his license, which factmust have increased the risk.It is evident, however, that while there was an attempt to settle thecase amicably, the settlement was never consummated because GoTiong failed to settle the accounts of Gonzales to the latter'ssatisfaction. Consequently, said nonconsummated compromisesettlement does not discharge the surety:In relation to the failure of Go Tiong to issue the warehouse receiptscontemplated by the Warehouse Receipts Act, which

failure, accordingto appellants, precluded plaintiff from suing on the bond, defining receipt as any receipt issued by a warehouseman for commodity delivered to him, showing that the law does not require asindispensable that a warehouse receipt be issued.as long as the depositor is injured by a breach of any obligation of thewarehouseman, which obligation is secured by a bond, said depositor may sue on said bond. In other words, the surety cannot avoid liabilityfrom the mere failure of the warehouseman to issue the prescribedreceiptThe surety company concedes that the bond which it gave contains thestatutory conditions. The statute . . . requires that the bond shall beconditioned upon the faithful performance of the public local grainwarehouseman of all the provisions of law relating to the storage of grain by such warehouseman.The obligation of the surety covers the duty of the warehouseman toissue the prescribed receipt, as well as the other duties imposed uponhim by the statute.We deem it unnecessary to discuss and rule upon the other questionsraised in the appeal.appealed decision affirmed