Title
Philippine Tobacco Flue Curing and Redrying Corp. vs. Pablo
Case
G.R. No. L-20085
Decision Date
Aug 8, 1975
PTFCRC contested a demand for an additional bond under the General Bonded Warehouse Act, arguing it was not engaged in warehousing. The Supreme Court ruled in its favor, affirming the trial court's decision that PTFCRC's activities were service-based, not warehousing, and the bond demand was unreasonable.

Case Digest (G.R. No. 202275)
Expanded Legal Reasoning Model

Facts:

  • Background of the Parties and the Transaction
    • The petitioner-appellee, Philippine Tobacco Flue Curing and Redrying Corporation (PTFCRC), is a domestic corporation engaged in flue curing and redrying of tobacco leaves.
    • The respondent-appellant, Director of the Bureau of Commerce (through which the Director of Commerce operates), is tasked with enforcing the provisions of the General Bonded Warehouse Act.
    • Initially, on February 2, 1959, the PTFCRC and the Agricultural Credit and Cooperative Financing Administration (ACCFA) entered into a Memorandum Agreement where:
      • The PTFCRC agreed to redry, pack, and store all Virginia leaf tobacco delivered by ACCFA in accordance with standard trade procedures including fumigation to prevent pest damage.
      • ACCFA agreed to pay P0.18 per kilo for the redrying and packing of the tobacco and a monthly warehousing fee of P2.20 per hogshead.
      • As security for its performance, PTFCRC was to file a bond of P200,000.00 which could be increased by ACCFA as the value and amount of tobacco delivered increased.
  • Developments Prompting the Bond Controversy
    • On February 26, 1960, the Director of Commerce, through the Bureau’s Chief Commission Agent, required the PTFCRC to file an additional bond:
      • This demand was based on findings that the PTFCRC’s records indicated it had received for storage 50,000 hogsheads of Virginia leaf tobacco valued at P40,000,000.
      • The corporation was only authorized to store tobacco worth up to P2,300,000 (approximately 4,000 hogsheads) at any one time.
    • On March 12, 1960, PTFCRC, through its legal counsel, contended that:
      • It was not engaged in warehousing and storage per se and thus not subject to the provisions of the General Bonded Warehouse Act.
      • Accordingly, the additional bond requirement imposed by the Director of Commerce was unwarranted.
    • Subsequent to this, the controversy deepened:
      • The matter was escalated through appeals to the Secretary of Commerce and Industry.
      • On May 12, 1960, the Secretary rejected PTFCRC’s appeal, ordering the filing of the additional bond.
  • The Revised Agreement and Further Developments
    • On May 19, 1960, a new Memorandum Agreement was executed between PTFCRC and ACCFA which:
      • Mandated that ACCFA deliver 75% of its tobacco to PTFCRC for curing and treatment until ready for cigarette manufacturing.
      • Established a stipulated fee of P2.20 per hogshead for the services rendered.
      • Required PTFCRC to post and maintain a surety bond of P700,000.00 as security for the faithful performance of the agreement.
      • Explicitly declared the earlier agreement of February 2, 1959, as extinguished, terminated, void, and superseded.
    • On June 1, 1960, the Director of Commerce issued a further directive:
      • PTFCRC was required to file an additional bond in the amount of P24,905,579.63 within two days from receipt of the letter.
    • In response, PTFCRC filed a petition for prohibition with a writ of preliminary injunction against the Director of Commerce claiming:
      • The additional bond requirement was imposed with grave abuse of discretion.
      • The action was in disregard of law and jurisdiction, potentially causing irreparable damage to the corporation.
  • Court Proceedings and Preliminary Judgments
    • The Court of First Instance of Manila, after trial, rendered a judgment that:
      • Declared PTFCRC was not engaged in the business of warehousing within the context of the General Bonded Warehouse Act concerning the tobacco covered under the May 19, 1960, agreement.
      • Held that the petitioner-appellee should not be obligated to file the additional bond as demanded.
      • Nullified the Director of Commerce’s order for filing the P24,905,579.63 bond.
      • Made the writ of preliminary injunction permanent.
    • This appellate case thus arose in view of the fundamental dispute over the interpretation and application of Sections 4 and 5 of Act No. 3893, as amended.
  • Contextual Factors
    • The tobacco subject matter pertains to that harvested in 1959, which undergoes an ageing process of 18 to 24 months before being sold.
    • The ACCFA, which initially insured its tobacco through GSIS, later became defunct with its functions taken over by the Agricultural Credit Administration.
    • By the time the dispute advanced, many of the tobacco stocks had already been withdrawn and disposed of, further questioning the necessity for an additional bond.

Issues:

  • Legal Characterization of the Transaction
    • Whether the contract between PTFCRC and ACCFA constitutes a warehousing arrangement subject to the General Bonded Warehouse Act.
    • Whether the services rendered by PTFCRC (flue curing and redrying of tobacco) exempt it from the strictures applicable to warehousing.
  • Authority and Discretion of the Director of Commerce
    • Whether the Director of Commerce acted within his statutory authority in demanding an additional bond from PTFCRC.
    • Whether the imposition of an additional bond represents an abuse of discretion given the contractual security already provided.
  • Adequacy of Existing Security
    • Whether the performance bond of P700,000.00 under the May 19, 1960, agreement, coupled with the ACCFA’s insurance arrangement, provides sufficient protection.
    • Whether enforcing further bonding would unjustly burden PTFCRC considering the amount and nature of the stored tobacco.
  • Applicability of the General Bonded Warehouse Act
    • Whether the provisions of Sections 4 and 5 of Act No. 3893, as amended, are applicable to the PTFCRC given its non-warehousing classification.
    • How the intent of the legislative provision—to protect commodity owners from negligence or abuses by warehousemen—applies in this specific case.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
Unlock Full Case Digest

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster—building context before diving into full texts.

About Privacy Terms