G.R. No. L-11776; August 30, 1958
RAMON GONZALES, plaintiff-appellee, vs. GO TIONG and LUZON SURETY CO., INC., defendants-appellants.

FACTS

Defendant Go Tiong owned a rice mill and warehouse in Pangasinan. On February 4, 1953, he obtained a license to operate as a bonded warehouseman under Act No. 3893 (the General Bonded Warehouse Act). To secure his obligations, defendant Luzon Surety Co. executed Guaranty Bond No. 294 on January 26, 1953. Prior to obtaining his license, Go Tiong received from plaintiff Ramon Gonzales several deliveries of palay totaling 368 sacks, for which he issued ordinary receipts (Exhibits A-D). After becoming a licensed bonded warehouseman, Go Tiong received further deliveries from Gonzales totaling 492 sacks, also covered by ordinary receipts, making a grand total of 860 sacks valued at P8,600. On or about March 15, 1953, Gonzales demanded payment from Go Tiong but was put off. Shortly thereafter, the warehouse burned down. At the time of the fire, the warehouse contained 5,847 sacks of palay, exceeding the 5,000-sack limit authorized by Go Tiong’s license. The receipts issued to Gonzales were ordinary receipts, not formal “warehouse receipts” or “quedans” as defined by the Warehouse Receipts Act ( Act No. 2137 ). After the fire, depositors filed claims with the Bureau of Commerce. Gonzales initially filed a claim but later withdrew it. Subsequently, Gonzales and Go Tiong entered into an amicable settlement agreement whereby Gonzales would dismiss his actions if Go Tiong settled the accounts. Go Tiong failed to settle, so Gonzales prosecuted this action against Go Tiong and Luzon Surety Co. for the value of the palay. The trial court rendered judgment against both defendants, who appealed.

ISSUE

The principal issues, as distilled from the appellants’ assignments of error, are:
1. Whether Gonzales’s claim is governed by the Civil Code provisions on deposit or by the special Bonded Warehouse Act ( Act No. 3893 , as amended).
2. Whether Go Tiong is exempt from liability for the loss of the palay due to the fire, which is claimed to be a fortuitous event.
3. Whether the Luzon Surety Co. is discharged from liability because:
a. The amicable settlement between Gonzales and Go Tiong constituted a material alteration of the surety bond.
b. The receipts issued were not formal warehouse receipts (“quedans”).
c. Gonzales allegedly renounced his rights under the Bonded Warehouse Act by withdrawing his claim from the Bureau of Commerce and executing the amicable settlement.
4. Whether the transaction constituted a gratuitous deposit or a sale rather than a deposit.

RULING

The Supreme Court AFFIRMED the trial court’s decision.
1. Applicability of the Bonded Warehouse Act: The claim is governed by Act No. 3893 , as amended, not the Civil Code. This Act is a special law regulating the business of receiving commodities for storage and defines the rights and obligations of a bonded warehouseman. Any deposit made with him as a bonded warehouseman is governed by this Act. The nature of the receipts issued is not material or decisive. While the Warehouse Receipts Act permits the issuance of formal warehouse receipts, its provisions are not mandatory. The Bonded Warehouse Act itself broadly defines a “receipt” as “any receipt issued by a warehouseman for commodity delivered to him.” Go Tiong, as the principal obligor, cannot defend on the ground that he issued ordinary receipts, especially since he repeatedly promised Gonzales to issue formal “quedans” and was in the habit of issuing ordinary receipts to depositors.
2. Liability for Loss by Fire: Go Tiong is not exempt from liability. The Bonded Warehouse Act imposes an obligation on the warehouseman to deliver the stored commodity or pay its market value upon demand. This obligation is secured by the bond. The defense of fortuitous event (fire) is not available under this special law. The surety’s liability on the bond is triggered by the warehouseman’s failure to fulfill this statutory obligation, regardless of the cause of the loss.
3. Liability of the Surety Company:
a. The amicable settlement did not discharge the surety. The Court found it unnecessary to rule on this point specifically, as the surety’s liability was upheld on other grounds.
b. The surety is liable despite the lack of formal warehouse receipts. The bond secures the performance of all statutory duties of the warehouseman, including the duty to issue proper receipts. The surety cannot avoid liability merely because the warehouseman failed to issue the prescribed receipt. The Court cited the American case Andreson vs. Krueger in support.
c. There was no renunciation of rights under the Act. Gonzales’s withdrawal of his administrative claim and the execution of the amicable settlement (which Go Tiong breached) did not constitute an abandonment of his right to sue on the bond.
d. The Court deemed it unnecessary to discuss the other specific errors regarding the surety’s liability, as the core issues were resolved.
4. Nature of the Transaction: The deposits were not gratuitous. Go Tiong induced Gonzales to deposit palay free of charge to promote his business and attract other depositors, with the understanding that Gonzales would convince others to deposit as well. The transaction was a deposit governed by the Bonded Warehouse Act, not a sale.
DISPOSITIVE PORTION: The appealed decision was affirmed, with costs against the appellants.