G.R. No. L-5439 December 29, 1954
CALTEX (PHILIPPINES), INC., THE SHELL COMPANY OF THE PHILIPPINE ISLANDS LIMITED, and STANDARD VACUUM OIL COMPANY, plaintiffs-appellees, vs. DELGADO BROTHERS, INC., and ALFREDO JACINTO, in his capacity as Commissioner of Customs of the Port of Manila, respondents and appellants.

FACTS

The plaintiffs (Caltex, Shell, and Stanvac) imported bulk petroleum products into the Philippines. Upon arrival, they secured permits for shipside delivery. The defendant Delgado Brothers, Inc., which had an “Arrastre Contract” or “Management Contract” with the Bureau of Customs, required the plaintiffs to deposit sums of money as “checking charges” for the checking services performed by Delgado Brothers’ checkers. The plaintiffs made these deposits under protest and subsequently filed an action to recover them. The checking services involved Delgado Brothers’ checkers taking ullage, specific gravity, and temperature measurements of the cargo on board the tankers and lighters. However, the plaintiffs’ own representatives also took measurements. The evidence showed that measurements taken on board tankers or lighters were inaccurate due to the vessels’ movement, with a potential error of 5% or more, whereas measurements taken in the plaintiffs’ shore tanks at Pandacan (built on solid foundations) were far more accurate. The Bureau of Customs, for the purpose of assessing specific taxes and duties, relied exclusively on the measurements taken in the plaintiffs’ shore tanks, which were verified by customs officers. Records indicated a discrepancy of over 5,000 long tons, with the shore tank measurements showing more cargo received than Delgado Brothers’ records indicated. Delgado Brothers contended they were entitled to collect checking charges under paragraphs 17 and 23 of their Management Contract. The plaintiffs argued that no useful checking services were rendered, and that under paragraphs 2, 5, and 7 of the contract and a related communication, they were exempt from such charges.

ISSUE

Whether Delgado Brothers, Inc. is legally entitled to collect “checking charges” from the plaintiffs for the checking services performed on the imported bulk petroleum products.

RULING

No. The Supreme Court affirmed the decision of the Court of First Instance of Manila, ordering the refund of the deposited checking charges. The Court held that Delgado Brothers was not entitled to collect the charges for several reasons. First, the checking services rendered were of no utility or benefit to either the plaintiffs or the Government. The Bureau of Customs did not use Delgado Brothers’ measurements, relying instead on the more accurate shore tank measurements taken by the plaintiffs and verified by customs officers. Second, under the specific terms of the Management Contract (paragraphs 17 and 23), Delgado Brothers’ right to collect charges was for the “receiving, handling, custody and delivery of merchandise and the services rendered in conjunction therewith.” The evidence showed Delgado Brothers did not receive, handle, take custody of, or deliver the bulk petroleum products; the cargo was pumped directly from tankers to lighters and then to the plaintiffs’ shore tanks. Third, paragraph 2 of the contract granted Delgado Brothers the exclusive right to check merchandise, but it expressly exempted from this exclusive right “case crude oil and kerosene and gasoline in lots of over ten thousand cases or its equivalent, and whole cargoes of one commodity when consigned to one consignee only.” The plaintiffs’ imports fell under these exemptions. Fourth, an amendment to the contract dated June 1, 1951, which attempted to impose charges on such bulk petroleum products, was declared null and void as it was made without the required public bidding. Therefore, Delgado Brothers had no right to collect the checking charges, and the plaintiffs were entitled to a refund.