CREDTRANS: Warehouse Receipts Law

Consolidated Terminals vs. Artex Devt

52 Sec. 10
G.R. No. L-25748 March 10, 1975 Aquino J. Erwin
Petitioners: Consolidated Terminals Inc. Respondents: Artex Development Co., Inc.
Recit Ready Summary
Consolidated Terminals Inc. (CTI) is an operator of a customs bonded warehouse at Port Area, Manila.
CTI received on deposit in behalf of the consignee, Paramount Textile Mills (PTM), 193 bales of cotton.
Subsequently, Artex Devt Co. (Artex) obtained delivery of the bales allegedly by virtue of a forged permit
to deliver imported goods issued by the Customs.
CTI then commenced a replevin suit against Artex, which was later amended into an action for damages.
Artex moved for dismissal and the lower court dismissed the complainant for lack of cause of action since
CTI is only a warehouseman and that Artex was already paid the warehousing and handling charges,
thus CTI can no longer recover as warehouseman. Hence, CTI appealed to the SC, contending that as
warehouseman it was entitled to the repossession of the merchandise and that Artex acted wrongfully in
depriving it of possession by presenting a falsified delivery permit.
The SC affirmed the lower court decision and ruled that the amended complaint does not clearly show
that CTI has a cause of action for damages against Artex because it did not allege what right of CTI was
violated by Artex, or what delict or wrong was committed by Artex against CTI which would justify the
latter in recovering the value of bales of cotton even if it was not the owner thereof.
Facts
 CTI is an operator of a customs bonded warehouse located at Port Area, Manila. It received on
deposit 193 bales of high density compressed raw cotton valued at P99,609.76. It was understood
that CTI would keep the cotton in behalf of Luzon Brokerage Corporation (LBC) until the consignee,
Paramount Textile Mills (PTM), had opened a letter of credit (LC) in favor of shipper, Adolph Hanslik
Cotton of Corpus Christi; Texas. In clarification, CTI in its affidavit alleged that Artex acquired the
cotton from the consignee, PTM.
 It was alleged that by virtue of a forged permit to deliver imported goods issued by Customs, Artex
was able to obtain delivery of the bales of cotton after paying CTI for storage and handling charges.
 At the time the merchandise was released to Artex, the LC had not yet been opened and the customs
duties and taxes due on the shipment had not been paid.
 CTI sought to recover possession of the cotton by means of a writ of replevin, however it could not
be executed. CTI then filed an amended complaint by transforming its original complaint into an
action for the recovery from Artex of compensatory damages, P10,000 as nominal and exemplary
damages and P20,000 as attorney's fees.
 In its motion to dismiss, Artex alleged that it was not shown in the delivery permit that Artex was the
entity that presented that document to CTI. Artex further averred that it returned the cotton to PTM
because it did not conform to the stipulated specifications as to quality.
 The CFI of Manila ruled in favor of Artex’s since CTI is only a warehouseman and according to
complaint, Artex was already paid the warehousing and handling charges, the CTI can no longer
recover for its services as warehouseman.
 CFI also ruled that CTI has no cause of action against Artex:
 The delivery of goods w/o opening the LC cannot be the basis of CTI because failure to open
the letter of credit gives rise to a cause of action for the shipper of the goods and not to CTI.
 As to the unpaid customs duties and other revenues, this does not give rise to a cause of action
in favor of the plaintiff for the government.
 As to the alleged forged permit, it did not give rise to a cause of action in favor of the CTI but for
Bureau of Customs and of the consignee.
Point/s of Contention
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. It cited Sec. 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 . . .

1
Issue: Ruling
W/N CTI has a cause of action against Artex. NONE
Rationale
The Court ruled that CTI has no cause of action against Artex.
 The amended complaint does not clearly show that CTI has a cause of action for damages against
Artex. The real parties interested in the bales of cotton were LBC as depositor, PTM 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 Court stated that: 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.
 Therefore, CTI's basic action to recover the value of the merchandise is untenable because the
amended complaint did not allege what right of CTI was violated by Artex, or what delict or wrong
was committed by Artex against CTI which would justify the recovery of the value of bales of cotton
even if it was not the owner thereof.
Disposition: Wherefore, the order of dismissal is affirmed for lack of cause of action.