Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-48336 September 21, 1942

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. FELIPE MAPOY and R. M. MAIPID, defendant-appellants. Romualdo Constantino for appellants. Ross, Selph, Carrascoso & Janda as private prosecutors. Assistant Solicitor-General Enriquez and Solicitor Alikpala for appellee. 1. CRIMINAL LAW AND PROCEDURE; VIOLATION OF BULK SALES LAW (Act No. 3952); WHEN PAYMENT OF INDEMNITY TO OFFENDED PARTY DOES NOT LIE. Defendants were charged with violation of the Bulk Sales Law in that they mortgaged all of their stock of goods, etc., without any notice to Daido Boeki Kaisha, Ltd., one of the offended parties, to which they were indebted in the sum of P2,568.85. They pleaded guilty and its sentenced by the Court of First Instance of Manila to pay a fine of P100, and the costs, and to indemnify Daido Boeki Kaisha, Ltd., jointly and severally in the sum of P2,568.85, with subsidiary imprisonment in case of insolvency. Held: That it was error for the trial court to consider said indebtedness as a liability arising from the crime charged, and to order defendants to indemnify Daido Boeki Kaisha, Ltd., in the sum of P2,568.85, with subsidiary imprisonment in case of insolvency. 2. ID; ID; ID; Inasmuch as under section 4 of the Bulk Sales Law, the mortgaged in question was fraudulent and void, and there being no proof that the mortgaged goods have disappeared, the same are still subject to attachment for the satisfaction of creditors' lawful claims against the defendants. Daido Boeki Kaisha, Ltd., may still bring a separate civil action against defendants herein for the collection of any indebtedness that may be due from defendants, and if the latter will not pay the judgment in such civil case, the goods involved in the instant case may be seized and sold. Therefore, the obligations of defendants to pay Daido Boeki Kaisha , Ltd., the sum of P2,568.85, which was already existing when the mortgage was signed, was not the result of the violation of the Bulk Sales Law, nor was it affected by said violation.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 155076 January 13, 2009

LUIS MARCOS P. LAUREL, Petitioner, vs. HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE LONG DISTANCE TELEPHONE COMPANY Respondents. RESOLUTION YNARES-SANTIAGO, J.: On February 27, 2006, this Courts First Division rendered judgment in this case as follows: IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the Regional Trial Court and the Decision of the Court of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the petitioner to quash the Amended Information. SO ORDERED.
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By way of brief background, petitioner is one of the accused in Criminal Case No. 99-2425, filed with the Regional Trial Court of Makati City, Branch 150. The Amended Information charged the accused with theft under Article 308 of the Revised Penal Code, committed as follows: On or about September 10-19, 1999, or prior thereto in Makati City, and within the jurisdiction of this Honorable Court, the accused, conspiring and confederating together and all of them mutually helping and aiding one another, with intent to gain and without the knowledge and consent of the Philippine Long Distance Telephone (PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the international long distance calls belonging to PLDT by conducting International Simple Resale (ISR), which is a method of routing and completing international long distance calls using lines, cables, antenae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined, effectively stealing this business from PLDT while using its facilities in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount. CONTRARY TO LAW.
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Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on the ground that the factual allegations in the Amended Information do not constitute the felony of theft. The trial court denied the Motion to Quash the Amended Information, as well petitioners subsequent Motion for Reconsideration. Petitioners special civil action for certiorari was dismissed by the Court of Appeals. Thus, petitioner filed the instant petition for review with this Court. In the above-quoted Decision, this Court held that the Amended Information does not contain material allegations charging petitioner with theft of personal property since international long distance calls and the business of providing telecommunication or telephone services are not personal properties under Article 308 of the Revised Penal Code. Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It maintains that the Amended Information charging petitioner with theft is valid and sufficient; that it states the names of all the accused who were specifically charged with the crime of theft of PLDTs international calls and business of providing telecommunication or telephone service on or about September 10 to 19, 1999 in Makati City by conducting ISR or International Simple Resale; that it identifies the international calls and business of providing telecommunication or telephone service of PLDT as the personal properties which were unlawfully taken by the accused; and that it satisfies the test of sufficiency as it enabled a person of common understanding to know the charge against him and the court to render judgment properly. PLDT further insists that the Revised Penal Code should be interpreted in the context of the Civil Codes definition of real and personal property. The enumeration of real properties in Article 415 of the Civil Code is exclusive such that all those not included therein are personal properties. Since Article 308 of the Revised Penal Code used the words "personal property" without

qualification, it follows that all "personal properties" as understood in the context of the Civil Code, may be the subject of theft under Article 308 of the Revised Penal Code. PLDT alleges that the international calls and business of providing telecommunication or telephone service are personal properties capable of appropriation and can be objects of theft. PLDT also argues that "taking" in relation to theft under the Revised Penal Code does not require "asportation," the sole requisite being that the object should be capable of "appropriation." The element of "taking" referred to in Article 308 of the Revised Penal Code means the act of depriving another of the possession and dominion of a movable coupled with the intention, at the time of the "taking," of withholding it with the character of permanency. There must be intent to appropriate, which means to deprive the lawful owner of the thing. Thus, the term "personal properties" under Article 308 of the Revised Penal Code is not limited to only personal properties which are "susceptible of being severed from a mass or larger quantity and of being transported from place to place." PLDT likewise alleges that as early as the 1930s, international telephone calls were in existence; hence, there is no basis for this Courts finding that the Legislature could not have contemplated the theft of international telephone calls and the unlawful transmission and routing of electronic voice signals or impulses emanating from such calls by unlawfully tampering with the telephone device as within the coverage of the Revised Penal Code. According to respondent, the "international phone calls" which are "electric currents or sets of electric impulses transmitted through a medium, and carry a pattern representing the human voice to a receiver," are personal properties which may be subject of theft. Article 416(3) of the Civil Code deems "forces of nature" (which includes electricity) which are brought under the control by science, are personal property. In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a telephone call is a conversation on the phone or a communication carried out using the telephone. It is not synonymous to electric current or impulses. Hence, it may not be considered as personal property susceptible of appropriation. Petitioner claims that the analogy between generated electricity and telephone calls is misplaced. PLDT does not produce or generate telephone calls. It only provides the facilities or services for the transmission and switching of the calls. He also insists that "business" is not personal property. It is not the "business" that is protected but the "right to carry on a business." This right is what is considered as property. Since the services of PLDT cannot be considered as "property," the same may not be subject of theft. The Office of the Solicitor General (OSG) agrees with respondent PLDT that "international phone calls and the business or service of providing international phone calls" are subsumed in the enumeration and definition of personal property under the Civil Code 3 4 hence, may be proper subjects of theft. It noted that the cases of United States v. Genato, United States v. Carlos and United 5 States v. Tambunting, which recognized intangible properties like gas and electricity as personal properties, are deemed incorporated in our penal laws. Moreover, the theft provision in the Revised Penal Code was deliberately couched in broad terms precisely to be all-encompassing and embracing even such scenario that could not have been easily anticipated. According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access Device Regulations Act of 1998 and RA 8792 or the Electronic Commerce Act of 2000 does not preclude prosecution under the Revised Penal Code for the crime of theft. The latter embraces unauthorized appropriation or use of PLDTs international calls, service and business, for personal profit or gain, to the prejudice of PLDT as owner thereof. On the other hand, the special laws punish the surreptitious and advanced technical means employed to illegally obtain the subject service and business. Even assuming that the correct indictment should have been under RA 8484, the quashal of the information would still not be proper. The charge of theft as alleged in the Information should be taken in relation to RA 8484 because it is the elements, and not the designation of the crime, that control. Considering the gravity and complexity of the novel questions of law involved in this case, the Special First Division resolved to refer the same to the Banc. We resolve to grant the Motion for Reconsideration but remand the case to the trial court for proper clarification of the Amended Information. Article 308 of the Revised Penal Code provides: Art. 308. Who are liable for theft. Theft is committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latters consent. The elements of theft under Article 308 of the Revised Penal Code are as follows: (1) that there be taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use of violence against or intimidation of persons or force upon things. Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of the term "personal property" in the penal code provision on theft had been established in Philippine jurisprudence. This Court, in United States v. Genato, United States v. Carlos, and United States v. Tambunting, consistently ruled that any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation can be the object of theft.

Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term "personal property" has had a generally accepted definition in civil law. In Article 335 of the Civil Code of Spain, "personal property" is defined as "anything susceptible of appropriation and not included in the foregoing chapter (not real property)." Thus, the term "personal property" in the Revised Penal Code should be interpreted in the context of the Civil Code provisions in accordance with the rule on statutory construction that where words have been long used in a technical sense and have been judicially construed to have a certain meaning, and have been adopted by the legislature as having a certain meaning prior to a particular statute, in which they are used, the words used in 6 such statute should be construed according to the sense in which they have been previously used. In fact, this Court used the Civil Code definition of "personal property" in interpreting the theft provision of the penal code in United States v. Carlos. Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term "personal property" at the time the old Penal Code was being revised, still the legislature did not limit or qualify the definition of "personal property" in the Revised Penal Code. Neither did it provide a restrictive definition or an exclusive enumeration of "personal property" in the Revised Penal Code, thereby showing its intent to retain for the term an extensive and unqualified interpretation.1avvphi1.zw+ Consequently, any property which is not included in the enumeration of real properties under the Civil Code and capable of appropriation can be the subject of theft under the Revised Penal Code. The only requirement for a personal property to be the object of theft under the penal code is that it be capable of appropriation. It 7 need not be capable of "asportation," which is defined as "carrying away." Jurisprudence is settled that to "take" under the theft 8 provision of the penal code does not require asportation or carrying away. To appropriate means to deprive the lawful owner of the thing. The word "take" in the Revised Penal Code includes any act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the offenders own hands, as well as any mechanical device, such as an access device or card as in the instant case. This includes controlling the destination of the property stolen to deprive the owner of the property, such as the use of a meter tampering, as held in Natividad v. 10 Court of Appeals, use of a device to fraudulently obtain gas, as held in United States v. Tambunting, and the use of a jumper to 11 divert electricity, as held in the cases of United States v. Genato, United States v. Carlos, and United States v. Menagas. As illustrated in the above cases, appropriation of forces of nature which are brought under control by science such as electrical energy can be achieved by tampering with any apparatus used for generating or measuring such forces of nature, wrongfully redirecting such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature. In the instant case, petitioner was charged with engaging in International Simple Resale (ISR) or the unauthorized routing and completing of international long distance calls using lines, cables, antennae, and/or air wave frequency and connecting these calls directly to the local or domestic exchange facilities of the country where destined. As early as 1910, the Court declared in Genato that ownership over electricity (which an international long distance call consists of), as well as telephone service, is protected by the provisions on theft of the Penal Code. The pertinent provision of the Revised Ordinance of the City of Manila, which was involved in the said case, reads as follows: Injury to electric apparatus; Tapping current; Evidence. No person shall destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or measuring electricity, telegraph or telephone service, nor tap or otherwise wrongfully deflect or take any electric current from such wire, meter, or other apparatus. No person shall, for any purpose whatsoever, use or enjoy the benefits of any device by means of which he may fraudulently obtain any current of electricity or any telegraph or telephone service; and the existence in any building premises of any such device shall, in the absence of satisfactory explanation, be deemed sufficient evidence of such use by the persons benefiting thereby. It was further ruled that even without the above ordinance the acts of subtraction punished therein are covered by the provisions on theft of the Penal Code then in force, thus: Even without them (ordinance), the right of the ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles in cases of subtraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the decisions of the supreme court of Spain of January 20, 1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of the Penal Code of that country, articles 517 and 518 of the code in force in these islands. The acts of "subtraction" include: (a) tampering with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully deflecting or taking any electric current from such wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device by means of which one may fraudulently obtain any current of electricity or any telegraph or telephone service. In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to private respondent PLDTs telephone system, through which petitioner is able to resell or re-route international long distance calls using respondent PLDTs facilities constitutes all three acts of subtraction mentioned above.
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The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft: Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor or assignor, or all, or substantially all, of the fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of the Act. x x x. In Strochecker v. Ramirez, this Court stated: With regard to the nature of the property thus mortgaged which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code, and may be the subject of mortgage. Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Following the ruling in Strochecker v. Ramirez, business should also be classified as personal property. Since it is not included in the exclusive enumeration of real properties 13 under Article 415, it is therefore personal property. As can be clearly gleaned from the above disquisitions, petitioners acts constitute theft of respondent PLDTs business and service, committed by means of the unlawful use of the latters facilities. In this regard, the Amended Information inaccurately describes the offense by making it appear that what petitioner took were the international long distance telephone calls, rather than respondent PLDTs business. A perusal of the records of this case readily reveals that petitioner and respondent PLDT extensively discussed the issue of ownership of telephone calls. The prosecution has taken the position that said telephone calls belong to respondent PLDT. This is evident from its Comment where it defined the issue of this case as whether or not "the unauthorized use or appropriation of PLDT international telephone calls, service and facilities, for the purpose of generating personal profit or gain that should have otherwise 14 belonged to PLDT, constitutes theft." In discussing the issue of ownership, petitioner and respondent PLDT gave their respective explanations on how a telephone call is 15 generated. For its part, respondent PLDT explains the process of generating a telephone call as follows: 38. The role of telecommunication companies is not limited to merely providing the medium (i.e. the electric current) through which the human voice/voice signal of the caller is transmitted. Before the human voice/voice signal can be so transmitted, a telecommunication company, using its facilities, must first break down or decode the human voice/voice signal into electronic impulses and subject the same to further augmentation and enhancements. Only after such process of conversion will the resulting electronic impulses be transmitted by a telecommunication company, again, through the use of its facilities. Upon reaching the destination of the call, the telecommunication company will again break down or decode the electronic impulses back to human voice/voice signal before the called party receives the same. In other words, a telecommunication company both converts/reconverts the human voice/voice signal and provides the medium for transmitting the same. 39. Moreover, in the case of an international telephone call, once the electronic impulses originating from a foreign telecommunication company country (i.e. Japan) reaches the Philippines through a local telecommunication company (i.e. private respondent PLDT), it is the latter which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Thus, it is not true that the foreign telecommunication company provides (1) the electric current which transmits the human voice/voice signal of the caller and (2) the electric current for the called party to receive said human voice/voice signal. 40. Thus, contrary to petitioner Laurels assertion, once the electronic impulses or electric current originating from a foreign telecommunication company (i.e. Japan) reaches private respondent PLDTs network, it is private respondent PLDT which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Without private respondent PLDTs network, the human voice/voice signal of 16 the calling party will never reach the called party. In the assailed Decision, it was conceded that in making the international phone calls, the human voice is converted into electrical impulses or electric current which are transmitted to the party called. A telephone call, therefore, is electrical energy. It was also held in the assailed Decision that intangible property such as electrical energy is capable of appropriation because it may be taken and
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carried away. Electricity is personal property under Article 416 (3) of the Civil Code, which enumerates "forces of nature which are 17 brought under control by science." Indeed, while it may be conceded that "international long distance calls," the matter alleged to be stolen in the instant case, take the form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex communications infrastructure and facilities. PLDT not being the owner of said telephone calls, then it could not validly claim that such telephone calls were taken without its consent. It is the use of these communications facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of the telephone services and business. Therefore, the business of providing telecommunication and the telephone service are personal property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of "subtraction" penalized under said article. However, the Amended Information describes the thing taken as, "international long distance calls," and only later mentions "stealing the business from PLDT" as the manner by which the gain was derived by the accused. In order to correct this inaccuracy of description, this case must be remanded to the trial court and the prosecution directed to amend the Amended Information, to clearly state that the property subject of the theft are the services and business of respondent PLDT. Parenthetically, this amendment is not necessitated by a mistake in charging the proper offense, which would have called for the dismissal of the information under Rule 110, Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal Procedure. To be sure, the crime is properly designated as one of theft. The purpose of the amendment is simply to ensure that the accused is fully and sufficiently apprised of the nature and cause of the charge against him, and thus guaranteed of his rights under the Constitution. ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar of the Regional Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion to Defer Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The case is remanded to the trial court and the Public Prosecutor of Makati City is hereby DIRECTED to amend the Amended Information to show that the property subject of the theft were services and business of the private offended party. SO ORDERED.

Footnotes
1

Rollo, p. 728. Id. at 57-58. 15 Phil. 170 (1910). 21 Phil. 553 (1911). 41 Phil. 364 (1921). Krivenko v. Register of Deeds, 79 Phil. 461 (1947). People v. Mercado, 65 Phil. 665 (1938). Id.; Duran v. Tan, 85 Phil 476 (1950). Regalado, Criminal Law Conspectus (2000 ed.), p. 520. G.R. No. L-14887, January 31, 1961, 1 SCRA 380. 11 N.E. 2d 403 (1937). 44 Phil. 933 (1922). II Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 26 (1992 ed.).

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G.R. No. L-11776

August 30, 1958

RAMON GONZALES, plaintiff-appellee, vs. GO TIONG and LUZON SURETY CO., INC., defendants-appellants. Rustico V. Nazareno for appellee. David, Abel and Ysip for appellant Go Tiong. Tolentino, Garcia and D. R. Cruz for appellant Luzon Surety Co., Inc. MONTEMAYOR, J.: Defendants Go Tiong and Luzon Surety Co. are appealing from the decision of the Court of First Instance of Manila, Judge Magno S. Gatmaitan presiding, the dispositive part of which reads as follows: In view whereof, judgment is rendered condemning defendant Go Tiong and Luzon Surety Co., jointly and severally, to pay plaintiff the sum of P4,920 with legal interest from the date of the filing of the complaint until fully paid; judgment is also rendered against Go Tiong to pay the sum of P3,680 unto plaintiff, also with legal interest from the date of the filing of the complaint until fully paid. Go Tiong is also condemned to pay the sum of P1,000 as attorney's fees, plus costs. The appeal was first taken to the Court of Appeals, the latter indorsing the case to us later under the provisions of Section 17 (6) of Republic Act No. 296, on the ground that the issues raised were purely questions of law. Go Tiong owned a rice mill and warehouse, located at Mabini, Urdaneta, Pangasinan. On February 4, 1953, he obtained a license to engage in the business of a bonded warehouseman (Exhibit N). To secure the performance of his obligations as such bonded warehouseman, the Luzon Surety Co. executed Guaranty Bond No. 294 in the sum of P18,334 (Exhibit O), conditioned particularly on the fulfillment by Go Tiong of his duty or obligation to deliver to the depositors in his storage warehouse, the palay received by him for storage, at any time demand is made, or to pay the market value thereof, in case he was unable to return the same. The bond was executed on January 26, 1953. Go Tiong insured the warehouse and the palay deposited therein with the Alliance Surety and Insurance Company. But prior to the issuance of the license to Go Tiong to operate as bonded warehouseman, he had on several occasions received palay for deposit from plaintiff Gonzales, totaling 368 sacks, for which he issued receipts, Exhibits A, B, C, and D. After he was licensed as bonded warehouseman, Go Tiong again received various deliveries of palay from plaintiff, totaling 492 sacks, for which he issued the corresponding receipts, all the grand total of 860 sacks, valued at P8,600 at the rate of P10 per sack. On or about March 15, 1953, plaintiff demanded from Go Tiong the value of his deposits in the amount of P8,600, but he was told to return after two days, which he did, but Go Tiong again told him to come back. A few days later, the warehouse burned to the ground. Before the fire, Go Tiong had been accepting deliveries of palay from other depositors and at the time of the fire, there were 5,847 sacks of palay in the warehouse, in excess of the 5,000 sacks authorized under his license. The receipts issued by Go Tiong to the plaintiff were ordinary receipts, not the "warehouse receipts" defined by the Warehouse Receipts Act (Act No. 2137). After the burning of the warehouse, the depositors of palay, including plaintiff, filed their claims with the Bureau of Commerce, and it would appear that with the proceeds of the insurance policy, the Bureau of Commerce paid off some of the claim. Plaintiff's counsel later withdrew his claim with the Bureau of Commerce, according to Go Tiong, because his claim was denied by the Bureau, but according to the decision of the trial court, because nothing came from plaintiff's efforts to have his claim paid. Thereafter, Gonzales filed the present action against Go Tiong and the Luzon Surety for the sum of P8,600, the value of his palay, with legal interest, damages in the sum of P5,000 and P1,500 as attorney's fees. Gonzales later renewed his claim with the Bureau of Commerce (Exhibit S). While the case was pending in court, Gonzales and Go Tiong entered into a contract of amicable settlement to the effect that upon the settlement of all accounts due to him by Go Tiong, he, Gonzales, would have all actions pending against Go Tiong dismissed. Inasmuch as Go Tiong failed to settle the accounts, Gonzales prosecuted his court action.. For purposes of reference, we reproduce the assignment of errors of Go Tiong, as well as the assignment of errors of the Luzon Surety, all reading thus: I. The trial court erred in finding that plaintiff-appellee's claim is covered by the Bonded Warehouse Law, Act 3893, as amended, and not by the Civil Code. II. The trial court erred in not exempting defendant-appellant Go Tiong for the loss of the palay deposited, pursuant to the provisions of the New Civil Code.".

xxx

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I. The trial court erred in not declaring that the amicable settlement by and between plaintiff-appellee and defendant Go Tiong constituted a material alteration of the surety bond of appellant Luzon Surety which extinguished and discharged its liability. II. The trial court erred in bolding that the receipts for the palay received by Go Tiong, though not in the form of "quedans" or warehouse receipts are chargeable against the surety bond filed under the provisions of the General Bonded Warehouse Act (Act No. 3893 as amended by Republic Act No. 247) as a result of a loss. III. The trial court erred in not holding that the plaintiff had renounced and abandoned his rights under the Bonded Warehouse Act by the withdrawal of his claim from the Bureau of Commerce and the execution of the "amicable settlement". IV. The trial court erred in not holding that the palay delivered to Go Tiong constitutes gratuitous deposit which was extinguished upon the loss and destruction of the subject matter. V. The trial court erred in not declaring that the transaction between defendant Go Tiong and plaintiff was more of a sale rather than a deposit. VI. The trial court erred in declaring that the Luzon Surety Co., Inc., had not complied with its undertaking despite the liquidation of all the claims by the Bureau of Commerce. VII. The lower court erred in adjudging the herein surety liable under the terms of the Bond. We shall discuss the assigned errors at the same time, considering the close relation between them, although we do not propose to discuss and rule upon all of them. Both appellants urge that plaintiff's claim is governed by the Civil Code and not by the Bonded Warehouse Act (Act No. 3893, as amended by Republic Act No. 247), for the reason that, as already stated, what Go Tiong issued to plaintiff were ordinary receipts, not the warehouse receipts contemplated by the Warehouse Receipts Law, and because the deposits of palay of plaintiff were gratuitous. Act No. 3893 as amended is a special law regulating the business of receiving commodities for storage and defining the rights and obligations of a bonded warehouseman and those transacting business with him. Consequently, any deposit made with him as a bonded warehouseman must necessarily be governed by the provisions of Act No. 3893. The kind or nature of the receipts issued by him for the deposits is not very material much less decisive. Though it is desirable that receipts issued by a bonded warehouseman should conform to the provisions of the Warehouse Receipts Law, said provisions in our opinion are not mandatory and indispensable in the sense that if they fell short of the requirements of the Warehouse Receipts Act, then the commodities delivered for storage become ordinary deposits and will not be governed by the provisions of the Bonded Warehouse Act. Under Section 1 of the Warehouse Receipts Act, one would gather the impression that the issuance of a warehouse receipt in the form provided by it is merely permissive and directory and not obligatory: SECTION 1. Persons who may issue receipts. Warehouse receipts may be issued by any warehouseman., and the Bonded Warebouse Act as amended permits the warehouseman to issue any receipt, thus: . . . . "receipt" as any receipt issued by a warehouseman for commodity delivered to him. As the trial court well observed, as far as Go Tiong was concerned, the fact that the receipts issued by him were not "quedans" is no valid ground for defense because he was the principal obligor. Furthermore, as found by the trial court, Go Tiong had repeatedly promised plaintiff to issue to him "quedans" and had assured him that he should not worry; and that Go Tiong was in the habit of issuing ordinary receipts (not "quedans") to his depositors. As to the contention that the deposits made by the plaintiff were free because he paid no fees therefor, it would appear that Go Tiong induced plaintiff to deposit his palay in the warehouse free of charge in order to promote his business and to attract other depositors, it being understood that because of this accommodation, plaintiff would convince other palay owners to deposit with Go Tiong. Appellants contend that the burning of the warehouse was a fortuitous event and not due to any fault of Go Tiong and that consequently, he should not be held liable, appellants supporting the contention with the ruling in the case of La Sociedad Dalisay vs. De los Reyes, 55 Phil. 452, reading as follows:

Inasmuch as the fire, according to the judgment appealed from, was neither intentional nor due to the negligence of the appellant company or its officials; and it appearing from the evidence that the then manager attempted to save the palay, the appellant company should not be held responsible for damages resulting from said fire. . . . . The trial court correctly disposed of this same contention, thus: The defense that the palay was destroyed by fire neither does the Court consider to be good for while the contract was in the nature of a deposit and the loss of the thing would exempt the obligor in a contract of deposit to return the goods, this exemption from the responsibility for the damages must be conditioned in his proof that the loss was by force majeure, and without his fault. The Court does not see from the evidence that the proof is clear on the legal exemption. On the contrary, the fact that he exceeded the limit of the authorized deposit must have increased the risk and would militate against his defense of non-liability. For this reason, the Court does not follow La Sociedad vs. De Los Santos, 55 Phil. 42 quoted by Go Tiong. (p. 3, Decision). Considering the fact, as already stated, that prior to the burning of the warehouse, plaintiff demanded the payment of the value of his palay from Go Tiong on two occasions but was put off without any valid reason, under the circumstances, the better rule which we accept is the following: . . . . This rule proceeds upon the theory that the facts surrounding the care of the property by a bailee are peculiarly within his knowledge and power to prove, and that the enforcement of any other rule would impose great difficulties upon the bailors. ... It is illogical and unreasonable to hold that the presumption of negligence in case of this kind is rebutted by the bailee by simply proving that the property bailed was destroyed by an ordinary fire which broke out on the bailee's own premises, without regard to the care exercised by the latter to prevent the fire, or to save the property after the commencement of the fire. All the authorities seem to agree that the rule that there shall be a presumption of negligence in bailment cases like the present one, where there is default in delivery or accounting, for the goods is just a necessary one. . . . (9 A.L.R. 566; see also Hanes vs. Shapiro, 84 S.E. 33; J. Russel Mfg. Co. vs. New Haven, S.B. Co., 50 N.Y. 211; Beck vs. Wilkins-Ricks Co., 102 S.E. 313, Fleishman vs. Southern R. Co., 56 S.E. 974). Besides, as observed by the trial court, the defendant violated the terms of his license by accepting for deposit palay in excess of the limit authorized by his license, which fact must have increased the risk. The Luzon Surety claims that the amicable settlement by and between Gonzales and Go Tiong constituted a material alteration of its bond, thereby extinguishing and discharging its liability. It is evident, however, that while there was an attempt to settle the case amicably, the settlement was never consummated because Go Tiong failed to settle the accounts of Gonzales to the latter's satisfaction. Consequently, said non-consummated compromise settlement does not discharge the surety: A compromise or settlement between the creditor or obligee and the principal, by which the latter is discharged from liability, discharges the surety, . . . . But an unconsummated . . . agreement to compromise, falling short of an effective settlement, will not discharge the surety. (50 C. J. 185) In relation to the failure of Go Tiong to issue the warehouse receipts contemplated by the Warehouse Receipts Act, which failure, according to appellants, precluded plaintiff from suing on the bond, reference may be made to Section 2 of Act No. 3893, defining receipt as any receipt issued by a warehouseman for commodity delivered to him, showing that the law does not require as indispensable that a warehouse receipt be issued. Furthermore, Section 7 of said law provides that as long as the depositor is injured by a breach of any obligation of the warehouseman, which obligation is secured by a bond, said depositor may sue on said bond. In other words, the surety cannot avoid liability from the mere failure of the warehouseman to issue the prescribed receipt. In the case of Andreson vs. Krueger, 212 N.W. 198, 199, it was held: The surety company concedes that the bond which it gave contains the statutory conditions. The statute . . . requires that the bond shall be conditioned upon the faithful performance of the public local grain warehouseman of all the provisions of law relating to the storage of grain by such warehouseman. The surety company thereby made itself responsible for the performance by the warehouseman of all the duties and obligations imposed upon him by the statute; and, if he failed to perform any such duty to the loss or detriment of those who delivered grain for storage, the surety company became liable therefor. Where the warehouseman receives grain for storage and refuses to return or pay it, the fact that he failed to issue the receipt, when the statute required him to issue on receiving it, is not available to the surety as a defense against an action on the bond. The obligation of the surety covers the duty of the warehouseman to issue the prescribed receipt, as well as the other duties imposed upon him by the statute. We deem it unnecessary to discuss and rule upon the other questions raised in the appeal. In view of the foregoing, the appealed decision is hereby affirmed, with costs.

G.R. No. L-17640

November 29, 1965

VIRGINIA I. VDA. DE LIMJOCO, petitioner-appellant, vs. THE DIRECTOR OF COMMERCE, respondent-appellee. Rafael L. Arcega for petitioner-appellant. Office of the Solicitor General for respondent-appellee. MAKALINTAL, J.: This case, filed as a petition for declaratory relief in the Court of First Instance of Manila, involves the interpretation of Section 2 of the General Bonded Warehousing Act (Act No. 3893 as amended by Republic Act No. 247), specifically in relation to the rice milling business of petitioner-appellant. Certain facts were stipulated in the Court below, and the following summarized statement in the decision appealed from is accepted by both parties: It appears that sometime prior to March 22, 1950, petitioner and her husband, the late Bonifacio T. Limjoco, were the owners of a rice mill commonly called "kiskisan" and were engaged in the business of milling palay belonging to their customers for the purpose of removing its hull and converting it into rice. (p. 30, RA). On July 31, 1952 Bonifacio T. Limjoco died, leaving the milling business in the hands of his surviving spouse, the petitioner in this case. The petitioner continued in the business, which prior to the death of her husband, was managed by the latter without, however, renewing the license which according to Exhibit "A" expired on December 31, 1950. Since then and up to the present, the petitioner refused to secure a license from the Bureau of Commerce claiming that her business does not fall within the provisions of Act 3893 as amended by Republic Act 247. From the testimony of the petitioner and from the stipulation of facts entered into by the parties, as well as the exhibits presented by the petitioner, it appears that the petitioner owns a rice mill of the semicono type. The facilities of the rice mill are open to the public in the sense that anybody who wants his palay to be milled and converted into rice may deliver the same to the rice mill paying P0.40 per cavan of palay for the services of the petitioner in milling it. The mill itself is within a building which the petitioner calls a "camalig" about ten meters long, eight meters wide and five meters high. The "camalig" is totally enclosed partly by steelmatting, partly by wood and partly by galvanized iron sheets. From the stipulation of facts as well as from the testimony of appellant the trial Court further found that there were occasions when her customers brought more palay than could be milled in one day, whereupon they would leave the same in the custody of appellant, piled inside the "camalig" to await its turn to be milled; that sometimes the palay thus left in her possession amounted to as much as 100 cavans, and at other times as little as 10 cavans; that no charge was made by appellant for thus keeping the palay, the arrangement being, in accordance with the customs of the place, a favor done to the customers; and that, on the other hand, appellant was also benefited by such arrangement, for unless she acceded thereto the customers might take their palay for milling to her competitors. Section 2 of the law in question provides: As used in this Act, the term "Warehouse" shall be deemed to mean every building, structure, or other protected inclosure in which rice is kept for storage. The term "rice" shall be deemed to mean either palay, in bundles, or in grains, or clean rice, or both. "Person" includes a corporation or partnership or two or more persons having a joint or common interest; "warehouseman" means a person engaged in the business of receiving rice for storage; and "receipt" means any receipt issued by a warehouseman for rice delivered to him. For the purpose of this Act, the business of receiving rice for storage shall include (1) any contract or transaction wherein the warehouseman is obligated to return the very same rice delivered to him or pay its value; (2) any contract or transaction wherein the rice delivered is to be milled for and on account of the owner thereof; (3) any contract or transaction wherein the rice delivered is commingled with rice delivered by or belonging to other persons, and the warehouseman is obligated to return rice of the same kind or pay its value. The Director of Commerce ruled that appellant's rice milling business falls under the law just quoted, required her to secure the corresponding renewal license and started steps for her prosecution in view of her refusal to do so. The move, it seems, was subsequently held in abeyance upon the filing of the petition herein. The trial court upheld the Director of Commerce and ruled that the law in question is applicable in this case. Appellant submits, in substance, that the test to determine the applicability of Act No. 3893 as amended is whether or not she is engaged in the business of receiving palay for storage; that the clause in section 2 thereof which refers to "any contract or transaction wherein the rice, delivered is to be milled for and on account of the owners" must be understood in relation to the subject matter of the statute as expressed in its title, namely, "An Act to Regulate the Business of Receiving Commodity for Storage"; and that since her business is the milling of palay, the delivery thereof to her is merely incidental to such business and does not constitute storage within the meaning of the statute.

Section 2, however, is too clear to permit of any exercise in construction or semantics. It does not stop at the bare use of the word "storage," but expressly provides that any contract or transaction wherein the palay delivered is to be milled for and on account of the owner shall be deemed included in the business of receiving rice for storage for the purpose of the Act. In other words, it is enough that the palay is delivered, even if only to have 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 merely utilizes the services of the mill but keeps the palay under his physical control all steps of the way. But in this case it is a fact that palay is delivered to appellant and sometimes piled inside her "camalig" in appreciable quantities, to wait for its turn in the milling process. This is precisely the situation covered by the statute. We agree with His Honor, the trial Judge, when he said: "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. The main intention of the lawmaker is to give protection to the owner of the commodity against possible abuses (and we might add negligence) of the person to whom the physical control of his properties is delivered." This is not the first time this question has come before Us. It was raised in the case of People vs. Versola, G.R. No. L-5707, March 27, 1958, where this Court, speaking through Mr. Justice Roberto Concepcion, said: At any rate, whenever a rice mill engaged in the business of hulling palay for others, is housed in a "camarin" like that of appellant herein, the keeping of palay or rice therein follows as a necessary consequence. This is true, even if the grains were received therein exclusively for milling purposes. Hence, one way or the other, there is a form of storage, the duration of which may vary, depending upon circumstances. In any event, the ricemill operator is responsible for the palay or rice, while the same is in his possession, and public policy or public interest demands that the rights of the owners of the commodity which is our main staple be duly protected. Hence, the need of securing the license prescribed in Act No. 3893, in order that the Director of Commerce could determine the conditions under which the mill may be authorized to operate, conformably with the objectives of said legislation, and the amount of the bond to be required for the protection of the people who avail themselves of its services. Appellant contends that the inclusion of the business of milling palay in Act No. 3893 infringes the constitutional mandate that no law shall embrace more than one subject which shall be expressed in the title thereof. We believe the subject matter of said Act as expressed in its title, namely, the regulation of the business of receiving commodity for storage, is sufficiently broad to cover the business of milling palay where the palay is delivered to the mill operator and kept in a construction which serves the purpose of a warehouse, as in this case. 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 the operation of the statute, for otherwise the very fact of non-compliance with the legal requirements in this respect would be its own excuse from the liabilities imposed.The decision appealed from is affirmed, with costs.