Republic of the Philippines

SUPREME COURT
Manila
EN BANC
December 20, 1924
G.R. Nos. 21000, 21002-21004, and 21006
In the matter of the involuntary insolvency of Umberto de Poli.
BANK OF THE PHILIPPINE ISLANDS, ET AL., claimants-
appellees,
vs.
J.R. HERRIDGE, assignee of the insolvent estate of U. de Poli,
BOWRING and CO., C.T. BOWRING and CO., LTD., and T.R.
YANGCO, creditors-appellants.
Crossfield and O'Brien, J.A. Wolfson and Camus and Delgado for
appellants.
Hartigan and Welch, Fisher and DeWitt and Gibbs and McDonough for
appellees.
OSTRAND, J .:
The present appeals, all of which relate to the Insolvency of U. de Poli,
have been argued together and as the principal questions involved are the
same in all of them, the cases will be disposed of in one decision.
The insolvent Umberto de Poli was for several years engaged on an
extensive scale in the exportation of Manila hemp, maguey and other
products of the country. He was also a licensed public warehouseman,
though most of the goods stored in his warehouses appear to have been
merchandise purchased by him for exportation and deposited there by he
himself.
In order to finance his commercial operations De Poli established credits
with some of the leading banking institutions doing business in Manila at
that time, among them the Hongkong & Shanghai Banking Corporation,
the Bank of the Philippine Islands, the Asia Banking Corporation, the
Chartered Bank of India, Australia and China, and the American Foreign
Banking Corporation. The methods by which he carried on his business
with the various banks was practically the same in each case and does not
appear to have differed from the ordinary and well known commercial
practice in handling export business by merchants requiring bank credits.
De Poli opened a current account credit with the bank against which he
drew his checks in payment of the products bought by him for
exportation. Upon the purchase, the products were stored in one of his
warehouses and warehouse receipts issued therefor which were endorsed
by him to the bank as security for the payment of his credit in the account
current. When the goods stored by the warehouse receipts were sold and
shipped, the warehouse receipt was exchanged for shipping papers, a
draft was drawn in favor of the bank and against the foreign purchaser,
with bill of landing attached, and the entire proceeds of the export sale
were received by the bank and credited to the current account of De Poli.
On December 8, 1920, De Poli was declared insolvent by the Court of
First Instance of Manila with liabilities to the amount of several million
pesos over and above his assets. An assignee was elected by the creditors
and the election was confirmed by the court on December 24, 1920. The
assignee qualified on January 4, 1921, and on the same date the clerk of
the court assigned and delivered to him the property of the estate.
Among the property taken over the assignee was the merchandise stored
in the various warehouses of the insolvent. This merchandise consisted
principally of hemp, maguey and tobacco. The various banks holding
warehouse receipts issued by De Poli claim ownership of this
merchandise under their respective receipts, whereas the other creditors
of the insolvent maintain that the warehouse receipts are not negotiable,
that their endorsement to the present holders conveyed no title to the
property, that they cannot be regarded as pledges of the merchandise
inasmuch as they are not public documents and the possession of the
merchandise was not delivered to the claimants and that the claims of the
holders of the receipts have no preference over those of the ordinary
unsecured creditors.
On July 20, 1921, the banks above-mentioned and who claim preference
under the warehouse receipts held by them, entered into the following
stipulation:
It is stipulated by the between the undersigned counsel, for the Chartered
Bank of India, Australia & China, the Hongkong & Shanghai Banking
Corporation, the Asia Banking Corporation and the Bank of Philippine
Islands that:
Whereas, the parties hereto are preferred creditors of the insolvent debtor
U. de Poli, as evidenced by the following quedans or warehouse receipts
for hemp and maguey stored in the warehouses of said debtor:
QUEDANS OR WAREHOUSE RECEIPTS OF THE CHARTERED
BANK
No. A-131 for 3,808 bales hemp.
No. A-157 for 250 bales hemp.
No. A-132 for 1,878 bales maguey.
No. A-133 for 1,574 bales maguey. Nos. 131, 132 and 133 all bear date
November 6, 1920, and No. 157, November 19, 1920.
QUEDANS OR WAREHOUSE RECEIPTS OF THE HONGKONG &
SHANGHAI BANKING CORPORATION
No. 130 for 490 bales hemp and 321 bales maguey.
No. 134 for 1,970 bales hemp.
No. 135 for 1,173 bales hemp.
No. 137 for 237 bales hemp.
QUEDANS OR WAREHOUSE RECEIPTS OF THE ASIA BANKING
CORPORATION
No. 57 issued May 22, 1920, 360 bales hemp.
No. 93 issued July 8, 1920 bales hemp.
No. 103 issued August 18, 1920, 544 bales hemp.
No. 112 issued September 15, 1920, 250 bales hemp.
No. 111 issued September 15, 1920, 2,007 bales maguey.
QUEDANS OR WAREHOUSE RECEIPTS OF THE BANK OF THE
PHILIPPINE ISLANDS
No. 147 issued November 13, 1920, 393 bales hemp.
No. 148 issued November 13, 1920, 241 bales hemp.
No. 149 issued November 13, 1920, 116 bales hemp.
No. 150 issued November 13, 1920, 217 bales hemp.
And whereas much of the hemp and maguey covered by the above
mentioned quedans was either non-existent at the time of the issuance of
said quedans or has since been disposed of by the debtor and of what
remains much of the same hemp and maguey transferred by means of
quedans to one of the parties hereto has also been transferred by means
of other quedans to one or more of the other parties hereto and
Whereas, the hemp and maguey covered by said quedans is to a
considerable extent commingled.
Now, therefore, it is hereby agreed subject to the rights of any other
claimants hereto and to the approval of this Honorable Court that all that
remains of the hemp and maguey covered by the warehouse receipts of
the parties hereto or of any of them shall be adjudicated to them
proportionately by grades in accordance with the quedans held by each as
above set forth in accordance with the rule laid down in section 23 of the
Warehouse Receipts Law for the disposition of commingled fungible
goods.
Manila, P.I., July 20, 1921.
GIBBS, MCDONOUGH & JOHNSON
By A. D. GIBBS
Attorneys for the Chartered Bank
of India, Australia & China
FISHER & DEWITT
By C.A. DEWITT
Attorneys for the Hongkong
& Shanghai Banking Corporation
WOLFSON, WOLFSON & SCHWARZKOFF
Attorneys for the Asia
Banking Corporation
HARTIGAN & WELCH
Attorneys for the Bank
of the Philippine Islands
Claims for hemp and maguey covered by the respective warehouse
receipts of the banks mentioned in the foregoing stipulation were
presented by each of said banks. Shortly after the adjudication of the
insolvency of the firm of Wise & Co., one of the unsecured creditors of
the insolvent on June 25, 1921, presented specific written objections to
the claims of the banks on the ground of the insufficiency of the
warehouse receipts and also to the stipulation above quoted on the
ground that it was entered into for the purpose of avoiding the necessity
of identifying the property covered by each warehouse receipt. Bowring
& Co., C.T. Bowring Co., Ltd., and Teodoro R. Yangco, also unsecured
creditors of the insolvent, appeared in the case after the decision of the
trial court was rendered and joined with the assignee in his motion for a
rehearing and in his appeal to this court.
Upon hearing, the court below held that the receipts in question were
valid negotiable warehouse receipts and ordered the distribution of the
hemp and maguey covered by the receipts among the holders thereof
proportionately by grades, in accordance with the stipulation above
quoted, and in a supplementary decision dated November 2, 1921, the
court adjudged the merchandise covered by warehouse receipts Nos. A-
153 and A-155 to the Asia Banking Corporation. From these decisions
the assignee of the insolvent estate, Bowring & Co., C.T. Bowring Co.,
Ltd., and Teodoro R. Yangco appealed to this court.
The warehouse receipts are identical in form with the receipt involved in
the case of Roman vs. Asia Banking Corporation (46 Phil., 705), and
there held to be a valid negotiable warehouse receipt which, by
endorsement, passed the title to the merchandise described therein to the
Asia Banking Corporation. That decision is, however, vigorously
attacked by the appellants, counsel asserting, among other things, that
"there was not a single expression in that receipt, or in any of those now
in question, from which the court could or can say that the parties
intended to make them negotiable receipts. In fact, this is admitted in the
decision by the statement "... and it contains no other direct statement
showing whether the goods received are to be delivered to the bearer, to a
specified person, or to a specified person or his order." There is nothing
whatever in these receipts from which the court can possibly say that the
parties intended to use the phrase "a la orden" instead of the phrase "por
orden," and thus to make said receipts negotiable. On the contrary, it is
very clear from the circumstances under which they were issued, that
they did not intend to do so. If there was other language in said receipts,
such as would show their intention in some way to make said receipts
negotiable, then there would be some reason for the construction given
by the court. In the absence of language showing such intention, the
court, by substituting the phrase "a la orden" for the phrase "por orden,"
is clearly making a new contract between the parties which, as shown by
the language used by them, they never intended to enter into."
These very positive assertions have, as far as we can see, no foundation
in fact and rest mostly on misconceptions.
Section 2 of the Warehouse Receipts Act (No. 2137) prescribes the
essential terms of such receipts and reads as follows:
Warehouse receipts needed not be in any particular form, but every such
receipt must embody within its written or printed terms
(a) The location of the warehouse where the goods are stored,
(b) The date of issue of the receipt,
(c) The consecutive number of the receipt,
(d) A statement whether the goods received will be delivered to the
bearer, to a specified person, or to a specified person or his order,
(e) The rate of storage charges,
(f) A description of the goods or of the packages containing them,
(g) The signature of the warehouseman, which may be made by his
authorized agent,
(h) If the receipt is issued for goods of which the warehouseman is
owner, either solely or jointly or in common with others, the fact of such
ownership, and
(i) A statement of the amount of advances made and of liabilities
incurred for which the warehouseman claims a lien. If the precise amount
of such advances made or of such liabilities incurred is, at the time of the
issue of the receipt, unknown to the warehouseman or to his agent who
issues it, a statement of the fact that advances have been made or
liabilities incurred and the purpose thereof is sufficient.
A warehouseman shall be liable to any person injured thereby, for all
damage caused by the omission from a negotiable receipt of any of the
terms herein required.
Section 7 of the Act reads:
A nonnegotiable receipt shall have plainly placed upon its face by the
warehouseman issuing it "nonnegotiable," or "not negotiable." In case of
the warehouseman's failure so to do, a holder of the receipt who
purchased it for value supposing it to be negotiable, may, at his option,
treat such receipt as imposing upon the warehouseman the same
liabilities he would have incurred had the receipt been negotiable.
All of the receipts here in question are made out on printed blanks and
are identical in form and terms. As an example, we may take receipt No.
A-112, which reads as follows:


U. DE POLI
209 Estero de Binondo
BODEGAS
QUEDAN No. A-112
Almacen Yangco
Por
Marcas
UDP
Bultos
250
Clase de
las
mercancias
Fardos
abaca
"Quedan depositados en estos almacenes
por orden del Sr. U. de Poli la cantidad
de doscientos cincuenta fardos abaca
segun marcas detalladas al margen, y
con arreglo a las condiciones siguientes:
1.
a
Estan asegurados contra riesgo de
incendios exclusivamente, segun las
condiciones de mis polizas; quedando
los demas por cuenta de los
depositantes.
2.
a
No se responde del peso, clase ni mal
estado de la mercancia depositada.
3.
a
El almacenaje sera de quince
centimos fardo por mes.
I certify that I am the sole
owner of the merchandise
herein described.
(Sgd.) "UMBERTO DE
POLI
4.
a
El seguro sera de un octavo por
ciento mensual por el total. Tanto el
almacenaje como el seguro se cobraran
por meses vencidos, y con arreglo a los
dias devengados siendo el minimo para
los efectos del cobro 10 dias.
5.
a
No seran entregados dichos efectos ni
parte de los mismos sin la presentacion
de este "quedan" para su
correspondiente deduccion.
6.
a
El valor para el seguro de estas
mercancias es de pesos filipinos nueve
mil quinientos solamentes.
7.
a
Las operaciones de entrada y salida,
seran de cuenta de los depositantes,
pudiendo hacerlos con sus trabajadores,
o pagando los que le sean facilitados,
con arreglo a los tipos que tengo
convenido con los mios.
Valor del Seguro P9,500.
V. B.
(Sgd.) UMBERTO DE POLI
Manila, 15 de sept. de 1920.
El Encargado,
(Sgd.) I. MAGPANTAY
The receipt is not marked "nonnegotiable" or "not negotiable," and is
endorsed "Umberto de Poli."
As will be seen, the receipt is styled "Quedan" (warehouse receipt) and
contains all the requisites of a warehouse receipt as prescribed by section
2, supra, except that it does not, in express terms, state whether the goods
received are to be delivered to bearer, to a specified person or to his
order. The intention to make it a negotiable warehouse receipt appears,
nevertheless, quite clearly from the document itself: De Poli deposited
the goods in his own warehouse; the warehouse receipt states that he is
the owner of the goods deposited; there is no statement that the goods are
to be delivered to the bearer of the receipt or to a specified person and the
presumption must therefore necessarily be that the goods are in the
warehouse subject to the orders of their owner De Poli. As the owner of
the goods he had, of course, full control over them while the title
remained in him; we certainly cannot assume that it was the intention to
have the goods in the warehouse subject to no one's orders. That the
receipts were intended to be negotiable is further shown by the fact that
they were not marked "nonnegotiable" and that they were transferred by
the endorsement of the original holder, who was also the warehouseman.
In his dual capacity of warehouseman and the original holder of the
receipt, De Poli was the only party to the instrument at the time of its
execution and the interpretation he gave it at that time must therefore be
considered controlling as to its intent.
In these circumstances, it is hardly necessary to enter into any discussion
of the intended meaning of the phrase "por orden" occurring in the
receipts, but for the satisfaction of counsel, we shall briefly state some of
our reasons for the interpretation placed upon that phrase in the Felisa
Roman case:
The rule is well-known that wherever possible writings must be so
construed as to give effect to their general intent and so as to avoid
absurdities. Applying this rule, it is difficult to see how the phrase in
question can be given any other rational meaning than that suggested in
the case mentioned. It is true that the meaning would have been more
grammatically expressed by the word "a la orden"; the world "por
preceding the word "orden" is generally translated into the English
language as "by" but "por" also means "for" or "for the account of" (see
Velazquez Dictionary) and it is often used in the latter sense. The
grammatical error of using it in connection with "orden" in the present
case is one which might reasonably be expected from a person
insufficiently acquainted with the Spanish language.
If the receipt had been prepared in the English language and had stated
that the goods were deposited "for order" of U. de Poli, the expression
would not have been in accordance with good usage, but nevertheless in
the light of the context and that circumstances would be quite intelligible
and no one would hesitate to regard "for order" as the equivalent of "to
the order." Why may not similar latitude be allowed in the construction
of a warehouse receipt in the Spanish language?
If we were to give the phrase the meaning contended for by counsel, it
would reveal no rational purpose. To say that a warehouseman deposited
his own goods with himself by his own order seems superfluous and
means nothing. The appellants' suggestion that the receipt was issued by
Ireneo Magpantay loses its force when it is considered that Magpantay
was De Poli's agent and that his words and acts within the scope of his
agency were, in legal effect, those of De Poli himself. De Poli was the
warehouseman and not Magpantay.
Counsel for the appellants also assail the dictum in our decision in the
Felisa Roman case that section 7 of the Warehouse Receipts Act "appears
to give any warehouse receipt not marked "nonnegotiable" or "not
negotiable" practically the same effect as a receipt which by its terms is
negotiable provided the holder of such unmarked receipt acquired it for
value supposing it to be negotiable." The statement is, perhaps, too broad
but it certainly applies in the present case as against the appellants, all of
whom are ordinary unsecured creditors and none of them is in position to
urge any preferential rights.
As instruments of credit, warehouse receipts play a very important role in
modern commerce and the present day tendency of the courts is towards
a liberal construction of the law in favor of a bona fide holder of such
receipts. Under the Uniform Warehouse Receipts Act, the Supreme Court
of New York in the case of Joseph vs. P. Viane, Inc.
( [1922], 194 N.Y. Supp., 235), held the following writing a valid
warehouse receipt:
"Original. Lot No. 9. New York, November 19, 1918. P. Viane, Inc.,
Warehouse, 511 West 40th Street, New York City. For account of Alpha
Litho. Co., 261 9th Avenue. Marks: Fox Film Co. 557 Bdles 835- R. 41
x 54-116. Car Number: 561133. Paul Viane, Inc. E.A. Thompson. P.
Viane, Inc., Warehouse."
In the case of Manufacturers' Mercantile Co vs. Monarch Refrigerating
Co.
( [1915], 266 III., 584), the Supreme Court of Illinois said:
The provisions of Uniform Warehouse Receipts Act, sec. 2 (Hurd's Rev.
St. 1913, c. 114, sec. 242), as to the contents of the receipt, are for the
benefit of the holder and of purchasers from him, and failure to observe
these requirements does not render the receipt void in the hands of the
holder.
In the case of Hoffman vs. Schoyer ( [1892], 143 III., 598), the court held
that the failure to comply with Act III, April 25, 1871, which requires all
warehouse receipts for property stored in Class C to "distinctly state on
their face the brands or distinguishing marks upon such property," for
which no consequences, penal or otherwise, are imposed, does not render
such receipts void as against an assignee for value.
The appellants argue that the receipts were transferred merely as security
for advances or debts and that such transfer was of no effect without a
chattel mortgage or a contract of pledge under articles 1867 and 1863 of
the Civil Code. This question was decided adversely to the appellants'
contention in the case of Roman vs. Asia Banking Corporation, supra.
The Warehouse Receipts Act is complete in itself and is not affected by
previous legislation in conflict with its provisions or incompatible with
its spirit or purpose. Section 58 provides that within the meaning of the
Act "to "purchase" includes to take as mortgagee or pledgee" and
"purchaser" includes mortgagee and pledgee." It therefore seems clear
that, as to the legal title to the property covered by a warehouse receipt, a
pledgee is on the same footing as a vendee except that the former is
under the obligation of surrendering his title upon the payment of the
debt secured. To hold otherwise would defeat one of the principal
purposes of the Act, i. e., to furnish a basis for commercial credit.
The appellants also maintain that baled hemp cannot be regarded as
fungible goods and that the respective warehouse receipts are only good
for the identical bales of hemp for which they were issued. This would be
true if the hemp were ungraded, but we can see no reason why bales of
the same government grade of hemp may not, in certain circumstances,
be regarded as fungible goods. Section 58 of the Warehouse Receipts Act
defines fungible goods as follows:
"Fungible goods" means goods of which any unit is, from its nature or by
mercantile custom, treated as the equivalent of any other unit.
In the present case the warehouse receipts show how many bales of each
grade were deposited; the Government grade of each bale was clearly
and permanently marked thereon and there can therefore be no confusion
of one grade with another; it is not disputed that the bales within the
same grade were of equal value and were sold by the assignee for the
same price and upon the strength of the Government grading marks.
Moreover, it does not appear that any of the claimant creditors, except
the appellees, hold warehouse receipts for the goods here in question.
Under these circumstances, we do not think that the court below erred in
treating the bales within each grade as fungible goods under the
definition given by the statute. It is true that sections 22 and 23 provide
that the goods must be kept separated and that the warehouseman may
not commingle goods except when authorized by agreement or custom,
but these provisions are clearly intended for the benefit of the
warehouseman. It would, indeed, be strange if the warehouseman could
escape his liability to the owners of the goods by the simple process of
commingling them without authorization. In the present case the holders
of the receipts have impliedly ratified the acts of the warehouseman
through the pooling agreement hereinbefore quoted.
The questions so far considered are common to all of the claims now
before us, but each claim has also its separate features which we shall
now briefly discuss:
R.G. Nos. 21000 AND 21004
CLAIMS OF THE BANK OF THE PHILIPPINE ISLANDS AND THE
GUARANTY TRUST COMPANY OF NEW YORK
The claim of the Bank of the Philippine Islands is supported by four
warehouse receipts, No. 147 for 393 bales of hemp, No. 148 for 241
bales of hemp, No. 149 for 116 bales of hemp and No. 150 for 217 bales
of hemp. Subsequent to the pooling agreement these warehouse receipts
were signed, endorsed and delivered to the Guaranty Trust Company of
New York, which company, under a stipulation of October 18, 1921, was
allowed to intervene as a party claiming the goods covered by said
receipts, and which claim forms the subject matter of the appeal R.G. No.
21004. All of the warehouse receipts involved in these appeals were
issued on November 13, 1920, and endorsed over the Bank of the
Philippine Islands.
On November 16, 1920, De Poli executed and delivered to said bank a
chattel mortgage on the same property described in the receipts, in which
chattel mortgage no mention was made of the warehouse receipts. This
mortgage was registered in the Office of the Register of Deeds of Manila
on November 18, 1920.
The appellants argue that the obligations created by the warehouse
receipts were extinguished by the chattel mortgage and that the validity
of the claim must be determined by the provisions of the Chattel
Mortgage Law and not by those of the Warehouse Receipts Act, or, in
other words, that the chattel mortgage constituted a novation of the
contract between the parties.
Novations are never presumed and must be clearly proven. There is no
evidence whatever in the record to show that a novation was intended.
The chattel mortgage was evidently taken as additional security for the
funds advanced by the bank and the transaction was probably brought
about through a misconception of the relative values of warehouse
receipts and chattel mortgages. As the warehouse receipts transferred the
title to the goods to the bank, the chattel mortgage was both unnecessary
and inefficatious and may be properly disregarded.
Under the seventh assignment of error the appellants argue that as De
Poli was declared insolvent by the Court of First Instance of Manila on
December 8, 1920, only twenty-five days after the warehouse receipts
were issued, the latter constituted illegal preferences under section 70 of
the Insolvency Act. In our opinion the evidence shows clearly that the
receipts were issued in due and ordinary course of business for a valuable
pecuniary consideration in good faith and are not illegal preferences.
R.G. No. 21002
CLAIM OF THE HONGKONG & SHANGHAI BANKING
CORPORATION
The warehouse receipts held by this claimant-appellee are numbered A-
130 for 490 bales of hemp and 321 bales of maguey, No. A-134 for 1,970
bales of hemp, No. A-135 for 1,173 bales of hemp and No. A-137 for
237 bales of hemp, were issued by De Poli and were endorsed and
delivered to the bank on or about November 8, 1920. The appellants
maintain that the bank at the time of the delivery to it of the warehouse
receipts had reasonable cause to believe that De Poli was insolvent, and
that the receipts therefore constituted illegal preferences under the
Insolvency Law and are null and void. There is nothing in the record to
support this contention.
The other assignments of error relate to questions which we have already
discussed and determined adversely to the appellants.
R.G. No. 21003
CLAIM OF THE CHARTERED BANK OF INDIA, AUSTRALIA &
CHINA
This claimant holds warehouse receipts Nos. 131 for 3,808 bales of
hemp, A-157 for 250 bales of hemp, A-132 for 1,878 bales of maguey
and A-133 for 1,574 bales of maguey. Nos. A-131, A-132 and A-133
bear the date of November 6, 1920, and A-157 is dated November 19,
1920.
Under the fourth assignment of error, the appellants contend that the
court erred in permitting counsel for the claimant bank to retract a
withdrawal of its claim under warehouse receipt No. A-157. It appears
from the evidence that during the examination of the witness Fairnie,
who was the local manager of the claimant bank, counsel for the bank,
after an answer made by Mr. Fairnie to one of his questions, withdrew
the claim under the warehouse receipt mentioned, being under the
impression that Mr. Fairnie's answer indicated that the bank had
knowledge of De Poli's pending insolvency at the time the receipt was
delivered to the bank. Later on in the proceedings the court, on motion of
counsel, reinstated the claim. Counsel explains that by reason of Mr.
Fairnie's Scoth accent and rapid style of delivery, he misunderstood his
answer and did not discover his mistake until he read the transcript of the
testimony.
The allowance of the reinstatement of the claim rested in the sound
discretion of the trial court and there is nothing in the record to show that
this discretion was abused in the present instance.
Under the fifth assignment of error appellants argue that the manager of
the claimant bank was informed of De Poli's difficulties on November
19, 1920, when he received warehouse receipt No. A-157 and had
reasonable cause to believe that De Poli was insolvent and that the
transaction therefore constituted an illegal preference.
Mr. Fairnie, who was the manager of the claimant bank at the time the
receipt in the question was delivered to the bank, testifies that he had no
knowledge of the impending insolvency and Mr. De Poli, testifying as a
witness for the assignee-appellee, stated that he furnished the bank no
information as to his failing financial condition at any time prior to the
filing of the petition for his insolvency, but that on the contrary he
advised the bank that his financial condition was sound.
The testimony of the same witnesses also shows that the bank advanced
the sum of P20,000 to De Poli at Cebu against the same hemp covered by
warehouse receipt No. A-157 as early as October, 1920, and that upon
shipment thereof to Manila the bill of lading, or shipping documents,
were made out in favor of the Chartered Bank and forwarded to it at
Manila; that upon the arrival of the hemp at Manila, Mr. De Poli, by
giving a trust receipt to the bank for the bill of lading, obtained
possession of the hemp with the understanding that the warehouse receipt
should be issued to the bank therefor, and it was in compliance with that
agreement previously made that the receipt was issued on November 19,
1920. Upon the facts stated we cannot hold that the bank was given an
illegal preference by the endorsement to it of the warehouse receipt in
question. (Mitsui Bussan Kaisha vs. Hongkong & Shanghai Banking
Corporation, 36 Phil., 27.)
R.G. No. 21006
CLAIM OF THE ASIA BANKING CORPORATION
Claimant holds warehouse receipts Nos. A-153, dated November 18,
1920, for 139 bales of tobacco, A-154, dated November 18, 1920, for
211 bales of tobacco, A-155, dated November 18, 1920, for 576 bales of
tobacco, A-57, dated May 22, 1920, for 360 bales of hemp, A-93, dated
July 8, 1920, for 382 bales of hemp, A-103, dated August 18, 1920, for
544 bales of hemp, A-112, dated September 15, 1920, for 250 bales of
hemp and A-111, dated September 15, 1920, for 207 bales of maguey.
The assignments of error in connection with this appeal are, with the
exception of the fourth, similar to those in the other cases and need not
be further discussed.
Under the fourth assignment, the appellants contend that warehouse
receipts Nos. A-153, A-154 and A-155 were illegal preferences on the
assumption that the claimant bank must have had reasonable reasons to
believe that De Poli was insolvent on November 18, 1920, when the three
receipts in question were received. In our opinion, the practically
undisputed evidence of the claimant bank sufficiently refutes this
contention.
For the reasons hereinbefore stated the judgments appealed from are
hereby affirmed, without costs. So ordered.
Street, Malcolm, Avancea, Villamor, and Romualdez, JJ., concur.




















Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16315 May 30, 1964
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
HAWAIIAN-PHILIPPINE COMPANY, respondent.
Office of the Solicitor General for petitioner.
Hilado and Hilado for respondent.
DIZON, J .:
This is a petition filed by the Commissioner of Internal Revenue for the
review of the decision of the Court of Tax Appeals in C.T.A. Case No.
598 ordering him to refund to respondent Hawaiian-Philippine Company
the amount of P8,411.99 representing fixed and percentage taxes
assessed against it and which the latter had deposited with the City
Treasurer of Silay, Occidental Negros.
The undisputed facts of this ease, as found by the Court of Tax Appeals,
are as follows:
The petitioner, a corporation duly organized in accordance with
law, is operating a sugar central in the City of Silay, Occidental
Negros. It produces centrifugal sugar from sugarcane supplied
by planters. The processed sugar is divided between the
planters and the petitioner in the proportion stipulated in the
milling contracts, and thereafter is deposited in the warehouses
of the latter. (Pp. 4-5, t.s.n.) For the sugar deposited by the
planters, the petitioner issues the corresponding warehouse
receipts of "quedans". It does not collect storage charges on the
sugar deposited in its warehouse during the first 90 days period
counted from the time it is extracted from the sugarcane. Upon
the lapse of the first ninety days and up to the beginning of the
next milling season, it collects a fee of P0.30 per picul a month.
Henceforth, if the sugar is not yet withdrawn, a penalty of
P0.25 per picul or fraction thereof a month is imposed.
(Exhibits "B-1", "C-1", "D-1", "B-2", "C-2", p. 10, t.s.n.)
The storage of sugar is carried in the books of the company
under Account No. 5000, denominated "Manufacturing Cost
Ledger Control"; the storage fees under Account No. 521620;
the expense accounts of the factory under Account No. 5200;
and the so-called "Sugar Bodega Operations" under Account
No. 5216, under which is a Sub-Account No. 20, captioned,
"Credits". (Pp. 16-17, t.s.n., Exhibit "F".) The collections from
storage after the lapse of the first 90 days period are entered in
the company's books as debit to CASH, and credit to Expense
Account No. 2516-20 (p. 18, t.s.n.).
The credit for storage charges decreased the deductible expense
resulting in the corresponding increase of the taxable income of
the petitioner. This is reflected by the entries enclosed in
parenthesis in Exhibit "G", under the heading "Storage
Charges". (P. 18, t.s.n.) The alleged reason for this accounting
operation is that, inasmuch as the "Sugar Bodega Operations"
is considered as an expense account, entries under it are
"debits". Similarly, since "Storage Charges" constitute "credit",
the corresponding figures (see Exhibit "C") are enclosed in
parenthesis as they decrease the expenses of maintaining the
sugar warehouses.
Upon investigation conducted by the Bureau, it was found that
during the years 1949 to 1957, the petitioner realized from
collected storage fees a total gross receipts of P212,853.00, on
the basis of which the respondent determined the petitioner's
liability for fixed and percentage taxes, 25% surcharge, and
administrative penalty in the aggregate amount of P8,411.99
(Exhibit "5", p. 11, BIR rec.)
On October 20, 1958, the petitioner deposited the amount of
P8,411.99 with the Office of the City Treasurer of Silay.
(Exhibits "I" and "I-1", pp. 59-60, CTA rec.) Later, it filed its
petition for review before this Court (Exhibit "K", p. 25, CTA
rec.)
After due hearing the Court of Tax Appeals rendered the appealed
decision.
The only issue to be resolved in the case at bar is whether or not, upon
the facts stated above, petitioner is a warehouseman liable for the
payment of the fixed and percentage taxes prescribed in Sections 182 and
191 of the National Internal Revenue Code which read as follows:
SEC. 182. FIXED TAXES (a) ON BUSINESS (1)
PERSONS SUBJECT TO PERCENTAGE TAX. Unless
otherwise provided every person engaging in a business on
which the percentage tax is imposed shall pay a fixed annual
tax of twenty pesos. ... .
SEC. 191. PERCENTAGE TAX ON ROAD, BUILDING,
IRRIGATION, ARTESIAN WELL, WATERWORKS, AND
OTHER CONSTRUCTION WORK CONTRACTORS,
PROPRIETORS OR OPERATORS OF DOCKYARD, AND
OTHERS. ... warehousemen; plumbers, smiths; house or sign
painters; lithographers, publishers, except those engaged in the
publication or printing and publication of any newspaper,
magazine, review or bulletin which appear at regular intervals
with fixed prices for subscription and sale, and which is not
devoted principally to the publication of advertisements;
printers and bookbinders, business agents and other
independent contractors, shall pay a tax equivalent to THREE
PERCENTUM of their gross receipts. ... .
Respondent disclaims liability under the provisions quoted above,
alleging that it is not engaged the business of storing its planters' sugar
for profit; that the maintenance of its warehouses is merely incidental to
its business of manufacturing sugar and in compliance with its obligation
to its planters. We find this to be without merit.
It is clear from the facts of the case that, after manufacturing the sugar of
its planters, respondent stores it in its warehouses and issues the
corresponding "quedans" to the planters who own the sugar; that while
the sugar is stored free during the first ninety days from the date the it
"quedans" are issued, the undisputed fact is that, upon the expiration of
said period, respondent charger, and collects storage fees; that for the
period beginning 1949 to 1957, respondent's total gross receipts from this
particular enterprise amounted to P212,853.00.
A warehouseman has been defined as one who receives and stores goods
of another for compensation (44 Words and Phrases, p. 635). For one to
be considered engaged in the warehousing business, therefore, it is
sufficient that he receives goods owned by another for storage, and
collects fees in connection with the same. In fact, Section 2 of the
General Bonded Warehouse Act, as amended, defines a warehouseman
as "a person engaged in the business of receiving commodity for
storage."
That respondent stores its planters' sugar free of charge for the first
ninety days does not exempt it from liability under the legal provisions
under consideration. Were such fact sufficient for that purpose, the law
imposing the tax would be rendered ineffectual. 1wph1.t
Neither is the fact that respondent's warehousing business is carried in
addition to, or in relation with, the operation of its sugar central sufficient
to exempt it from payment of the tax prescribed in the legal provisions
quoted heretofore Under Section 178 of the National Internal Revenue
Code, the tax on business is payable for every separate or distinct
establishment or place where business subject to the tax is conducted,
and one line of business or occupation does not become exempt by being
conducted with some other business or occupation for which such tax has
been paid.
Lastly, respondent's contention that the imposition of the tax under
consideration would amount to double taxation is likewise without merit.
As is clear from the facts, respondent's warehousing business, although
carried on in relation to the operation of its sugar central, is a distinct and
separate business taxable under a different provision of the Tax Code.
There can be no double taxation where the State merely imposes a tax on
every separate and distinct business in which a party is engaged.
Moreover, in Manufacturers Life insurance Co. vs. Meer, G.R. No. L-
2910, June 29, 1951; City of Manila vs. Inter-Island Gas service, G.R. L-
8799, August 31, 1956, We have ruled that there is no prohibition against
double or multiple taxation in this jurisdiction.
WHEREFORE, the decision appealed from is reversed and set aside,
with costs.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., Barrera,, Paredes and Makalintal, JJ., concur.
Regala, J., took no part.















































Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.".
x x x x x x x x x
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.
Paras, C. J., Padilla, Reyes, A., Bautista Angelo, Concepcion, Endencia,
Reyes, J.B.L., and Felix, JJ., concur.
Bengzon, J., concurs in the result.

















































Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17825 June 26, 1922
In the matter of the Involuntary insolvency of U. DE POLI.
FELISA ROMAN, claimant-appellee,
vs.
ASIA BANKING CORPORATION, claimant-appellant.
Wolfson, Wolfson and Schwarzkopf and Gibbs, McDonough & Johnson
for appellant.
Antonio V. Herrero for appellee.
OSTRAND, J .:
This is an appeal from an order entered by the Court of First Instance of
Manila in civil No. 19240, the insolvency of Umberto de Poli, and
declaring the lien claimed by the appellee Felisa Roman upon a lot of
leaf tobacco, consisting of 576 bales, and found in the possession of said
insolvent, superior to that claimed by the appellant, the Asia Banking
Corporation.
The order appealed from is based upon the following stipulation of facts:
It is hereby stipulated and agreed by and between Felisa
Roman and Asia Banking Corporation, and on their behalf by
their undersigned attorneys, that their respective rights, in
relation to the 576 bultos of tobacco mentioned in the order of
this court dated April 25, 1921, be, and hereby are, submitted
to the court for decision upon the following:
I. Felisa Roman claims the 576 bultos of tobacco under and by
virtue of the instrument, a copy of which is hereto attached and
made a part hereof and marked Exhibit A.
II. That on November 25, 1920, said Felisa Roman notified the
said Asia Banking Corporation of her contention, a copy of
which notification is hereto attached and made a part hereof
and marked Exhibit B.
III. That on November 29, 1920, said Asia Banking
Corporation replied as per copy hereto attached and marked
Exhibit C.
IV. That at the time the above entitled insolvency proceedings
were filed the 576 bultos of tobacco were in possession of U.
de Poli and now are in possession of the assignee.
V. That on November 18, 1920, U. de Poli, for value received,
issued a quedan, covering aforesaid 576 bultos of tobacco, to
the Asia Banking Corporation as per copy of quedan attached
and marked Exhibit D.
VI. That aforesaid 576 bultos of tobacco are part and parcel of
the 2,777 bultos purchased by U. de Poli from Felisa Roman.
VII. The parties further stipulate and agree that any further
evidence that either of the parties desire to submit shall be
taken into consideration together with this stipulation.
Manila, P. I., April 28, 1921.
(Sgd.) ANTONIO V. HERRERO
Attorney for Felisa Roman
(Sgd.) WOLFSON, WOLFSON &
SCHWARZKOPF
Attorney for Asia Banking Corp.
Exhibit A referred to in the foregoing stipulation reads:
1. Que la primera parte es duea de unos dos mil quinientos a
tres mil quintales de tacabo de distintas clases, producidos en
los municipios de San Isidro, Kabiaw y Gapan adquiridos por
compra con dinero perteneciente a sus bienes parafernales, de
los cuales es ella administradora.
2. Que ha convenido la venta de dichos dos mil quinientos a
tres mil quintales de tabaco mencionada con la Segunda Parte,
cuya compraventa se regira por las condiciones siguientes:
(a) La Primera Parte remitira a la Segunda debidamente
enfardado el tabaco de que ella es propietaria en bultos no
menores de cincuenta kilos, siendo de cuenta de dicha Primera
Parte todos los gastos que origine dicha mercancja hasta la
estacion de ferrocarril de Tutuban, en cuyo lugar se hara cargo
la Segunda y desde cuyo instante seran de cuenta de esta los
riesgos de la mercancia.
(b) El precio en que la Primera Parte vende a la Segunda el
tabaco mencionada es el de veintiseis pesos (P26), moneda
filipina, por quintal, pagaderos en la forma que despues se
establece.
(c) La Segunda Parte sera la consignataria del tabaco en esta
Ciudad de Manila quien se hara cargo de el cuando reciba la
factura de embarque y la guia de Rentas Internas, trasladandolo
a su bodega quedando en la misma en calidad de deposito hasta
la fecha en que dicha Segunda Parte pague el precio del mismo,
siendo de cuenta de dicha Segunda Parte el pago de almacenaje
y seguro.
(d) LLegada la ultima expedicion del tabaco, se procedera a
pesar el mismo con intervencion de la Primera Parte o de un
agente de ella, y conocido el numero total de quintales
remitidos, se hara liquidacion del precio a cuenta del cual se
pagaran quince mil pesos (P15,000), y el resto se dividira en
cuatro pagares vencederos cada uno de ellos treinta dias
despues del anterior pago; esto es, el primer pagare vencera a
los treinta dias de la fecha en que se hayan pagado los quince
mil pesos, el segundo a igual tiempo del anterior pago, y asi
sucesivamente; conviniendose que el capital debido como
precio del tabaco devengara un interes del diez por ciento
anual.
Los plazos concedidos al comprador para el pago del precio
quedan sujetos a la condicion resolutoria de que si antes del
vencimiento de cualquier plazo, el comprador vendiese parte
del tabaco en proporcion al importe de cualquiera de los
pagares que restasen por vencer, o caso de que vendiese, pues
se conviene para este caso que desde el momento en que la
Segunda Parte venda el tabaco, el deposito del mismo, como
garantia del pago del precio, queda cancelado y
simultaneamente es exigible el importe de la parte por pagar.
Leido este documento por los otorgantes y encontrandolo
conforme con lo por ellos convenido, lo firman la Primera
Parte en el lugar de su residencia, San Isidro de Nueva Ecija, y
la Segunda en esta Ciudad de Manila, en las fechas que
respectivamente al pie de este documento aparecen.
(Fdos.) FELISA ROMAN VDA. DE MORENO
U. DE POLI
Firmado en presencia de:
(Fdos.) ANTONIO V. HERRERO
T. BARRETTO
("Acknowledged before Notary")
Exhibit D is a warehouse receipt issued by the warehouse of U. de Poli
for 576 bales of tobacco. The first paragraph of the receipt reads as
follows:
Quedan depositados en estos almacenes por orden del Sr. U. de
Poli la cantidad de quinientos setenta y seis fardos de tabaco en
rama segun marcas detalladas al margen, y con arreglo a las
condiciones siguientes:
In the left margin of the face of the receipts, U. de Poli certifies that he is
the sole owner of the merchandise therein described. The receipt is
endorced in blank "Umberto de Poli;" it is not marked "non-negotiable"
or "not negotiable."
Exhibit B and C referred to in the stipulation are not material to the
issues and do not appear in the printed record.
Though Exhibit A in its paragraph (c) states that the tobacco should
remain in the warehouse of U. de Poli as a deposit until the price was
paid, it appears clearly from the language of the exhibit as a whole that it
evidences a contract of sale and the recitals in order of the Court of First
Instance, dated January 18, 1921, which form part of the printed record,
show that De Poli received from Felisa Roman, under this contract, 2,777
bales of tobacco of the total value of P78,815.69, of which he paid
P15,000 in cash and executed four notes of P15,953.92 each for the
balance. The sale having been thus consummated, the only lien upon the
tobacco which Felisa Roman can claim is a vendor's lien.
The order appealed from is based upon the theory that the tobacco was
transferred to the Asia Banking Corporation as security for a loan and
that as the transfer neither fulfilled the requirements of the Civil Code for
a pledge nor constituted a chattel mortgage under Act No. 1508, the
vendor's lien of Felisa Roman should be accorded preference over it.
It is quite evident that the court below failed to take into consideration
the provisions of section 49 of Act No. 2137 which reads:
Where a negotiable receipts has been issued for goods, no
seller's lien or right of stoppage in transitu shall defeat the
rights of any purchaser for value in good faith to whom such
receipt has been negotiated, whether such negotiation be prior
or subsequent to the notification to the warehouseman who
issued such receipt of the seller's claim to a lien or right of
stoppage in transitu. Nor shall the warehouseman be obliged to
deliver or justified in delivering the goods to an unpaid seller
unless the receipt is first surrendered for cancellation.
The term "purchaser" as used in the section quoted, includes mortgagee
and pledgee. (See section 58 (a) of the same Act.)
In view of the foregoing provisions, there can be no doubt whatever that
if the warehouse receipt in question is negotiable, the vendor's lien of
Felisa Roman cannot prevail against the rights of the Asia Banking
Corporation as the indorse of the receipt. The only question of
importance to be determined in this case is, therefore, whether the receipt
before us is negotiable.
The matter is not entirely free from doubt. The receipt is not perfect: It
recites that the merchandise is deposited in the warehouse "por orden"
instead of "a la orden" or "sujeto a la orden" of the depositor and it
contain no other direct statement showing whether the goods received are
to be delivered to the bearer, to a specified person, or to a specified
person or his order.
We think, however, that it must be considered a negotiable receipt. A
warehouse receipt, like any other document, must be interpreted
according to its evident intent (Civil Code, arts. 1281 et seq.) and it is
quite obvious that the deposit evidenced by the receipt in this case was
intended to be made subject to the order of the depositor and therefore
negotiable. That the words "por orden" are used instead of "a la orden" is
very evidently merely a clerical or grammatical error. If any intelligent
meaning is to be attacked to the phrase "Quedan depositados en estos
almacenes por orden del Sr. U. de Poli" it must be held to mean "Quedan
depositados en estos almacenes a la orden del Sr. U. de Poli." The phrase
must be construed to mean that U. de Poli was the person authorized to
endorse and deliver the receipts; any other interpretation would mean that
no one had such power and the clause, as well as the entire receipts,
would be rendered nugatory.
Moreover, the endorsement in blank of the receipt in controversy
together with its delivery by U. de Poli to the appellant bank took place
on the very of the issuance of the warehouse receipt, thereby immediately
demonstrating the intention of U. de Poli and of the appellant bank, by
the employment of the phrase "por orden del Sr. U. de Poli" to make the
receipt negotiable and subject to the very transfer which he then and
there made by such endorsement in blank and delivery of the receipt to
the blank.
As hereinbefore stated, the receipt was not marked "non-negotiable."
Under modern statutes the negotiability of warehouse receipts has been
enlarged, the statutes having the effect of making such receipts
negotiable unless marked "non-negotiable." (27 R. C. L., 967 and cases
cited.)
Section 7 of the Uniform Warehouse Receipts Act, says:
A non-negotiable receipt shall have plainly placed upon its face
by the warehouseman issuing it 'non-negotiable,' or 'not
negotiable.' In case of the warehouseman's failure so to do, a
holder of the receipt who purchased it for value supposing it to
be negotiable may, at his option, treat such receipt as imposing
upon the warehouseman the same liabilities he would have
incurred had the receipt been negotiable.
This section shall not apply, however, to letters, memoranda, or
written acknowledgments of an informal character.
This section appears to give any warehouse receipt not marked "non-
negotiable" or "not negotiable" practically the same effect as a receipt
which, by its terms, is negotiable provided the holder of such unmarked
receipt acquired it for value supposing it to be negotiable, circumstances
which admittedly exist in the present case.
We therefore hold that the warehouse receipts in controversy was
negotiable and that the rights of the endorsee thereof, the appellant, are
superior to the vendor's lien of the appellee and should be given
preference over the latter.
The order appealed from is therefore reversed without costs. So ordered.
Araullo, C.J., Malcolm, Avancea, Villamor, Johns and Romualdez, JJ.,
concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-25748 March 10, 1975
CONSOLIDATED TERMINALS, INC., plaintiff-appellant,
vs.
ARTEX DEVELOPMENT CO., INC., defendant-appellee.
Pelaez, Jalandoni and Jamir for plaintiff-appellant.
Norberto J. Quisumbing and Humberto V. Quisumbing for
defendant-appellee.

AQUINO, J .:+.wph!1
Consolidated Terminals, Inc. (CTI) appealed from the order of
Judge Jesus Y. Perez of the Court of First Instance of Manila,
dismissing its amended complaint for damages against Artex
Development Co., Inc. (Artex for short). The dismissal was
predicated on lack of cause of action.
The following ultimate facts, which were hypothetically admitted in
the motion to dismiss, were alleged in the amended complaint:
CTI was the operator of a customs bonded warehouse located at
Port Area, Manila. It received on deposit one hundred ninety-three
(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 until the consignee
thereof, Paramount Textile Mills, Inc., had opened the
corresponding letter of credit in favor of shipper, Adolph Hanslik
Cotton of Corpus Christi, Texas.
Allegedly by virtue of a forged permit to deliver imported goods,
purportedly issued by the Bureau of Customs, Artex was able to
obtain delivery of the bales of cotton on November 5 and 6, 1964
after paying CTI P15,000 as storage and handling charges. At the
time the merchandise was released to Artex, the letter of credit
had not yet been opened and the customs duties and taxes due
on the shipment had not been paid. (That delivery permit, Annex A
of the complaint, was not included by CTI in its record on appeal).
CTI, in its original complaint, sought to recover possession of the
cotton by means of a writ of replevin. The writ could not be
executed. CTI then filed an amended complaint by transforming its
original complaint into an action for the recovery from Artex of
P99,609.76 as compensatory damages, P10,000 as nominal and
exemplary damages and P20,000 as attorney's fees.
It should be clarified that CTI in its affidavit for manual delivery of
personal property (Annex B of its complaint not included in its
record on appeal) and in paragraph 7 of its original complaint
alleged that Artex acquired the cotton from Paramount Textile
Mills, Inc., the consignee. Artex alleged in its motion to dismiss
that it was not shown in the delivery permit that Artex was the
entity that presented that document to the CTI. Artex further
averred that it returned the cotton to Paramount Textile Mills, Inc.
when the contract of sale between them was rescinded because
the cotton did not conform to the stipulated specifications as to
quality (14-15, Record on Appeal). No copy of the rescissory
agreement was attached to Artex's motion to dismiss.
In sustaining Artex's motion to dismiss, which CTI did not oppose
in writing, Judge Perez said:t.hqw
Since the plaintiff (CTI) is only a warehouseman
and according to the amended complaint,
plaintiff was already paid the warehousing and
handling charges of the 193 bales of high
density compressed raw cotton mentioned in the
complaint, the plaintiff can no longer recover for
its services as warehouseman.
The fact that the delivery of the goods was
obtained by the defendant without opening the
corresponding letter of credit cannot be the
basis of a cause of action of the plaintiff
because such failure of the defendant to open
the letter of credit gives rise to a cause of action
in favor of the shipper of the goods and not in
favor of the plaintiff.
With respect to the allegation of the amended
complaint that the goods were taken by the
defendant without paying the customs duties
and other revenues (sic) assessed thereon, this
does not give rise to a cause of action in favor of
the plaintiff for the party aggrieved is the
government.
Likewise, the alleged presentation of a forged
permit to deliver imported goods by the
defendant did not give rise to a cause of action
in favor of the plaintiff but in favor of the Bureau
of Customs and of the consignee. (18-19,
Record on Appeal).
Judge Perez was guided more by logic and common sense than
by any specific rule of law or jurisprudence.
CTI in this appeal contends that, as warehouseman, it was entitled
to the possession (should be 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.
The only statutory rule cited by CTI is section 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 ...".
We hold that CTI's appeal has not merit. Its amended complaint
does not clearly show that, as warehouseman, it has a cause of
action for damages against Artex. The real parties interested in
the bales of cotton were Luzon Brokerage Corporation as
depositor, Paramount Textile Mills, Inc. 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 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.
But that eventuality has not arisen in this case. So, CTI's basic
action to recover the value of the merchandise seems to be
untenable. It was not the owner of the cotton. How could it be
entitled to claim the value of the shipment?
In other words, on the basis of the allegations of the amended
complaint, the lower court could not render a valid judgment in
accordance with the prayer thereof. It could not render such valid
judgment because the amended complaint did not unequivocally
allege what right of CTI was violated by Artex, or, to use the
familiar language of adjective law, 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. (See Ma-ao Sugar Central Co., Inc. vs. Barrios, 79 Phil.
666; 1 Moran's Comments on the Rules of Court, 1970 Ed., pp.
259, 495).
WHEREFORE, the order of dismissal is affirmed with costs
against the plaintiff-appellant.
SO ORDERED.
Makalintal, C.J., Barredo, Antonio and Fernandez, JJ.,
concur.1wph1.t
Fernando, J., took no part.















































Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-6342 January 26, 1954
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
LAUREANO ATENDIDO, defendants-appellant.
Nicolas Fernandez for appellee.
Gaudencio L. Atendido for appellant.
BAUTISTA, ANGELO, J .:
This is an appeal from a decision of the Court of First Instance of Nueva
Ecija which orders the defendant to pay to the plaintiff the sum of
P3,000, with interest thereon at the rate of 6% per annum from June 26,
1940, and the costs of action.
On June 26, 1940, Laureano Atendido obtained from the Philippine
National Bank a loan of P3,000 payable in 120 days with interests at 6%
per annum from the date of maturity. To guarantee the payment of the
obligation the borrower pledged to the bank 2,000 cavanes of palay
which were then deposited in the warehouse of Cheng Siong Lam & Co.
in San Miguel, Bulacan, and to that effect the borrower endorsed in favor
of the bank the corresponding warehouse receipt. Before the maturity of
the loan, the 2,000 cavanes of palay disappeared for unknown reasons in
the warehouse. When the loan matured the borrower failed to pay either
the principal or the interest and so the present action was instituted.
Defendant set up a special defense and a counterclaim. As regards the
former, defendant claimed that the warehouse receipt covering the palay
which was given as security having been endorsed in blank in favor of
the bank, and the palay having been lost or disappeared, he thereby
became relieved of liability. And, by way of counterclaim, defendant
claimed that, as a corollary to his theory, he is entitled to an indemnity
which represents the difference between the value of the palay lost and
the amount of his obligation.
The case was submitted on an agreed statements of facts and thereupon
the court rendered judgment as stated in the early part of this decision.
Defendant took the case on appeal to the Court of Appeals but later it
was certified to this Court on the ground that the question involved is
purely one of law.
The only issue involved in this appeal is whether the surrender of the
warehouse receipt covering the 2,000 cavanes of palay given as a
security, endorsed in blank, to appellee, has the effect of transferring
their title or ownership to said appellee, or it should be considered merely
as a guarantee to secure the payment of the obligation of appellant.
In upholding the view of appellee, the lower court said: "The
surrendering of warehouse receipt No. S-1719 covering the 2,000
cavanes of palay by the defendant in favor of the plaintiff was not that of
a final transfer of that warehouse receipt but merely as a guarantee to the
fulfillment of the original obligation of P3,000.00. In other word,
plaintiff corporation had no right to dispose (of) the warehouse receipt
until after the maturity of the promissory note Exhibit A. Moreover, the
2,000 cavanes of palay were not in the first place in the actual possession
of plaintiff corporation, although symbolically speaking the delivery of
the warehouse receipt was actually done to the bank."
We hold this finding to be correct not only because it is in line with the
nature of a contract of pledge as defined by law (Articles 1857, 1858 &
1863, Old Civil Code), but is supported by the stipulations embodied in
the contract signed by appellant when he secured the loan from the
appellee. There is no question that the 2,000 cavanes of palay covered by
the warehouse receipt were given to appellee only as a guarantee to
secure the fulfillment by appellant of his obligation. This clearly appears
in the contract Exhibit A wherein it is expressly stated that said 2,000
cavanes of palay were given as a collateral security. The delivery of said
palay being merely by way of security, it follows that by the very nature
of the transaction its ownership remains with the pledgor subject only to
foreclose in case of non-fulfillment of the obligation. By this we mean
that if the obligation is not paid upon maturity the most that the pledgee
can do is to sell the property and apply the proceeds to the payment of
the obligation and to return the balance, if any, to the pledgor (Article
1872, Old Civil Code). This is the essence of this contract, for, according
to law, a pledgee cannot become the owner of, nor appropriate to
himself, the thing given in pledge (Article 1859, Old Civil Code). If by
the contract of pledge the pledgor continues to be the owner of the thing
pledged during the pendency of the obligation, it stands to reason that in
case of loss of the property, the loss should be borne by the pledgor. The
fact that the warehouse receipt covering the palay was delivered,
endorsed in blank, to the bank does not alter the situation, the purpose of
such endorsement being merely to transfer the juridical possession of the
property to the pledgee and to forestall any possible disposition thereof
on the part of the pledgor. This is true notwithstanding the provisions to
the contrary of the Warehouse Receipt Law.
In case recently decided by this Court (Martinez vs. Philippine National
Bank, 93 Phil., 765) which involves a similar transaction, this Court held:
In conclusion, we hold that where a warehouse receipt or
quedan is transferred or endorsed to a creditor only to secure
the payment of a loan or debt, the transferee or endorsee does
not automatically become the owner of the goods covered by
the warehouse receipt or quedan but he merely retains the right
to keep and with the consent of the owner to sell them so as to
satisfy the obligation from the proceeds of the sale, this for the
simple reason that the transaction involved is not a sale but
only a mortgage or pledge, and that if the property covered by
the quedans or warehouse receipts is lost without the fault or
negligence of the mortgagee or pledgee or the transferee or
endorsee of the warehouse receipt or quedan, then said goods
are to be regarded as lost on account of the real owner,
mortgagor or pledgor.
Wherefore, the decision appealed from is affirmed, with costs against
appellant.
Bengzon, Padilla, Montemayor, Jugo, Reyes and Labrador, JJ., concur.









Republic of the Philippines
SUPREME COURT
Manila
EN BANC
March 5, 1932
G.R. No. 34655
SIY CONG BIENG & CO., INC., plaintiff-appellee,
vs.
HONGKONG & SHANGHAI BANKING CORPORATION,
defendant-appellant.
DeWitt, Perkins & Brandy for appellant.
Feria & La O for appellee.
OSTRAND, J .:
This action was brought in the Court of First Instance of Manila to
recover the sum of P31,645, the value of 464 bales of hemp deposited in
certain bonded warehouses as evidenced by the quedans (warehouse
receipts) described in the complaint, said quedans having been delivered
as pledge by one Otto Ranft to the herein defendant, the Hongkong and
Shanghai Banking Corporation, for the guarantee of a preexisting debt of
the former to the latter. The record shows that both parties, through their
respective counsel, subscriber and submitted to the court below the
following agreement of facts:
STIPULATION OF FACTS
(Translated into English)
Come now the parties, both the plaintiff and the defendant Hongkong &
Shanghai Banking Corporation, through their respective counsel in the
above entitled case, and respectfully submit to the court the following
agreed statements of facts:
1. That both the plaintiff and the defendant Hongkong & Shanghai
Banking Corporation are corporations domicile in the City of Manila and
duly authorized to transact business in accordance with the laws of the
Philippine Islands.
2. That the plaintiff is a corporation engaged in business generally, and
that the defendant Hongkong & Shanghai Banking Corporation is a
foreign bank authorized to engage in the banking business in the
Philippines.
3. That on June 25, 1926, certain negotiable warehouse receipts
described below were pledge by Otto Ranft to the defendant Hongkong
& Shanghai Banking Corporation to secure the payment of his
preexisting debts to the latter:
No. Warehouseman Depositor Bales
1707 Public Warehouse Co
Siy Cong Bieng & Co.,
Inc.
27
133 W.F. Stevenson Co do 67
1722 Public Warehouse Co do 60
1723 do do 4
1634
The Philippine Warehouse
Company
do 99
1918 Public Warehouse Co O. Ranft 166
2 Siy Cong Bieng & Co., Inc do 2
1702
The Philippine Warehouse
Company
Siy Cong Bieng & Co.,
Inc.
39
And that the baled hemp covered by these warehouse receipts was worth
P31,635; receipts number 1707,133,1722, 1723, 1634, and 1702 being
endorsed in blank by the plaintiff and Otto Ranft, and numbers 1918 and
2, by Otto Ranft alone.
4. That in the night of June 25, 1926, said Otto Ranft died suddenly at his
house in the City of Manila.
5. That both parties submit this agreed statement of facts, but reserve
their right to have in evidence upon other points not included herein, and
upon which they cannot come to an agreement.
Manila, August 7, 1929.
The evidence shows that on June 25, 1926, Ranft called at the office of
the herein plaintiff to purchase hemp (abaca), and he was offered the
bales of hemp as described in the quedans above mentioned. The parties
agreed to the aforesaid price, and on the same date the quedans, together
with the covering invoice, were sent to Ranft by the plaintiff, without
having been paid for the hemp, but the plaintiff's understanding was that
the payment would be made against the same quedans, and it appear that
in previous transaction of the same kind between the bank and the
plaintiff, quedans were paid one or two days after their delivery to them.
In the evening of the day upon which the quedans in question were
delivered to the herein defendant, Ranft died, and when the plaintiff
found that such was the case, it immediately demanded the return of the
quedans, or the payment of the value, but was told that the quedans had
been sent to the herein defendant as soon as they were received by Ranft.
Shortly thereafter the plaintiff filed a claim for the aforesaid sum of
P31,645 in the intestate proceedings of the estate of the deceased Otto
Ranft, which on an appeal form the decision of the committee on claims,
was allowed by the Court of First Instance in case No. 31372 (City of
Manila). In the meantime, demand had been made by the plaintiff on the
defendant bank for the return of the quedans, or their value, which
demand was refused by the bank on the ground that it was a holder of the
quedans in due course. Thereupon the plaintiff filed its first complaint
against the defendant, wherein it alleged that it has "sold" the quedans in
question to the deceased O. Ranft for cash, but that the said O. Ranft had
not fulfilled the conditions of the sale. Later on, plaintiff filed an
amended complaint, wherein they changed the word "sold" referred to in
the first complaint to the words "attempted to sell".
Upon trial the judge of the court below rendered judgment in favor of the
plaintiff principally on the ground that in the opinion of the court the
defendant bank "could not have acted in good faith for the reason that
according to the statements of its own witness, Thiele, the quedans were
delivered to the bank in order to secure the debts of Ranft for the
payment of their value and from which it might be deduced that the said
bank knew that the value of the said quedans was not as yet paid when
the same were endorsed to it, and its alleged belief that Ranft was the
owner of the said quedans was not in accordance with the facts proved at
the time"; and that, moreover, the circumstances were such that "the bank
knew, or should have known, that Ranft had not yet acquired the
ownership of the said quedans and that it therefore could not invoke the
presumption that it was acting in good faith and without negligence on its
part".
In our opinion the judgment of the court below is not tenable. It may be
noted, first, that the quedans in question were negotiable in form; second,
that they were pledge by Otto Ranft to the defendant bank to secure the
payment of his preexisting debts to said bank (paragraph 3 of the
Stipulation of Facts); third, that such of the quedans as were issued in the
name of the plaintiff were duly endorsed in blank by the plaintiff and by
Otto Ranft; and fourth, that the two remaining quedans which were duly
endorsed in blank by him.
When these quedans were thus negotiated, Otto Ranft was indebted to
the Hongkong & Shanghai Banking Corporation in the sum of
P622,753.22, which indebtedness was partly covered by quedans. He
was also being pressed to deposit additional payments as a further
security to the bank, and there is no doubt that the quedans here in
question were received by the bank to secure the payment of Ranft's
preexisting debts; it is so stated in paragraph 3 of the stipulation of the
facts agreed on by the parties and hereinbefore quoted.
It further appears that it has been the practice of the bank in its
transactions with Ranft that the value of the quedans has been entered in
the current accounts between Ranft and the bank, but there is no evidence
to the effect that the bank was at any time bound to pay back to Ranft the
amount of any of the quedans, and there is nothing in the record to show
that the bank has promised to pay the values of the quedans neither to
Ranft nor to the herein plaintiff; on the contrary, as stated in the
stipulation of facts, the "negotiable warehouse receipts - were pledged by
Otto Ranft to the defendant Hongkong & Shanghai Banking Corporation
secure the payment of his preexisting debts to the latter", and taking into
consideration that the quedans were negotiable in form and duly
endorsed in blank by the plaintiff and by Otto Ranft, it follows that on
the delivery of the qeudans to the bank they were no longer the property
of the indorser unless he liquidated his debt with the bank.
In his brief the plaintiff insists that the defendant, before the delivery of
the quedans, should have ascertained whether Ranft had any authority to
negotiate the quedans.
We are unable to find anything in the record which in any manner would
have compelled the bank to investigate the indorser. The bank had a
perfect right to act as it did, and its action is in accordance with sections
47, 38, and 40 of the Warehouse Receipts Act (Act No. 2137), which
read as follows:
SEC. 47. When negotiation not impaired by fraud, mistake, or duress. ?
The validity of the negotiation of a receipt is not impaired by the fact that
such negotiation was a breach of duty on the part of the person making
the negotiation, or by the fact that the owner of the receipt was induced
by fraud, mistake, or duress to intrust the possession or custody of the
receipt was negotiated, or a person to whom the receipt was subsequent
negotiated, paid value therefor, without notice of the breach of duty, or
fraud, mistake, or duress.
SEC. 38. Negotiation of negotiable receipts by indorsement. A negotiable
receipt may be negotiated by the indorsement of the person to whose
order the goods are, by the terms of the receipt, deliverable. Such
indorsement may be in blank, to bearer or to a specified person. . . .
Subsequent negotiation may be made in like manner.
SEC. 40. Who may negotiate a receipt. A negotiable receipt may be
negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt has
been entrusted by the owner, if, by the terms of the receipt, the
warehouseman undertakes to deliver the goods to the order of the person
to whom the possession or custody of the receipt has been entrusted, or if
at the time of such entrusting the receipt is in such form that it may be
negotiated by delivery.
The question as to the rights the defendant bank acquired over the
aforesaid quedans after indorsement and delivery to it by Ranft, we find
in section 41 of the Warehouse Receipts Act (Act No. 2137):
SEC. 41. Rights of person to whom a receipt has been negotiated. ? A
person to whom a negotiable receipt has been duly negotiated acquires
thereby:
(a) Such title to the goods as the person negotiating the receipt to him
had or had ability to convey to a purchaser in good faith for value, and
also such title to the goods as the depositor of person to whose order the
goods were to be delivered by the terms of the receipt had or had ability
to convey to a purchaser in good faith for value, and. . . .
In the case of the Commercial National Bank of New Orleans vs. Canal-
Louisiana Bank & Trust Co. (239 U.S., 520), Chief Justice Hughes said
in regard to negotiation of receipts:
It will be observed that "one who takes by trespass or a finder is not
included within the description of those who may negotiate." (Report of
Commissioner on Uniform States Laws, January 1, 1910, p. 204.) Aside
from this, the intention is plain to facilitate the use of warehouse receipts
as documents of title. Under sec. 40, the person who may negotiate the
receipt is either the "owner thereof", or a "person to whom the possession
or custody of the receipt has been intrusted by the owner" if the receipt is
in the form described. The warehouse receipt represents the goods, but
the intrustion of the receipt, as stated, is more than the mere delivery of
the goods; it is a representation that the one to whom the possession of
the receipt has been so intrusted has the title to the goods. By sec. 47, the
negotiation of the receipt to a purchaser for value without notice is not
impaired by the fact that it is a breach of duty, or that the owner of the
receipt was induced "by fraud, mistake, or duree" to intrust the receipt to
the person who negotiated it. And, under sec. 41, one to whom the
negotiable receipt has been duly negotiated acquires such title to the
goods as the person negotiating the receipt to him, or the depositor or
person whose order the goods were delivered by the terms of the receipt,
either had or "had ability to convey to a purchaser in good faith for
value." The clear import of these provisions is that if the owner of the
goods permit another to have the possession or custody of negotiable
warehouse receipts running to the order of the latter, or to bearer, it is a
representation of title upon which bona fide purchasers for value are
entitled to rely, despite breaches of trust or violations of agreement on
the part of the apparent owner.
In its second assignment of error, the defendant-appellant maintains that
the plaintiff-appellee is estopped to deny that the bank had a valid title to
the quedans for the reason that the plaintiff had voluntarily clothed Ranft
with all the attributes of ownership and upon which the defendant bank
relied. In our opinion, the appellant's view is correct. In the National Safe
Deposit vs. Hibbs (229 U.S., 391), certain certificates of stock were
pledged as collateral by the defendant in error to the plaintiff bank, which
certificates were converted by one of the trusted employees of the bank
to his own use and sold by him. The stock certificates were unqualified
endorsed in blank by the defendant when delivered to the bank. The
Supreme Court of the United States through Justice Day applied the
familiar rule of equitable estoppel that where one of two innocent
persons must suffer a loss he who by his conduct made the loss possible
must bear it, using the following language:
We think this case correctly states the principle, and, applied to the case
in hand, is decisive of it. Here one of two innocent person must suffer
and the question at last is, Where shall the loss fall? It is undeniable that
the broker obtained the stock certificates, containing all the indicia of
ownership and possible of ready transfer, from one who had possession
with the bank's consent, and who brought the certificates to him,
apparently clothed with the full ownership thereof by all the tests usually
applied by business men to gain knowledge upon the subject before
making a purchase of such property. On the other hand, the bank, for a
legitimate purpose, with confidence in one of its own employees,
instrusted the certificates to him, with every evidence of title and
transferability upon them. The bank's trusted agent, in gross breach of his
duty, whether with technical criminality or not is unimportant, took such
certificates, thus authenticated with evidence of title, to one who, in the
ordinary course of business, sold them to parties who paid full value for
them. In such case we think the principles which underlie equitable
estoppel place the loss upon him whose misplaced confidence has made
the wrong possible. . . .
We regret that the plaintiff in this case has suffered the loss of the
quedans, but as far as we can see, there is now no remedy available to the
plaintiff. The bank is not responsible for the loss; the negotiable quedans
were duly negotiated to the bank and as far as the record shows, there has
been no fraud on the part of the defendant.
The appealed judgment is reversed and the appellant is absolved from the
plaintiff's complaint. Without costs. So ordered.
Johnson, Street, Malcolm, Villamor, Villa-Real and Imperial, JJ., concu




















































Lopez vs. Del Rosario and Quiogue, No. 19189, 44 Phil. 98 ,
November 27, 1922
G.R. No. L-19189 November 27, 1922
FROILAN LOPEZ, plaintiff-appellant,
vs.
SALVADOR V. DEL ROSARIO and BENITA QUIOGUE DE V. DEL ROSARIO,
defendants-appellants.
Araneta and Zaragoza for plaintiff-appellant.
Jose Espiritu and Gibbs, McDonough and Johnson for defendants-
appellants.

MALCOLM, J.:
Both parties to this action appeal from the judgment of Judge
Simplicio del Rosario of the Court of First Instance of Manila awarding
the plaintiff the sum of 88,495.21 with legal interest from May 13, 1921,
without special finding as to costs.
The many points pressed by contending counsel can be best
disposed of by, first, making a statement of the facts; next, considering
plaintiff's appeal; next, considering defendant's appeal; and, lastly,
rendering judgment.
STATEMENT OF THE FACTS
On and prior to June 6, 1920, Benita Quiogue de V. del Rosario,
whom we will hereafter call Mrs. Del Rosario, was the owner of a
bonded warehouse situated in the City of Manila. She was engaged in
the business of a warehouse keeper, and stored copra and other
merchandise in the said building. Among the persons who had copra
deposited in the Del Rosario warehouse was Froilan Lopez, the holder of
fourteen warehouse receipts in his own name, and the name of Elias T.
Zamora. (Exhibits C, D, and R.)

The warehouse receipts, or negotiable warrants, or quedans (as
they are variously termed) of Lopez named a declared value of
P107,990.40 (Exhibits L-1 to L-13). The warehouse receipts provided: (1)
For insurance at the rate of 1 per cent per month on the declared value;
(2) the company reserves to itself the right to raise and/or lower the
rates of storage and/or of insurance on giving one calendar month's
notice in writing; (3) this warrant carries no insurance unless so noted
on the face hereof, cost of which is in addition to storage; (4) the time
for which storage and/or insurance is charged is thirty (30) days; (5)
payment for storage and/or insurance, etc., shall be made in advance,
and/or within five (5) days after presentation of bill. It is admitted that
insurance was paid by Lopez to May 18, 1920, but not thereafter.

Mrs. Del Rosario secured insurance on the warehouse and its
contents with the National Insurance Co., Inc., the Commercial Union
Insurance Company, the Alliance Insurance Company, the South British
Insurance Co., Ltd., and the British Traders Insurance Co., Ltd., in the
amount of P404,800. All the policies were in the name of Sra. Benita
Quiogue de V. del Rosario, with the exception of one of the National
Insurance Company, Inc., for P40,000, in favor of the Compaia Coprera
de Tayabas. (Exhibits N, O, P, R-1 to R-4.)

The warehouse of Mrs. Del Rosario and its contents were
destroyed by fire on June 6, 1920. The warehouse was a total loss, while
of the copra stored therein, only an amount equal to P49,985 was
salvaged.
Following an unsuccessful attempt by Henry Hunter Bayne, Fire
Loss Adjuster, to effect a settlement between the insurance companies
and Mrs. Del Rosario, the latter, on August 24, 1920, authorized
Attorney F. C. Fisher to negotiate with the various insurance companies.
(Exhibit A.) As a result, an agreement between Mrs. Del Rosario and the
insurance companies to submit the matter to administration was
executed in September, 1920. (Exhibit B.) Mrs. Del Rosario laid claim
before the arbitrators, Messrs. Muir and Campbell, to P419,683.95, and
the proceeds of the salvage sale. The arbitrators in their report allowed
Mrs. Del Rosario P363,610, which, with the addition of the money
received from the salvaged copra amounting to P49,985, and interest,
made a total of P414,258, collected by her from the companies.
(Exhibits E, F, G, H, and Q.)

Mrs. Del Rosario seems to have satisfied all of the persons who
had copra stored in her warehouse, including the stockholders in the
Compaia Coprera de Tayabas (whose stock she took over), with the
exception of Froilan Lopez, the plaintiff. Ineffectual attempts by Mrs.
Del Rosario to effect a compromise with Lopez first for P71,994, later
raised to P72,724, and finally reduced to P17,000, were made. (Exhibits
Y, 1, 3, 4, 6, 7, 8, 12.) But Lopez stubbornly contended, or, at least, his
attorney contended for him, that he should receive not a centavo less
than P88,595.43. (Exhibits 4, 5.)
PLAINTIFF'S APPEAL
Plaintiff, by means of his assignment of error, lays claim to
P88,595.43 in lieu of P88,495.21 allowed by the trial court. The slight
difference of P100.22 is asked for so that plaintiff can participate in the
interest money which accrued on the amount received for the salvaged
copra. (Exhibits EE and FF.) Defendant makes no specific denial of this
claim. We think the additional sum should accrue to the plaintiff.

Plaintiff's second and third assignment of error present the point
that the defendant has fraudulently and even criminally refrained
from paying the plaintiff, and that the plaintiff should recover interest at
the rate of 12 per cent per annum. We fail to grasp plaintiff's point of
view. The defendant has not sought to elude her moral and legal
obligations. The controversy is merely one which unfortunately all too
often arises between litigious persons. Plaintiff has exactly the rights of
any litigant, equally situated, and no more.

It has been the constant practice of the court to make article 1108
of the Civil Code the basis for the calculation of interest. Damages in the
form of interest at the rate of 12 per cent, as claimed by the plaintiff,
are too remote and speculative to be allowed. The deprivation of an
opportunity for making money which might have proved beneficial or
might have been ruinous is of too uncertain character to be weighed in
the even balances of the law. (Civil Code, art. 1108; Gonzales Quiros vs.
Palanca Tan-Guinlay [1906], 5 Phil., 675; Tin Fian vs. Tan [1909], 14 Phil.,
126; Sun Life Insurance Co. of Canada vs. Rueda Hermanos & Co. and
Delgado [1918], 37 Phil., 844; Scvola, Codigo Civil, vol. 19, p. 576; 8 R.
C. L., 463; 17 C. J., 864.

DEFENDANT'S APPEAL
Counsel for defendant have adroitly and ingeniously attempted to
avoid all liability. However, we remain unimpressed by many of these
arguments.lawph!l.net

Much time has been spent by counsel for both parties in
discussing the question, of whether the defendant acted as the agent of
the plaintiff, in taking out insurance on the contents of the bodega, or
whether the defendant acted as a reinsurer of the copra. Giving a
natural expression to the terms of the warehouse receipts, the first
hypothesis is the correct one. The agency can be deduced from the
warehouse receipts, the insurance policies, and the circumstances
surrounding the transaction.

After all, however, this is not so vitally important, for it might well
be although we do not have to decide that under any aspect of the
case, the defendant would be liable. The law is that a policy effected by
bailee and covering by its terms his own property and property held in
trust; inures, in the event of a loss, equally and proportionately to the
benefit of all the owners of the property insured. Even if one secured
insurance covering his own goods and goods stored with him, and even
if the owner of the stored goods did not request or know of the
insurance, and did not ratify it before the payment of the loss, yet it has
been held by a reputable court that the warehouseman is liable to the
owner of such stored goods for his share. (Snow vs. Carr [1878], 61 Ala.,
363; 32 Am. Rep., 3; Broussard vs. South Texas Rice Co., [1910], 103
Tex., 535; Ann. Cas., 1913-A, 142, and note; Home Insurance Co. of New
York vs. Baltimore Warehouse Co. [1876], 93 U. S., 527.)

Moreover, it has not escaped our notice that in two documents,
one the agreement for arbitration, and the other the statement of claim
of Mrs. Del Rosario, against the insurance companies, she acknowledged
her responsibility to the owners of the stored merchandise, against risk
of loss by fire. (Exhibits B and C-3.) The award of the arbitrators covered
not alone Mrs. Del Rosario's warehouse but the products stored in the
warehouse by Lopez and others.

Plaintiff's rights to the insurance money have not been forfeited by
failure to pay the insurance provided for in the warehouse receipts. A
preponderance of the proof does not demonstrate that the plaintiff
ever ordered the cancellation of his insurance with the defendant. Nor
is it shown that the plaintiff ever refused to pay the insurance when the
bills were presented to him, and that notice of an intention to cancel
the insurance was ever given the plaintiff.

The record of the proceedings before the board of arbitrators, and
its report and findings, were properly taken into consideration by the
trial court as a basis for the determination of the amount due from the
defendant to the plaintiff. In a case of contributing policies, adjustments
of loss made by an expert or by a board of arbitrators may be submitted
to the court not as evidence of the facts stated therein, or as obligatory,
but for the purpose of assisting the court in calculating the amount of
liability. (Home Insurance Co. vs. Baltimore Warehouse Co., supra.)

Counsel for the defendant have dwelt at length on the
phraseology of the policies of the National Insurance Company, Inc.
Special emphasis has been laid upon one policy (Exhibit 9) in the name
of the Compaia Coprera de Tayabas. In this connection it may be said
that three members of the court, including the writer of this opinion,
have been favorable impressed by this argument, and would have
preferred at least to eliminate the policy for which premiums were paid,
not by Mrs. Del Rosario on behalf of Lopez and others, but by Compaia
Coprera de Tayabas. A majority of the court, however, believe that all
the assets should be marshalled and that the plaintiff should receive the
benefit accruing from the gross amount realized from all the policies.
Consequently, no deduction for this claim can be made.

The remaining contention of the defendant that the plaintiff
cannot claim the benefits of the agency without sharing in the expenses,
is well taken. Although the plaintiff did not expressly authorize the
agreement to submit the matter to arbitration, yet on his own theory of
the case, Mrs. Del Rosario was acting as his agent in securing insurance,
while he benefits from the amicable adjustment of the insurance claims.
As no intimation is made that the expenses were exorbitant, we
necessarily accept the statement of the same appearing in Exhibits Q
and 8.
Of the insurance money, totalling P414,258, P382,558 was for
copra and the remainder for buildings, corn, etc. The expenses for
collecting the P414,258 totalled P33,600. 382,558/414,258 of 33,600
equals P31,028.85, the proportionate part of the expenses with
reference to the copra. Of the expenses amounting, as we have said, to
P31,028.85, plaintiff would be liable for his proportionate share or
88,595.43/382,558.00 of P31,028.85 or P7,185.875.

The parties finally agree that the plaintiff at the time of the fire
was indebted to the defendant for storage and insurance in the sum of
P315.90.
JUDGMENT
In resume, the result is to sustain plaintiff's first assignment of
error and to overrule his second and third assignments of error, to
overrule defendant's assignment of error 1, 2, 3, and 4 in toto and to
accede to defendant's assignments of error, 5, 6, and 7 in part. If our
mathematics are correct, and the amounts can be figured in several
different ways, plaintiff is entitled to P88,595.43 minus P7,185.88, his
share of the expenses, minus P315.90, due for insurance and storage, or
approximately a net amount of P81,093.65, with legal interest. This sum
the defendant must disgorge.
Wherefore, judgment is modified and the plaintiff shall have and
recover from the defendants the sum of P81,093.65, with interest at 6
per cent per annum from May 13, 1921, until paid. Without special
finding as to costs in either instance, it is so ordered.
Araullo, C. J., Street, Avancea, Villamor, Ostrand, Johns, and
Romualdez, JJ., concur.
Johnson, J., took no part.
























EN BANC
[G.R. No. L-4080. September 21, 1953.]
JOSE R. MARTINEZ, as administrator of the Instate Estate of
Pedro Rodriguez, deceased, Plaintiff-Appellant, vs. PHILIPPINE
NATIONAL BANK, Defendant-Appellee.
D E C I S I O N
MONTEMAYOR, J .:
As of February 1942, the estate of Pedro Rodriguez was indebted to the
defendant Philippine National Bank in the amount of P22,128.44 which
represented the balance of the crop loan obtained by the estate upon its
1941-1942 sugar cane crop. Sometime in February 1942, Mrs. Amparo
R. Martinez, late administratrix of the estate upon request of the
defendant bank through its Cebu branch, endorsed and delivered to the
said bank two (2) quedans according to plaintiff-appellant issued by the
Bogo-Medellin Milling Co. where the sugar was stored covering
2,198.11 piculs of sugar belonging to the estate, although according to
the defendant-appellee, only one quedan covering 1,071.04 piculs of
sugar was endorsed and delivered. During the last Pacific war, sometime
in 1943, the sugar covered by the quedan or quedans was lost while in
the warehouse of the Bogo-Medellin Milling Co. In the year 1948, the
indebtedness of the estate including interest was paid to the bank,
according to the appellant, upon the insistence of and pressure brought to
bear by the bank.
Under the theory and claim that sometime in February 1942, when the
invasion of the Province of Cebu by the Japanese Armed Forces was
imminent, the administratrix of the estate asked the bank to release the
sugar so that it could be sold at a good price which was about P25 per
picul in order to avoid its possible loss due to the invasion, but that the
bank refused the request and as a result the amount of P54,952.75
representing the value of said sugar was lost, the present action was
brought against the defendant bank to recover said amount. After trial,
the Court of First Instance of Manila dismissed the complaint on the
ground that the transfer of the quedan or quedans representing the sugar
in the warehouse of the Bogo-Medellin Milling Co. to the bank did not
transfer ownership of the Sugar, and consequently, the loss of said sugar
should be borne by the plaintiff-appellant. Administrator Jose R.
Martinez is now appealing from that decision.
We agree with the trial court that at the time of the loss of the sugar
during the war, sometime in 1943, said sugar still belonged to the estate
of Pedro Rodriguez. It had never been sold to the bank so as to make the
latter owner thereof. The transaction could not have been a sale, first,
because one of the essential elements of the contract of sale, namely,
consideration was not present. If the sugar was sold, what was the price?
We do not know, for nothing was said about it. Second, the bank by its
charter is not authorized to engage in the business of buying and selling
sugar. It only accepts sugar as security for payment of its crop loans and
later on pursuant to an understanding with the sugar planters, it sells said
sugar for them, or the planters find buyers and direct them to the bank.
The sugar was given only as a security for the payment of the crop loan.
This is admitted by the appellant as shown by the allegations in its
complaint filed before the trial court and also in the brief for appellant
filed before us. According to law, the mortgagee or pledgee cannot
become the owner of or convert and appropriate to himself the property
mortgaged or pledged (Article 1859, old Civil Code; Article 2088, new
Civil Code). Said property continues to belong to the mortgagor or
pledgor. The only remedy given to the mortgagee or pledgee is to have
said property sold at public auction and the proceeds of the sale applied
to the payment of the obligation secured by the mortgage or pledge.
The position and claim of plaintiff-appellant is rather inconsistent and
confusing. First, he contends that the endorsement and delivery of the
quedan or quedans to the bank transferred the ownership of the sugar to
said bank so that as owner, the bank should suffer the loss of the sugar on
the principle that "a thing perishes for its owner". We take it that by
endorsing the quedan, defendant was supposed to have sold the sugar to
the bank for the amount of the outstanding loan of P22,128.44 and the
interest then accrued. That would mean that plaintiff's account with the
bank has been entirely liquidated and their contractual relations ended,
the bank, suffering the loss of the amount of the loan and interest. But
plaintiff-appellant in the next breath contends that had the bank released
the sugar in February 1942, plaintiff could have sold it for P54,952.75,
from which the amount of the loan and interest could have been
deducted, the balance to have been retained by plaintiff, and that since
the loan has been entirely liquidated in 1948, then the whole expected
sales price of P54,952.75 should now be paid by the bank to appellant.
This second theory presupposes that despite the endorsement of the
quedan, plaintiff still retained ownership of the sugar, a position that runs
counter to the first theory of transfer of ownership to the bank.
In the course of the discussion of this case among the members of the
Tribunal, one or two of them who will dissent from the majority view
sought to cure and remedy this apparent inconsistency in the claim of
appellant and sustain the theory that the endorsement of the quedan made
the bank the owner of the sugar resulting in the payment of the loan, so
that now, the bank should return to appellant the amount of the loan it
improperly collected in 1948.
In support of the theory of transfer of ownership of the sugar to the bank
by virtue of the endorsement of the quedan, reference was made to the
Warehouse Receipts Law, particularly section 41 thereof, and several
cases decided by this court are cited. In the first place, this claim is
inconsistent with the very theory of plaintiff-appellant that the sugar far
from being sold to the bank was merely given as security for the payment
of the crop loan. In the second place, the authorities cited are not directly
applicable. In those cases this court held that for purposes of facilitating
commercial transaction, the endorsee or transferee of a warehouse receipt
or quedan should be regarded as the owner of the goods covered by it. In
other words, as regards the endorser or transferor, even if he were the
owner of the goods, he may not take possession and dispose of the goods
without the consent of the endorsee or transferee of the quedan or
warehouse receipt; that in some cases the endorsee of a quedan may sell
the goods and apply the proceeds of the sale to the payment of the debt;
and as regards third persons, the holder of a warehouse receipt or quedan
is considered the owner of the goods covered by it. To make clear the
view of this court in said cases, we are quoting a portion of the decisions
of this court in two of these cases cited which are typical.
"As to the first cause of action, we hold that in January, 1919,
the bank became and remained the owner of the five quedans
Nos. 30, 35, 38, 41, and 42; that they were in form negotiable,
and that, as such owner, it was legally entitled to the possession
and control of the property therein described at the time the
insolvency petition was filed and had a right to sell it and apply
the proceeds of the sale to its promissory notes, including the
three notes of P18,000 each, which were formerly secured by
the three quedans Nos. 33, 36, and 39, which the bank
surrendered to the firm." (Philippine Trust Co. vs. National
Bank, 42 Phil., 413, 427).
". . . Section 53 provides that within the meaning of the Act 'to
"purchase" includes to take as mortgagee or pledgee' and
"purchaser" includes mortgagee and pledgee.' It therefore
seems clear that, as to the legal title to the property covered by
a warehouse receipt, a pledgee is on the same footing as a
vendee except that the former is under the obligation of
surrendering his title upon the payment of the debt secured. To
hold otherwise would defeat one of the principal purposes of
the Act, i.e., to furnish a basis for commercial credit." (Bank of
the Philippine Islands vs. Herridge, 47 Phil. 57, 70).
It is obvious that where the transaction involved in the transfer of a
warehouse receipt or quedan is not a sale but pledge or security, the
transferee or endorsee does not become the owner of the goods but that
he may only have the property sold and then satisfy the obligation from
the proceeds of the sale. From all this, it is clear that at the time the sugar
in question was lost sometime during the war, estate of Pedro Rodriguez
was still the owner thereof.
It is further contended in this appeal that the defendant- appellee failed to
exercise due care for the preservation of the sugar, and that the loss was
due to its negligence as a result of which the appellee incurred the loss.
In the first place, this question was not raised in the court below.
Plaintiff's complaint failed to make any allegation regarding negligence
in the preservation of this sugar. In the second place, it is a fact that the
sugar was lost in the possession of the warehouse selected by the
appellant to which it had originally delivered and stored it, and for causes
beyond the bank's control, namely, the war.
In connection with the claim that had the bank released the sugar
sometime in February, 1942, when requested by the plaintiff, said sugar
could have been sold at the rate of P25 a picul or a total of P54,952.75,
the amount of the present claim, there is evidence to show that the
request for release was not made to the bank itself but directly to the
official of the warehouse, the Bogo-Medellin Milling Co. and that the
bank was not aware of any such request, but that before April 9, 1942,
when the Cebu branch of the defendant was closed, the bank through its
officials offered the sugar for sale but that there were no buyers, perhaps
due to the unsettled and chaotic conditions then obtaining by reason of
the enemy occupation.
In conclusion, we hold that where a warehouse receipt or quedan is
transferred or endorsed to a creditor only to secure the payment of a loan
or debt, the transferee or endorsee does not automatically become the
owner of the goods covered by the warehouse receipt or quedan but he
merely retains the right to keep and with the consent of the owner to sell
them so as to satisfy the obligation from the proceeds of the sale, this for
the simple reason that the transaction involved is not a sale but only a
mortgage or pledge, and that if the property covered by the quedans or
warehouse receipts is lost without the fault or negligence of the
mortgagee or pledgee or the transferee or endorsee of the warehouse
receipt or quedan, then said goods are to be regarded as lost on account
of the real owner, mortgagor or pledgor.
In view of the foregoing, the decision appealed from is hereby affirmed,
with costs.
Bengzon, Padilla, Tuason, Reyes, Jugo, Bautista Angelo and
Labrador, J J ., concur.
Separate Opinions
PARAS, C.J ., dissenting:
The plaintiff seeks to recover from the defendant Philippine National
Bank the sum of P54,952.75, representing the value of 2,198.11 piculs of
sugar covered by two quedans indorsed and delivered to the bank by the
administratrix of the estate of the deceased Pedro Rodriguez to secure the
indebtedness of the latter in the amount of P22,128.44. It is alleged that
when the two quedans were indorsed and delivered to the defendant bank
in or about January, 1942, the sugar was in deposit at the Bogo-Medellin
Sugar Co., Inc.; that said sugar was lost during the war; that the
indebtedness of P22,128.44 was liquidated in 1948 by the estate of the
deceased Pedro Rodriguez and that, notwithstanding demands, the
defendant bank refused to credit the plaintiff with the value of the sugar
lost.
There is no question as to the existence of the sugar covered by the two
quedans, or as to the indorsement and delivery of said quedans to the
defendant bank The Court of First Instance of Manila which decided
against the plaintiff and held that the defendant bank is not liable for the
loss of the sugar in question, indeed stated that the only question that
arises is whether the indorsement of the warehouse receipts transferred
the ownership of the sugar to the defendant bank; that if it did, the bank
should suffer the loss, but if it did not, the loss should be for the account
of the estate of the deceased Pedro Rodriguez. In dismissing the
plaintiff's action, the trial court held that the indorsement of the quedans
to the defendant bank did not carry with it the transfer of ownership of
the sugar, as the indorsement and delivery were effected merely to secure
the payment of an indebtedness, to facilitate the sale of the sugar, and to
prevent the debtor from disposing of it without the knowledge and
consent of the defendant bank. The plaintiff has appealed.
The applicable legal provision is section 41 of Act No. 2137, otherwise
known as the Warehouse Receipts Law, which reads as follows:
"SEC. 41. Rights of person to whom a receipt has been
negotiated. A person to whom a negotiable receipt has been
duly negotiated acquires thereby:
"(a) Such title to the goods as the person negotiating the receipt
to him had or had ability to convey to a purchaser in good faith
for value, and also such title to the goods as the depositor or
person to whose order the goods were to be delivered by the
terms of the receipt had or had ability to convey to a purchaser
in good faith for value, and.
"(b) The direct obligation of the warehouseman to hold
possession of the goods for him according to the terms of the
receipt as fully as if the warehouseman had contracted directly
with him."
This provision plainly states that a person to whom a negotiable receipt
(such as the sugar quedans in question) has been duly negotiated acquires
title to the goods covered by the receipt, as well as the possession of the
goods through the warehouseman, as if the latter had contracted directly
with the person to whom the negotiable receipt has been duly negotiated.
Consequently, the defendant bank to whom the two quedans in question
have been indorsed and delivered, thereby acquired the ownership of the
sugar covered by said quedans, with the logical result that the loss of the
article should be borne by the defendant bank. The fact that the quedans
were indorsed and delivered as a security for the payment of an
indebtedness did not prevent the bank from acquiring ownership, since
the only effect of the transfer was that the debtor could reacquire said
ownership upon payment of his obligation. Section 41 of Act No. 2137
had already been construed by this court in the sense that ownership
passes to the indorsee, although the quedans are indorsed and delivered
merely as a security. (Sy Cong Bieng vs. Hongkong & Shanghai Bank,
56 Phil., 498; Philippine Trust Co. vs. Philippine National Bank, 42 Phil.,
438; Bank of the Philippine Islands vs. Herridge, 47 Phil., 57; Roman vs.
Asia Banking Corporation, 46 Phil., 405.)
The relation of a pledgor of a warehouse receipt, duly indorsed and
delivered to the pledgee, is substantially analogous to the relation of a
vendor and vendee, with right of repurchase. The vendor a retro actually
transfers the ownership of the property sold to the vendee, but the former
may reacquire said ownership upon payment of the repurchase price. If
the property sold a retro is lost before being repurchased, the vendee
naturally has to bear the loss, with the vendor having nothing to
repurchase. But if the loss should occur after the repurchase price has
been paid but before the property sold a retro is actually reconveyed, the
vendee is bound to return to the vendor only the repurchase price paid,
and not the value of the property.
In my opinion, therefore, the loss of the sugar should be for the account
of the defendant bank, which should return to the plaintiff P22,128.44,
the amount of the indebtedness of the estate of the deceased Pedro
Rodriguez which had already been paid in 1948, without however being
liable for the difference between P54,952.75 (actual value of the sugar)
and the amount of said payment.
The appealed judgment should therefore be reversed and the defendant
bank sentenced to pay to the plaintiff the sum of
P22,128.44.chanroblesvirtualawlibrary Pablo, J ., concurs.