G.R. No.

L-11776 August 30, 1958

RAMON GONZALES, plaintiff-appellee,

vs.
GO TIONG and LUZON SURETY CO., INC., defendants-appellants.

Rustico V. Nazareno for appellee.

David, Abel and Ysip for appellant Go Tiong.
Tolentino, Garcia and D. R. Cruz for appellant Luzon Surety Co., Inc.

MONTEMAYOR, J.:

Defendants Go Tiong and Luzon Surety Co. are appealing from the decision of the Court of First
Instance of Manila, Judge Magno S. Gatmaitan presiding, the dispositive part of which reads as
follows:

In view whereof, judgment is rendered condemning defendant Go Tiong and Luzon Surety
Co., jointly and severally, to pay plaintiff the sum of P4,920 with legal interest from the date
of the filing of the complaint until fully paid; judgment is also rendered against Go Tiong to
pay the sum of P3,680 unto plaintiff, also with legal interest from the date of the filing of the
complaint until fully paid. Go Tiong is also condemned to pay the sum of P1,000 as
attorney's fees, plus costs.

The appeal was first taken to the Court of Appeals, the latter indorsing the case to us later under the
provisions of Section 17 (6) of Republic Act No. 296, on the ground that the issues raised were
purely questions of law.

Go Tiong owned a rice mill and warehouse, located at Mabini, Urdaneta, Pangasinan. On February
4, 1953, he obtained a license to engage in the business of a bonded warehouseman (Exhibit N). To
secure the performance of his obligations as such bonded warehouseman, the Luzon Surety Co.
executed Guaranty Bond No. 294 in the sum of P18,334 (Exhibit O), conditioned particularly on the
fulfillment by Go Tiong of his duty or obligation to deliver to the depositors in his storage warehouse,
the palay received by him for storage, at any time demand is made, or to pay the market value
thereof, in case he was unable to return the same. The bond was executed on January 26, 1953. Go
Tiong insured the warehouse and the palay deposited therein with the Alliance Surety and Insurance
Company.

But prior to the issuance of the license to Go Tiong to operate as bonded warehouseman, he had on
several occasions received palay for deposit from plaintiff Gonzales, totaling 368 sacks, for which he
issued receipts, Exhibits A, B, C, and D. After he was licensed as bonded warehouseman, Go Tiong
again received various deliveries of palay from plaintiff, totaling 492 sacks, for which he issued the
corresponding receipts, all the grand total of 860 sacks, valued at P8,600 at the rate of P10 per
sack.

On or about March 15, 1953, plaintiff demanded from Go Tiong the value of his deposits in the
amount of P8,600, but he was told to return after two days, which he did, but Go Tiong again told
him to come back. A few days later, the warehouse burned to the ground. Before the fire, Go Tiong
had been accepting deliveries of palay from other depositors and at the time of the fire, there were
5,847 sacks of palay in the warehouse, in excess of the 5,000 sacks authorized under his license.
The receipts issued by Go Tiong to the plaintiff were ordinary receipts, not the "warehouse receipts"
defined by the Warehouse Receipts Act (Act No. 2137).
After the burning of the warehouse, the depositors of palay, including plaintiff, filed their claims with
the Bureau of Commerce, and it would appear that with the proceeds of the insurance policy, the
Bureau of Commerce paid off some of the claim. Plaintiff's counsel later withdrew his claim with the
Bureau of Commerce, according to Go Tiong, because his claim was denied by the Bureau, but
according to the decision of the trial court, because nothing came from plaintiff's efforts to have his
claim paid. Thereafter, Gonzales filed the present action against Go Tiong and the Luzon Surety for
the sum of P8,600, the value of his palay, with legal interest, damages in the sum of P5,000 and
P1,500 as attorney's fees. Gonzales later renewed his claim with the Bureau of Commerce (Exhibit
S).

While the case was pending in court, Gonzales and Go Tiong entered into a contract of amicable
settlement to the effect that upon the settlement of all accounts due to him by Go Tiong, he,
Gonzales, would have all actions pending against Go Tiong dismissed. Inasmuch as Go Tiong failed
to settle the accounts, Gonzales prosecuted his court action..

For purposes of reference, we reproduce the assignment of errors of Go Tiong, as well as the
assignment of errors of the Luzon Surety, all reading thus:

I. The trial court erred in finding that plaintiff-appellee's claim is covered by the Bonded
Warehouse Law, Act 3893, as amended, and not by the Civil Code.

II. The trial court erred in not exempting defendant-appellant Go Tiong for the loss of the
palay deposited, pursuant to the provisions of the New Civil Code.".

xxx xxx xxx

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.
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.: ñé+ .£ª 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: têñ.£îhqw â£
 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. 1äw phï1.ñët

Fernando, J., took no part.

 [G.R. No. 119231. April 18, 1996.]

PHILIPPINE NATIONAL BANK, Petitioner, v. HON. PRES. JUDGE BENITO C. SE, JR., RTC, BR. 45,
MANILA; NOAH’S ARK SUGAR REFINERY; ALBERTO T LOOYUKO, JIMMY T. GO and WILSON T.
GO, Respondent.

Rolan Nieto for Petitioner.

Medalla and Cruz, Law Offices-private respondents.

SYLLABUS

1. COMMERCIAL LAW; WAREHOUSE RECEIPTS LAW; THE UNCONDITIONAL PRESENTMENT OF THE

RECEIPTS FOR PAYMENT CARRIED WITH IT THE ADMISSIONS OF THE EXISTENCE AND VALIDITY OF THE
TERMS, CONDITIONS AND STIPULATIONS WRITTEN ON THE FACE OF THE WAREHOUSE RECEIPTS,
INCLUDING THE UNQUALIFIED RECOGNITION OF THE PAYMENT OF WAREHOUSEMAN’S LIEN FOR STORAGE
FEES AND PRESERVATION EXPENSES; CASE AT BAR. — Petitioner is in estoppel in disclaiming liability for
the payment of storage fees due the private respondents as warehouseman while claiming to be entitled to
the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim for
payment or delivery of the sugar stocks. The unconditional presentment of the receipts by the petitioner for
payments against private respondents on the strength of the provisions of the Warehouse Receipts Law
(R.A. 2137) carried with it the admission of the existence and validity of the terms, conditions and
stipulations written on the face of the Warehouse Receipts, including the unqualified recognition of the
payment of warehousemans lien for storage fees and preservation expenses. Petitioner may not now
retrieve the sugar stocks without paying the lien due private respondents as warehouseman.

2. ID.; ID.; ID.; WAREHOUSEMAN’S LIEN; POSSESSORY IN NATURE. — While the PNB is entitled to the
stocks of sugar as the endorse of the quedans, delivery to it shall be effected only upon payment of the
storage fees. Imperative is the right of the warehouseman to demand payment of his lien at this juncture,
because in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien
upon goods by surrendering possession thereof. In other words, the lien may be lost where the
warehouseman surrenders the possession of the goods without requiring payment of his lien, because a
warehouseman’s lien is possessory in nature.

DECISION

HERMOSISIMA, JR., J.:

The source of conflict herein is the question as to whether Philippine National Bank should pay storage fees
for sugar stocks covered by five (5) Warehouse Receipts stored in the warehouse of private respondents in
the face of the Court of Appeals’ decision (Affirmed by the Supreme Court) declaring the Philippine National
Bank as the owner of the said sugar stocks and ordering their delivery to the said bank. From the same facts
but on a different perspective, it can be said that the issue is: Can the warehouseman enforce his
warehouseman’s lien before delivering the sugar stocks as ordered by the Court of Appeals or need he file a
separate action to enforce payment of storage fees?

The herein petition seeks to annul: (1) the Resolution of respondent Judge Benito C. Se, Jr. of the Regional
Trial Court of Manila, Branch 45, dated December 20, 1994, in Civil Case No. 90-53023, authorizing
reception of evidence to establish the claim of respondents Noah’s Ark Sugar Refinery, Et Al., for storage
fees and preservation expenses over sugar stocks covered by five (5) Warehouse Receipts which is in the
nature of a warehouseman’s lien; and (2) the Resolution of the said respondent Judge, dated March 1, 1995,
declaring the validity of private respondents’ warehouseman’s lien under Section 27 of Republic Act No 2137
and ordering that execution of the Court of Appeals’ decision, dated December 13, 1991, be in effect held in
abeyance until the full amount of the warehouseman’s lien on the sugar stocks covered by five (5) quedans
subject of the action shall have been satisfied conformably with the provisions of Section 31 of Republic Act
2137.
Also prayed for by the petition is a Writ of Prohibition to require respondent RTC Judge to desist from further
proceeding with Civil Case No. 90-53023, except order the execution of the Supreme Court judgment; and a
Writ of Mandamus to compel respondent RTC Judge to issue a Writ of Execution in accordance with the said
executory Supreme Court decision.

THE FACTS

In accordance with Act No. 2137, the Warehouse Receipts Law, Noah’s Ark Sugar Refinery issued on several
dates, the following Warehouse Receipts (Quedans): (a) March 1, 1989, Receipt No. 18062, covering sugar
deposited by Rosa Sy, (b) March 7, 1989, Receipt No. 18080, covering sugar deposited by RNS
Merchandising (Rosa Ng Sy); (c) March 21, 1989, Receipt No. 18081, covering sugar deposited by St.
Therese Merchandising; (d) March 31, 1989, Receipt No. 18086, covering sugar deposited by St. Therese
Merchandising; and (e) April 1, 1989, Receipt No. 18087, covering sugar deposited by RNS Merchandising.
The receipts are substantially in the form, and contains the terms, prescribed for negotiable warehouse
receipts by Section 2 of the law.

Subsequently, Warehouse Receipts Nos. 18080 and 18081 were negotiated and endorsed to Luis T. Ramos;
and Receipts Nos. 18086, 18087 and 18062 were negotiated and endorsed to Cresencia K Zoleta Ramos and
Zoleta then used the quedans as security for two loan agreements — one for 15.6 million and the other for
P23.5 million — obtained by them from the Philippine National Bank. The aforementioned quedans were
endorsed by them to the Philippine National Bank

Luis T. Ramos and-Cresencia K Zoleta failed to pay their loans upon maturity on January 9, 1990.
Consequently, on March 16, 1990, the Philippine National Bank wrote to Noah’s Ark Sugar Refinery
demanding delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos. Noah’s
Ark Sugar Refinery refused to comply with the demand alleging ownership thereof, for Manila a verified
complaint for "Specific Performance with Damages and Application for Writ of Attachment" against Noah’s
Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, the last three being identified as the
sole proprietor, managing partner, and Executive Vice President of Noah’s Ark, respectively.

Respondent Judge Benito C. Se, Jr., in whose sala the case was raffled, denied the Application for
Preliminary Attachment. Reconsideration therefor was likewise denied.

Noah’s Ark and its co-defendants filed an Answer with Counterclaim and Third-Party Complaint in which they
claimed that they are the owners of the subject quedans and the sugar represented therein, averring as
they did that:jgc:chanro bles. com.ph

"9. . . . In an agreement dated April 1, 1989, defendants agreed to sell to Rosa Ng Sy of RNS Merchandising
and Teresita Ng of St. Therese Merchandising the total volume of sugar indicated in the quedans stored at
Noah ‘s Ark Sugar Refinery for a total consideration of P63,000,000.00, . . . The corresponding payments in
the form of checks issued by the vendees in favor of defendants were subsequently dishonored by the
drawee banks by reason of ‘payment stopped’ and ‘drawn against insufficient funds,’ . . . Upon proper
notification to said vendees and plaintiff in due course, defendants refused to deliver to vendees therein the
quantity of sugar covered by the subject quedans.

10. . . . Considering that the vendees and first endorsers of subject quedans did not acquire ownership
thereof, the subsequent endorsers and plaintiff itself did not acquire a better right of ownership than the
original vendees/first endorsers" 1

The Answer incorporated a Third-Party Complaint by Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go,
doing business under the trade name and style Noah’ Ark Sugar Refinery against Rosa Ng Sy and Teresita
Ng, praying that the latter be ordered to deliver or return to them the quedans (previously endorsed to PNB
and the subject of the suit) and pay damages and litigation expenses.

The Answer of Rosa Ng Sy and Teresita Ng, dated September 6, 1990, one of avoidance, is essentially to the
effect that the transaction between them, on the one hand, and Jimmy T. Go, on the other, concerning the
quedans and the sugar stocks covered by them was merely a stimulated one being part of the latter’s
complex banking schemes and financial maneuvers, and thus, they are not answerable in damages to him.

On January 31, 1991, the Philippine National Bank filed a Motion for Summary Judgment in favor of to the
plaintiff as against the defendants for the reliefs prayed for in the complaint.
On May 2, 1991, the Regional Trial Court issued an order denying the Motion for Summary Judgment.
Thereupon, the Philippine National Bank filed a Petition for Certiorari with the Court of Appeals, docketed as
CA-G.R. SP. No. 25938 on December 13, 1991.

Pertinent portions of be decision of the Court of Appeals read: jgc:chan roble s.com. ph

"In issuing the questioned Orders, the respondent Court ruled that ‘questions of law should be resolved after
and not before, the questions of fact are properly litigated.’ A scrutiny of defendant’s affirmative defenses
does not show material questions of fact as to the alleged nonpayment of purchase price by the
vendees/first endorsers, and which nonpayment is not disputed by PNB as it does not materially affect PNB’s
title to the sugar stocks as holder of the negotiable quedans

What is determinative of the propriety of summary judgment is not the existence of conflicting claims from
prior parties but whether from an examination of the pleadings, depositions, admissions and documents on
file, the defenses as to the main issue do not tender material questions of fact (see Garcia v. Court of
Appeals, 167 SCRA 815) or the issues thus tendered are in fact sham, fictitious, contrived, set up in bad
faith or so unsubstantial as not to constitute genuine issues for trial. (See Vergara v. Suelto, et al, 156 SCRA
753; Mercado, Et. Al. v. Court of Appeals, 162 SCRA 75). The questioned Orders themselves do not specify
what material facts are in issue. (See Sec. 4, Rule 34, Rules of Court).

To require a trial notwithstanding pertinent allegations of the pleadings and other facts appearing on the
record, would constitute a waste of time and an injustice to the PNB whose rights to relief to which it is
plainly entitled would he further delayed to its prejudice.

In issuing the questioned Orders, We find the respondent Court to have acted in grave abuse of discretion
which justify holding null and void and setting aside the Orders dated May 2 and July 4, 1990 of respondent
Court, and that a summary judgment be rendered forthwith in favor of the PNB against Noah’s Ark Sugar
Refinery, Et Al., as prayed for in petitioner’s Motion for Summary Judgment." 2

On December 13, 1991, the Court of Appeals nullified and set aside the orders of May 2 and July 4, 1990 of
the Regional Trial Court and ordered the trial court to render summary judgment in favor of the PNB. On
June 18, 1992, the trial court rendered judgment dismissing plaintiff’s complaint against private
respondents’ or lack of cause of action and likewise dismissed private respondents’ counterclaim against PNB
and of the Third-Party Complaint and the Third-Party Defendant’s Counterclaim. On September 4, 1992, the
trial court denied PNB’s Motion for Reconsideration.

On June 9, 1992, the PNB filed an appeal from the RTC decision with the Supreme Court, G.R No. 107243,
by way of a Petition for Review on Certiorari under Rule 45 of the Rules of Court. This Court rendered
judgment on September 1, 1993, the dispositive portion of which reads: jgc:chanrob les.c om.ph

"WHEREFORE, the trial judge’s decision in Civil Case No. 90-53023, dated June 18, 1992, is reversed and
set aside and a new one rendered conformably with the final and executory decision of the Court of Appeals
in CA-G.R SP. No. 25938, ordering the private respondents Noah ‘s Ark Sugar Refinery, Alberto T. Looyuko,
Jimmy T. Go and Wilson T. Go, jointly and severally: cha nro b1es vi rtua l 1aw lib ra ry

(a) to deliver to the petitioner Philippine National Bank, ‘the sugar stocks covered by the Warehouse
Receipts/Quedans which are now in the latter’s possession as holder for value and in due course; or
alternatively, to pay (said) plaintiff actual damages in the amount of P39.1 million,’ with legal interest
thereon from the filing of the compliant until full payment; and

(b) to pay plaintiff Philippine National Bank attorney’s fees, litigation expenses and judicial costs hereby
fixed at the amount of One Hundred Fifty Thousand Pesos (P150,000.00) as well as the costs.

SO ORDERED." 3

On September 29, 1993, private respondents moved for reconsideration of this decision. A
Supplemental/Second Motion for Reconsideration with leave of court was filed by private respondents on
November 8, 1993. We denied private respondents’ motion on January 10, 1994.

Private respondents filed a Motion Seeking Clarification of the Decision, dated September 1, 1993. We
denied this motion in this manner
"It bears stressing that the relief granted in this Court’s decision of September 1, 1993 is precisely that set
out in the final and executory decision of the Court of Appeals in CA-G.R. SP. No. 25938, dated December
13, 1991, which was affirmed in toto by this Court and which became unalterable upon becoming final and
executory." 4

Private respondents thereupon filed before the trial court an Omnibus Motion seeking among others the
deferment of the proceedings until private respondents are heard on their claim for warehouseman’s lien. On
the other hand, on August 22, 1994, the Philippine National Bank filed a Motion for the Issuance of a Writ of
Execution and an Opposition to the Omnibus Motion filed by private respondents.

The trial court granted private respondents’ Omnibus Motion on December 20, 1994 and set reception of
evidence on their claim for warehouseman’s lien. The resolution of the PNB’s Motion for Execution was
ordered deferred until the determination of private respondents’ claim.

On February 21, 1995, private respondents’ claim for lien was heard and evidence was received in support
thereof. The trial court thereafter gave both parties five (5) days to file respective memoranda.

On February 28, 1995, the Philippine National Bank filed a Manifestation with Urgent Motion to Nullify Court
Proceedings. In adjudication thereof, the trial court issued the following order on March 1, 1995: jgc:chanro bles. com.ph

"WHEREFORE, this court hereby finds that there exists in favor of the defendants a valid warehouseman’s
lien under Section 27 of Republic Act 2137 and accordingly, execution of the judgment is hereby ordered
stayed and/or precluded until the full amount of defendants’ lien on the sugar stocks covered by the five (5)
quedans subject of this action shall have been satisfied conformably with the provisions of Section 31 of
Republic Act 2137." 5

Consequently, the Philippine National Bank filed the herein petition to seek the nullification of the above-
assailed orders of respondent judge.

The PNB submits that: chanrob1es v irt ual 1aw li bra ry

"I

PNB’S RIGHT TO A WRIT OF EXECUTION IS SUPPORTED BY TWO FINAL AND EXECUTORY DECISIONS: THE
DECEMBER 13, 1991 COURT OF APPEALS DECISION IN CA-GR SP. NO. 25938; AND, THE NOVEMBER 9,
1992 SUPREME COURT DECISION IN G.R NO. 107243. RESPONDENT RTC’S MINISTERIAL AND MANDATORY
DUTY IS TO ISSUE THE WRIT OF EXECUTION TO IMPLEMENT THE DECRETAL PORTION OF SAID SUPREME
COURT DECISION

II

RESPONDENT RTC IS WITHOUT JURISDICTION TO HEAR PRIVATE RESPONDENTS’ OMNIBUS MOTION. THE
CLAIMS SET FORTH IN SAID MOTION (1) WERE ALREADY REJECTED BY THE SUPREME COURT IN ITS
MARCH 9, 1994 RESOLUTION DENYING PRIVATE RESPONDENTS’ ‘MOTION FOR CLARIFICATION OF
DECISION IN G.R No 107243; AND (2) ARE BARRED FOREVER BY PRIVATE RESPONDENTS’ FAILURE TO
INTERPOSE THEM IN THEIR ANSWER, AND FAILURE TO APPEAL FROM THE .JUNE 18, 1992 RTC DECISION
CIVIL CASE NO. 90-52023

III

RESPONDENT RTC’S ONLY JURISDICTION IS TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT
DECISION. THUS, PNB IS ENTITLED TO: (I) A WRIT OF CERTIORARI TO ANNUL THE RTC RESOLUTION
DATED DECEMBER 20, 1994 AND THE ORDER DATED FEBRUARY 7, 1995 AND ALL PROCEEDINGS TAKEN BY
THE RTC THEREAFTER, (2)A WRIT OF PROHIBITION TO PREVENT RESPONDENT RTC FROM FURTHER
PROCEEDING WITH CIVIL CASE NO. 90-53023 AND COMMITTING OTHER ACTS VIOLATIVE OF THE
SUPREME COURT DECISION IN G.R NO. 107243; AND (3) A WRIT OF MANDAMUS TO COMPEL RESPONDENT
RTC TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT JUDGMENT IN FAVOR OF PNB"
The issues presented before us in this petition revolve around the legality of the questioned orders of
respondent judge, issued as they were after we had denied with finality private respondents’ contention that
the PNB could not compel them to deliver the stocks of sugar in their warehouse covered by the endorsed
quedans or pay the value of the said stocks of sugar.

Petitioner’s submission is on a technicality, that is, that private respondents have lost their right to recover
warehouseman’s lien on the sugar stocks covered by the five (5) Warehouse Receipts for the reason that
they failed to set up said claim in their Answer before the trial court and that private respondents did not
appeal from the decision in this regard, dated June 18, 1992. Petitioner asseverates that the denial by this
Court on March 9, 1994 of the motion seeking clarification of our decision, dated September 1, 1993, has
foreclosed private respondents’ right to enforce their warehouseman’s lien for storage fees and preservation
expenses under the Warehouse Receipts Act.

On the other hand, private respondents maintain that they could not have claimed the right to a
warehouseman’s lien in their Answer to the complaint before the trial court as it would have been
inconsistent with their stand that they claim ownership of the stocks covered by the quedans since the
checks issued for payment thereof were dishonored. If they were still the owners, it would have been absurd
for them to ask payment for storage fees and preservation expenses. They further contend that our
resolution, dated March 9, 1994, denying their motion for clarification did not preclude their right to claim
their warehouseman’s lien under Sections 27 and 31 of Republic Act 2137, as our resolution merely affirmed
and adopted the earlier decision, dated December 13, 1991, of the Court of Appeals (6th Division) in CA-GR
SP No. 25938 and did not make any finding on the matter of the warehouseman’s lien.

We find for private respondents on be foregoing issue and so the petition necessarily must fail.

We have carefully examined our resolution, dated March 9, 1994, which denied Noah’s Ark’s motion for
clarification of our decision, dated September 1, 1993, wherein we affirmed in full and adopted the Court of
Appeals’ earlier decision, dated December 13, 1991, in CA-G.R SP. No. 25938. We are not persuaded by the
petitioner’s argument that our said resolution carried with it the denial of the warehouseman’s lien over the
sugar stocks covered by be subject Warehouse Receipts. We have simply resolved and upheld in our
decision, dated September 1, 1993, the propriety of summary judgment which was then assailed by private
respondents. In effect, we rule therein that, considering the circumstances obtaining before the trial court,
the issuance of the Warehouse Receipts not being disputed by the private respondents, a summary
judgment in favor of PNB was proper. We in effect further affirmed the finding that Noah’s Ark is a
warehouseman which was obliged to deliver the sugar stocks covered by the Warehouse Receipts pledged
by Cresencia K Zoleta and Luis T. Ramos to the petitioner pursuant to the pertinent provisions of Republic
Act 2137.

In disposing of the private respondents’ motion for clarification, we could not contemplate the matter of
warehouseman’s lien because the issue to be finally resolved then was the claim of private respondents for
retaining ownership of the stocks of sugar covered by the endorsed quedans. Stated otherwise, there was
no point in taking up the issue of warehouseman’s lien since the matter of ownership was as yet being
determined. Neither could storage fees be due then while no one has been declared the owner of the sugar
stocks in question.

Of considerable relevance is the pertinent stipulation in the subject Warehouse Receipts which provides for
respondent Noah’s Ark’s right to impose and collect warehouseman’s lien: jgc:chan roble s.com.p h

"Storage of the refined sugar quantities mentioned herein shall be free up to one (1) week from the date of
the quedans covering said sugar and thereafter, storage fees shall be charged in accordance with the
Refining Contract under which the refined sugar covered by this Quedan was produced." 6

It is not disputed, therefore, that, under the subject Warehouse Receipts provision, storage fees are
chargeable.

Petitioner anchors its claim against private respondents on the five (5) Warehouse Receipts issued by the
latter to third-party defendants Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. Therese
Merchandising, which found their way to petitioner after they were negotiated to them by Luis T. Ramos and
Cresencia K Zoleta for a loan of P39.1 Million. Accordingly, petitioner PNB is legally bound to stand by the
express terms and conditions on the face of the Warehouse Receipts as to the payment of storage fees.
Even in the absence of such a provision, law and equity dictate the payment of the warehouseman’s lien
pursuant to Sections 27 and 31 of the Warehouse Receipts law (RA. 2137), to wit: jgc:chanrob les. com.ph
"SECTION 27. What claims are included in the warehouseman’s lien. — Subject to the provisions of section
thirty, a warehouseman shall have lien on goods deposited or on the proceeds thereof in his hands, for an
lawful charges for storage and preservation of the goods; also for all lawful claims for money advanced,
interest, insurance, transportation, labor, weighing cooperating and other charges and expenses in relation
to such goods; also for all reasonable charges and expenses for notice, and advertisement of sale, and for
sale of the goods where default has been made in satisfying the warehouseman’s lien.

x x x

SECTION 31. Warehouseman need not deliver until lien is satisfied. — A warehouseman having a lien valid
against the person demanding the goods may refuse to Deliver the goods to him until the lien is satisfied."
libra ry
cra law virt ua1aw

After being declared not the owner, but the warehouseman, by the Court of Appeals on December 13, 1991
in CA-G.R SP. No. 25938, the decision having been affirmed by us on December 1, 1993, private
respondents cannot legally be deprived of their right to enforce their claim for warehouseman’s lien, for
reasonable storage fees and preservation expenses. Pursuant to Section 31 which we quote hereunder, the
goods under storage may not be delivered until said lien is satisfied.

"SECTION 31 Warehouseman need not deliver until lien is satisfied. — A warehouseman having a lien valid
against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied."
libra ry
cra law virt ua1aw

Considering that petitioner does not deny the existence, validity and genuineness of the Warehouse Receipts
on which it anchors its claim for payment against private respondents, it cannot disclaim liability for the
payment of the storage fees stipulated therein. As contracts, the receipts must be respected by authority of
Article 1159 of the Civil Code, to wit:
jgc:chan roble s.com.p h

"ARTICLE 1159. Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith"

Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents
as warehouseman while claiming to be entitled to the sugar stocks covered by the subject Warehouse
Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. The
unconditional presentment of the receipts by the petitioner for payment against private respondents on the
strength of the provisions of the Warehouse Receipts Law (R A. 2137) carried with it the admission of the
existence and validity of the terms, conditions and stipulations written on the face of the Warehouse
Receipts, including the unqualified recognition of the payment of warehouseman’s lien for storage fees and
preservation expenses. Petitioner may not now retrieve the sugar stocks without paying the lien due private
respondents as warehouseman.

In view of the foregoing, the rule may be simplified thus: While the PNB is entitled to the stocks of sugar as
the endorsee of the quedans, delivery to it shall be effected only upon payment of the storage fees.

Imperative is the right of the warehouseman to demand payment of his lien at this juncture, because, in
accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods by
surrendering possession thereof. In other words, the lien may be lost where the warehouseman surrenders
the possession of the goods without requiring payment of his lien, because a warehouseman’s lien is
possessory in nature.

We, therefore, uphold and sustain the validity of the assailed orders of public respondent, dated December
20, 1994 and March 1, 1995.

In fine, we fail to see any taint of abuse of discretion on the part of the public respondent in issuing the
questioned orders which recognized the legitimate right of Noah’s Ark, after being declared as
warehouseman, to recover storage fees before it would release to the PNB sugar stocks covered by the five
(5) Warehouse Receipts. Our resolution, dated March 9, 1994, did not preclude private respondents’
unqualified right to establish its claim to recover storage fees which is recognized under Republic Act No.
2137. Neither did the Court of Appeals’ decision, dated December 13, 1991, restrict such right.

Our Resolution’s reference to the decision by the Court of Appeals, dated December 13, 1991, in CA-G.R SP.
No. 25938, was intended to guide the parties in the subsequent disposition of the case to its final end. We
certainly did not foreclose private respondents’ inherent right as warehouseman to collect storage fees and
preservation expenses as stipulated on the face of each of the Warehouse Receipts and as provided for in
the Warehouse Receipts Law (RA. 2137).

WHEREFORE, the petition should be, as it is, hereby dismissed for lack of merit. The questioned orders
issued by public respondent judge are affirmed.

Costs against the petitioner.

SO ORDERED.

Padilla, Bellosillo, Vitug and Kapunan, Jr., JJ., concur.

Endnotes:

1. Answer with Counter and Third-Party Complaint, p. 3; Rollo, p. 47

2. Quoted in the Petition, p. 8; Rollo, p. 9.

3. Decision of the Supreme Court G.R. No. 107243, p. 8; Rollo, p. 64

4. Resolution of the Supreme Court" (Section Division) in G. R. No. 107243; Rollo, p. 71.

5. Resolution of the RTC in Civil Case no. 90-5323, p. 44

6. Comment, p. 5; Rollo, p. 92
G.R. No. L-34655 March 5, 1932

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., concur.

Separate Opinions

ROMUALDEZ, J., dissenting:

With due respect for the majority opinion, I dissent and vote for the confirmation of the appealed
judgment.
G.R. No. L-4080 September 21, 1953

JOSE P. MARTINEZ, as administrator of the Instate Estate of Pedro Rodriguez,

deceased, plaintiff-appellant,
vs.
PHILIPPINE NATIONAL BANK, defendant-appellee.

Delgado, Flores, & Macapagal for appellant.

Ramon B. de los Reyes and Angel G. Ilagan for appellee.

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 land pressure brought to bear by the
bank.

Under the theory and claim the 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 god price which was about P25 per picul in order to
avoid its possible loss due to the invasion, but that the bank refused that 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 sell 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 pledge cannot become the
owner of or convert and appropriate to himself the property mortgaged r pledged (Article 1859, old
Civil Code; Article 2088, new Civil code). Said property continues t 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 the 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 occured. 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 sale
price of P54,952.75 should now be paid by the bank to appellant. This second theory presupposes
that despite the indorsement 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 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 have not directly applicable. In those cases this court held that for purposes of facilitating
commercial transaction, the endorse of 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 endoser 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 endorse or transferee of the quedan or warehouse receipt; that in
some cases the endorse 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 court in
two of these cases cited which are typical.

As to the first 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, cured 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 58 provides that within the meaning of the Act "to "purchase" includes to take as
mortgagee or pledgee' and 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 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 excercise 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 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 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 bank was not aware of any such request, but that therefore 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 that 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 covered by the quedans of warehouse receipts is lost without the fault or negligence of the
mortgagee or pledgee or quedan, then said goods are to be regarded as lost on account of the real
owner, mortgagor or pledgor. 1âw phïl.nêt

In view of the foregoing, the decision appealed from is hereby affirmed, with costs.

Bengzon, Padilla, Tuason, Reyes, Jugo, Bautista Angelo, and Labrador, JJ., 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 administratix 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 f 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 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 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 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 negotiated 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
and delivered merely as security. (Sy Cong Being 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. Asis Banking Corporation, 46 Phil., 405).

The relation of a pledgor of a warehouse receipt duly indorsed and delivered to the pledge, is
substantially 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 is lost before being
repurchased, the vendee naturally has to bear the loss, with the vendor having nothing to repurhase.
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 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.
1âwphïl.nêt

Pablo, J., concurs.

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 bultosof 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.º Que la primera parte es dueña 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.º 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, Avanceña, Villamor, Johns and Romualdez, JJ., concur.
G.R. No. L-21005 December 20, 1924

In the matter of the involuntary insolvency of Umberto de Poli. THE AMERICAN FOREIGN
BANKING CORPORATION, claimant-appellee,
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 for the appellant assignee.

J. A. Wolfson for the appellants Bowring and Co. and C. T. Bowring and Co., Ltd.
Camus and Delgado for the appellant Yangco.
Ross, Lawrence and Selph for appellee.

OSTRAND, J.:

This is an appeal from the following decision of the Court of First Instance of Manila, the Honorable
George R. Harvey presiding:

On or about April 28, 1920, the debtor, U. de Poli, a licensed public warehouseman in the
City of Manila, issued warehouse receipt No. A-48, commonly known as a "quedan," for 560
bales of tobacco, which tobacco was particularly described therein as "Cagayan tabacco en
rama" with specified marks thereon. Said U. de Poli certified over his signature on the face of
said quedan as follows: I certify that I am the sole owner of the merchandise herein
described." (Exhibit A of American Foreign Banking Corporation.) This quedan was endorsed
in bank by U. de Poli, who delivered it to the American Foreign Banking Corporation as
security upon his overdraft, then amounting to about P40,000.

The claimant bank, by its motion of April 23, 1921, asked that the assignee be ordered to
deliver to said bank the 560 bales of leaf tobacco called for in said quedan upon surrender of
the original of the warehouse receipt.

In answer to said motion the assignee denied that the 560 bales of Cagayan tobacco listed in
said Exhibit A are now in his possession as assignee of said insolvent estate, and denied
that said Exhibit A constitutes a negotiable warehouse receipt under the law, for the reason
that it does not comply with the provisions of sections 2, 4 or 5 of the Warehouse Receipt
Act; and that, even assuming that said 560 bales of leaf tobacco were now in his possession,
he denies that the claimant bank is the owner thereof, or has any lien thereon, or any rights
therein, by virtue of said receipt, Exhibit A; and by his amended answer alleges that said
Exhibit A was not delivered by the insolvent, U. de Poli, to the claimant for the purpose of
transferring the ownership of the property described therein to it, but only as collateral
security for a preexisting indebtedness by way of overdraft, for which purpose it is under the
law invalid and wholly ineffective as against the general creditors of the said insolvent estate.
Substantially the same answer was made by Wise & Co. as general creditors."

There has been no question raised about the authenticity of the quedan. U. de Poli testified
that he issued it to said bank as security for his said overdraft; that the tobacco was in the
bodega on Calle Acarraga when he gave the quedan to the bank; that the tobacco had to be
stripped and booked, and, for this reason there might have been a slight difference between
the quantity given in the quedan and the quantity at present in existence in the warehouse;
that he knows that the tobacco was in the warehouse at the time he became insolvent,
because he had given an order to fill an order for stripped tobacco, and that the tobacco was
taken from the pile which he had given in guaranty to the American Foreign Banking
Corporation; that Vicente Molina was in charge of the warehouse, and that he (De Poli) acted
upon the data furnished to him by Mr. Molina.

The evidence shows that there were only 530 bales of this tobacco. The quedan (Exhibit A)
calls for "Cagayan tobacco," but it was stipulated in this case that the 530 bales of tobacco
claimed by the American Foreign Banking Corporation are Isabela tobacco. Mr. De Poli
explained this discrepancy in discrepancy in description by saying that he "had the
description of grade only and made the quedan without giving importance if it was Cagayan
or Isabela tobacco; that he asked only for grade, and did not ask whether it was Cagayan or
Isabela tobacco, because he had to deliver the security no matter whether it was Isabela or
Cagayan tobacco. The objection and motion of the opposition counsel that this explanation
be stricken out are hereby overruled.

The quedan in question was issued by J. Magpantay, who was "encargado" of all the U. de
Poli warehouse, but he did not have control of the warehouses, but he did not have control of
the warehouses, according to Mr. de Poli. Molina did not see the quedan when it was issued,
but said that he knew of the tobacco which Mr. De Poli transferred to the claimant bank,
because Mr. De Poli told him about it; that it was tobacco from Isabela for the year 1919, was
stored in the warehouse on Calle Azcarraga, and that there was no other tobacco in the
warehouse except the 1919 Isabela tobacco.

The evidence further shows that in December, 1920, Mr. Kaintzler, a sub accountant of the
claimant bank, went to the U. de Poli warehouse on Calle Azcarraga to have the tobacco
covered by this quedan, Exhibit A, pointed out to him; that the then assignee (Mr. Bayne)
and one of his accountants showed him (Kaintzler) the 530 bales of tobacco with the tag A.
F. B. C. on them, and these bales were pointed out to him by Mr. Bayne as the tobacco
which belonged to the American Foreign Banking Corporation.

The quedan (Exhibit A) is in the same form as quedan No. A-155, which, in the case of
Felisa Roman vs. Asia Banking Corporation, was declared by the Supreme Court of the
Philippine Islands to be a negotiable warehouse receipt conveying title to the said bank
superior to that of the vendor's lien of Felisa Roman (R. G. No. 17825). 1

The evidence shows that said quedan (Exhibit A) was taken by the American Foreign
Banking Corporation for value, believing it to be a negotiable warehouse receipt, and without
reasonable cause to believe that the debtor U. de Poli (who was operating a public
warehouse at the time) was insolvent.

In view of the decision of the Supreme Court in the Felisa Roman case, above-mentioned,
the only question raised by the attorneys for the consignee and for the common creditors
which will be considered by the court is that as to the sufficiency of the description of the
tobacco in said warehouse receipt. This lot of tobacco was the only tobacco in the
warehouse. The debtor said that it was the tobacco which he transferred to the claimant
bank. The tobacco was pointed out by the then assignee to the claimants representative as
the tobacco covered by said quedan, Exhibit A. Hence, there does not appear to be any
doubt about the identity of the tobacco.

The only question left for consideration is whether the use of the word "Cagayan" instead of
"Isabela" in describing the tobacco in the quedan rendered the quedan null and void as a
 negotiable warehouse receipt for the tobacco intended to be covered by it. The insolvent, U.
de Poli, testified positively that this quedan referred to the tobacco in the Azcarraga
warehouse, and he explained the discrepancy in the description. The then assignee (Mr.
Bayne) was evidently convinced that this lot of tobacco belonged to the claimant bank,
because he pointed it out to one of the bank's employees, who noted the tags thereon
bearing the initials of the claimant bank. lawphi 1.net

The court is of the opinion that the intention of the parties to the transaction must prevail
against such a technical objection as to the sufficiency of the description of the tobacco. It
might be different if there had been Cagayan tobacco in the warehouse at the time of the
issuance of the quedan, Exhibit A, or if there were any doubt whatever as to the identity of
the tobacco intended to be covered by the quedan. The assignee stands in the shoes of the
insolvent, and while it is his duty to protect the general creditors, he is not in the position of a
judgment creditor with an unsatisfied execution.

In view of the foregoing considerations, the court is of the opinion that the quedan, Exhibit A,
is a negotiable warehouse receipt which was duly issued and delivered by the debtor U. de
Poli to the American Foreign Banking Corporation, and that it divested U. de Poli of his title
to said tobacco and transferred the position and the title thereof to the American Foreign
Banking Corporation.

It is therefore ordered and adjudged that the consignee deliver the said five hundred and
thirty (530) bales of tobacco to the American Foreign banking Corporation, upon payment by
said bank of any liens or charges thereon, or, in the event of said tobacco having been sold,
the proceeds thereof, less the storage and insurance charges paid after the declaration of
insolvency; and thereafter due report will be made to this court of such delivery to the
claimant bank in order that the proceeds be deducted from the balance to said claimant bank
from the insolvent debtor.

We find no reversible error in the decision quoted and do not think it necessary to add anything to
the discussion therein contained.

The judgment appealed from is therefore affirmed, with the costs against the appellants. So ordered.

Street, Malcolm, Avanceña, Villamor and Romualdez, JJ., concur.

Footnotes

1 46 Phil., 705.
G.R. Nos. L-21000, 21002-21004, and 21006 December 20, 1924

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.itc-a1f

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:
lawphi1.net

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 Bultos Clase de las "Quedan depositados en estos almacenes por orden del Sr. U. de
UDP 250 mercancias
Fardos abaca 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 4.a El seguro sera de un octavo por ciento mensual por el total.
owner of the merchandise Tanto el almacenaje como el seguro se cobraran por meses
herein described. vencidos, y con arreglo a los dias devengados siendo el minimo
(Sgd.) "UMBERTO DE POLI 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. Manila, 15 de sept. de 1920.
V.º B.º El Encargado,
(Sgd.) UMBERTO DE POLI (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 835-½ 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, Avanceña, Villamor, and Romualdez, JJ., concur.