CASE DIGEST

SANTAMARIA  V. HONGKONG AND SHANGHAI BANKING CORP.

89  PHIL 780   (1951)

Facts: 

Around February 1937, Santamaria bought ten thousand shares for the sum of about 
P8,000.00 of the Batangas Minerals, Inc. through the offices of Woo, Uy-Tioco and
Naftaly, a stock brokerage firm.   The buyer received the stock certificates in the
name of Woo, Uy-Tioco and Naftaly and indorsed in blank by the firm.  Subsequently,
Santamaria  placed an order for ten thousand shares of the Crown Mines, Inc.  This
time through another brokerage firm by the name of R.J. Campos and Company.   To
secure the transaction, she submitted the stock certificate representing her prior
purchase of Batangas Minerals, Inc.  stocks which certificate was still in the same
condition as Santamaria received it.
Upon Santamaria’s return to R.J. Campos and Company for payment, she found out
that the firm was desisted by the SEC to continue transacting business.  She also
learned that the certificate that was forwarded as security was in the possession of
Hongkong and Shanghai Banking Corporation  by virtue of a document of
hypothecation wherein all shares in the brokerage firm’s custody was pledged to the
bank.  In this aspect, HKSBC sent the certificate to Batangas Minerals, Inc. for
registration. Hence, this civil action.

Issue

  Whether or not the contested certificate of stock should be returned to Santamaria.

RULING

The Supreme Court ruled that it should not be returned.  Santamaria was negligent in
the transaction and is stopped from claiming further title against the bona fide
transfer to HKSBC.  The latter was justified in believing that R.J. Campos and
Company had title thereto considering it was indorsed in blank, and, therefore,
deemed quasi-negotiable.  Thus, HKSBC cannot be blamed for believing that such
belonged to the holder and transferor. Furthermore, the bank was not obligated to
look beyond the certificate to ascertain the ownership of the stock at the time it
received the same from R.J. Campos and Company, for it was given to the bank
pursuant to  their letter of hypothecation.
DE LOS SANTOS  vs.  J.H. MCGRATH, ATTORNEY GENERAL OF THE UNITED STATES
96  PHIL 577  (1955)

FACTS

In this case, De Los Santos contends that he acquired 1.6 million shares of the
Lepanto Consolidated Mining Co., Inc. from two people; namely, Juan Campos and
Carl Hess, sometime in 1942.   The shares are registered in the name of Vicente
Madrigal in the books of the corporation.    After the war, the property was
sequestered by the appropriate state agency since it was classified as Japanese
property.   As lawyer for the state, the Attorney General argues that the said shares
were bought by Madrigal, in trust for, and for the benefit of the Mitsuis, a Japanese
corporation, who is the true owner thereof.  After such purchase, Madrigal delivered
such shares to the Manila office of the Mitsuis with his blank indorsement on it.  It was
just kept there.  The said shares were never sold and were most probably lost or
stolen during liberation.

ISSUE

Whether or not the contested certificates of stock could be transferred to De Los

Santos.

Ruling 

The Supreme Court ruled that it cannot be transferred to De Los Santos.  It was
established that Madrigal never disposed of the said shares in any manner whatsoever,
except by turning over the corresponding stock certificates to the Mitsuis. 
Furthermore, the managers of Mitsui during the concerned period attest that the
Mitsuis neither sold, conveyed, or alienated the said shares of stock, nor delivered the
aforementioned stock certificates, to anybody during the said period.  Finally, even
one of the evidence of a receipt of the alleged purchase by De Los Santos from
Campos and Hess, who were not the registered owners, was lost though a fire.  In
summary, if the owner of the certificate has indorsed it in blank, and it is stolen from
him, no title is acquired by an innocent purchaser for value. Shares of stock being
personal property may be the subject matter of pledge or chattel mortgage.   Such
collateral transfers are not covered by the registration requirement of Section 63 of
the Code since our Supreme Court has held that such provision applies only to
absolute transfer.  In other words, the registration in the corporate books of pledges
and chattel mortgages of shares cannot have any legal effect.
Where the certificate of stock is delivered to the creditor as a security for the
performance of an obligation, the contract is one of pledge governed by the Civil
Code and not by the Chattel Mortgage. A pledge can take effect against third persons
only if its date appears in a public instrument.  If the certificate of stock is not
delivered to the creditor, the transaction  must be registered in the chattel mortgage
registry of the province where the principal office of the corporation is located, in
order that it may be effective against third persons.

G.R. No. 90888 September 13, 1990

FRUCTUOSO R. CAPCO, petitioner, 
vs.
MANUEL R. MACASAET, JACOBO FELICIANO, and HONORABLE COURT OF
APPEALS, respondents.

The petitioner was a stockholder of record, director and executive vice-president of

Monte Oro Mineral Resources, Inc., a local mining company whose shares were traded
in the stock market. He owned 56,588,358 shares of the capital stock of Monte Oro
with par value of P0.01 per share or a total par value of P565,883.58 as evidenced by
Stock Certificate No. 002 for 14,159,583 shares and Stock Certificate No. 026 for
42,428,775 shares. The petitioner indorsed and delivered Stock Certificates Nos. 002
and 026 on February 18, 1976 to private respondent Manuel Macasaet, board chairman
and President of Monte Oro.On April 26,1976, the petitioner demanded the return of
his stock certificates from respondent Macasaet who failed to produce them because
he had given them to the other private respondent Jacobo Feliciano, another officer
of Monte Oro, allegedly in connection with a contemplated joint venture with the
group of one Leonilo Esguerra.On April 28, 1976, respondent Macasaet replaced the
petitioner's Stock Certificate No. 026 with his own Stock Certificate No. 025 covering
42,578,700 shares. The petitioner duly acknowledged the receipt of the said
replacement. On May 4, 1976, Stock Certificate No. 002 was returned by respondent
Macasaet to the petitioner as evidenced by the handwritten receipt signed by the
latter who likewise made a handwritten notation stating "all cleared" at the left hand
margin thereof.

On August 12, 1976, the petitioner filed a complaint for damages against the private
respondents alleging, among others, that at the time he demanded his Stock
Certificate Nos. 002 and 026 totalling 56,588,358 shares from respondent Macasaet
the petitioner had a ready buyer for 0.014 per share for all shares; that due to the
private respondents' failure to return the said stock certificates upon demand, the
petitioner lost P306,115.25 representing the difference between the amount of
P792,237.01 which he would have realized had his stock certificates been promptly
given back and the sum of P486,121.76, the actual net proceeds from the subsequent
sale of P42,550,000 shares at various prices after respondent Macasaet delivered his
own Stock Certificate No. 025 in exchange for the petitioners Stock Certificate No.
026; that the aforesaid amount of P 306,115.25 had long been overdue and unpaid
and despite repeated demands from the private respondents for the payment thereof,
the latter had failed and refused to pay the same to the petitioner's damage and
prejudice; and that due to the private respondents' intentional, deliberate and
malicious acts, moral and exemplary damages could be awarded to the petitioner.

Issue

Whether or not respondent is liable for the two certificates of title and for the
damages incurred by the petitioner

Ruling
Certificates of stocks are considered as "quasi-negotiable" instruments. When the
owner or shareholder of these certificates signs the printed form of sale or assignment
at the back of every stock certificate without filling in the blanks provided for the
name of the transferee as well as for the name of the attorney-in-fact, the said owner
or shareholder, in effect, confers on another all the indicia of ownership of the said
stock certificates.

In the case at bar, the petitioner signed the printed form at the back of both Stock
Certificate Nos. 002 and 026 without filling in the blanks at the time the said stock
certificates were delivered to respondent Macasaet. Hence, the petitioner's acts of
indorsement and delivery conferred on respondent Macasaet the right to hold them as
though they were his own. On account of this apparent transfer of ownership, it was
not irregular on the part of respondent Macasaet to deliver the stock certificates in
question to respondent Feliciano for consideration in connection with a contemplated
tie-up between two business groups.

At this juncture, it is worth noting that in view of the petitioner's concurrent positions
as director, Executive Vice-President and General Manager of Monte Oro at the time
of the incident under consideration, he could not have been unaware of the
consequences of the delivery coupled with the indorsement of his two stock
certificates to respondent Macasaet, notwithstanding the tenor of the
Acknowledgment Receipt. Moreover, it is hard to believe that the petitioner's delivery
of the subject stock certificates to respondent Macasaet was strictly for safe-keeping
purposes only because if that were his real and only intention, there is neither logic
nor reason for the indorsement of the said certificates.

We find no reversible error in the respondent Court's holding that the petitioner failed
to support his claim that he suffered the claimed damages as a result of respondent
Macasaet's failure to return Stock Certificate Nos. 002 and 026 upon demand. The
alleged "unrealized profits" representing actual and compensatory damages must be
supported by substantial and convincing proof. The records are bereft of such kind of
proof. Mere allegation that there was a "ready and willing buyer' of all the petitioners
shares covered by Stock Certificate Nos. 002 and 026 for P0.014 per share at the time
the demand for the return of the said certificates was made cannot suffice to allow
the petitioners claim for unrealized profits to prosper. Such claim is clearly
speculative in nature.

Actual or compensatory damages are those recoverable because of pecuniary loss in

business, trade, property, profession, job or occupation, and the same must be
proved; otherwise, if the proof is flimsy and non-substantial, no damages will be given

The good faith of respondent Macasaet is shown by the fact that after trying to
recover the missing certificates, he immediately substituted Stock Certificate No. 026
with his own Stock Certificate No. 025 which covered more shares than the
petitioner's replaced certificate. The petitioner's other Stock Certificate No. 002 was
subsequently returned and received by the petitioner with the notation "All Cleared"
on the acknowledgment receipt duly signed and personally written by him. We agree
with the respondent court's ruling that the said notation meant to discharge
respondent Macasaet' together with his co-respondent Feliciano from any liability with
respect to the stock certificates in question as there can be no other plausible
interpretation therefor. He would not have written "all cleared" if he was unhappy at
that time about the substitution of the higher value certificate for his other
certificate.

In fine, considering that in the absence of malice and bad faith, moral damages
cannot be awarded (Philippine National Bank v. Court of Appeals, 159 SCRA 433
[19881) and that the grant of moral and exemplary damages has no basis if not
predicated upon any of the cases enumerated in the Civil Code, we hold that the
respondent court properly set aside the award of actual, moral and exemplary
damages given by the trial court in favor of the petitioner. The petition is hereby
DISMISSED.

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.

FACTS
 The case is an appeal in civil case No. 19240 with regards to 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 warehouse of U. de Poli for 576 bales of tobacco issued a warehouse receipt. In
the face of the instrument ,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."

ISSUES

Whether or not warehouse receipt is negotiable instruments

RULING

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 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 receipt 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.
G.R. No. L-8646             March 31, 1915

THE UNITED STATES, plaintiff-appellee, 

vs.
BENITO SIY CONG BIEN and CO KONG, defendants. 
BENITO SIY CONG BIENG, appellant.

FACTS

Defendants Benito Siy Cong Bieng and Co Kong, were convicted of a violation of
section 7 of Act No. 1655 of the Philippine Commission, known as the Pure Food and
Drugs Act. Co Kong, while in charge of appellant's  store and acting as his agent and
employee, sold, in the ordinary course of business coffee which had been adulterated
by the admixture of peanuts and other extraneous substances while accused Benito
Siy Cong Bieng had violated the provision of Act No. 1655 and was criminally
responsible, in the same way as his agent Co Kong, notwithstanding the fact that he
had never had any knowledge of the acts performed by his agent in selling
adulterated coffee or of any kind of coffee.

ISSUES

a.Whether or not knowledge and intent is material in the act of commiting

adulteration.
b.Whether or not Siy Cong being should also be held liable with the acts performed by
his agent without his knowledge

RULING

a.The intent to commit an act prohibited and penalized by statute must, of course,
always appear before a conviction upon a charge of the commission of a crime can be
maintained. But whether or not the existence of guilty knowledge and criminal or evil
intent, that is to say, the conscious intent or will to violate the statute, just also
appear ing order to sustain a judgment of conviction is a question which must be
determined in each case by reference to the language of the statute defining the
offense.The statutory definition of the offense embraces no word implying that the
forbidden act shall be done knowingly or willfully, and if it did, the design and
purpose of the Act would in many instances be thwarted and practically defeated.
The intention of the Legislature is plain that persons engaged in the sale drugs and
food products cannot set up their ignorance of the nature and quality of the
commodities sold by them as a defense. We conclude therefore that under the Act
proof of the facts of the sale of adulterated drugs and food products as prohibited by
the Act is sufficient to sustain a conviction, without proof of guilty knowledge of the
fact of adulteration, or criminal intent in the making of the sale other than that
necessarily implied by the statute in the doing of the prohibited act.

Supported by numerous citations of authority, Thornton in his work on "Pure Food and
Drugs," says with reference to the Federal act of June 30, 1906: "The intent with
which these several violations of the statute is done is immaterial. There may be no
intention to violate the statute, yet if the act produces the result forbidden by the
statute, an offense has been committed." (Sec. 119, p. 202.)

b.And again: "Repeated statements have been made in this work that an intent to
violate the statute is not necessary in order to incur the infliction of a penalty for the
sale or keeping for sale of adulterated or impure food or drugs. An act performed with
no intent to violate a purefoods statute is just as much a crime under this Federal
Pure Food and Drug Act of June 30, 1906, as if a criminal design to violate it was
intended and entertained at the time of its performance. This rule extends to sales or
other acts by servants." (Sec. 512, p. 613.)

And under section 559, of the same author, citing numerous authorities, shows that in
prosecutions for the sale of adulterated milk it has been quite uniformly held that it is
no defense that the accused had no knowledge of the fact of alteration, and that it
need not be alleged or proven that he had such knowledge, in the absence of special
words in the statute requiring the sale to be made with knowledge of the
adulteration.

Labatt in his work on Master and Servant (vol. 7, sec. 2569) discusses the general rule
as to liability of the master for criminal conduct of his servant as follows: "Although
the courts are in accord as to the master's liability when he participates in the
criminal conduct of his servant, there is a decided conflict of opinion as to his
responsibility when the act of the servant is without the master's knowledge or
connivance and against his express orders. These cases can be reconciled to some
extent by the difference in the language employed in the statutes to define the
various offenses, and the policy of the statutes themselves. Wherever guilty intent is
an essential ingredient of the crime, it would be impossible to fix responsibility upon
the master for his servant's transgression of the law, if the master did not harbor such
an intent. . . . In most instances where the master is held to be responsible criminally
for the wrongful conduct of his servant, it is on the theory that the act complained of
is positively forbidden, and therefore guilty intention is not essential to a conviction
of the offense."

And in section 2573 "If certain acts are positively forbidden by statute, and it is the
policy of the law to prohibit them, irrespective of what the motive or intent of the
person violating statute may be, no principle of justice is violated by holding the
master responsible for the conduct of his servant on the same theory that he is held
responsible civilly."

With this we are of opinion that even in the absence of express provisions in the
statute, the appellant in the case at bar was properly held criminally responsible for
the act of his agent in selling the adulterated coffee, and indeed it is clear that his
liability is expressly contemplated under the provision of section 12 of Act No. 1655 of
the Philippine Commission.
Michael A. Osmenia vs. Citibank March 23, 2004
Gr. No. 141278

Facts:
Petitioner purchased from the Citibank Manager’s Check in the amount of P
1,545,000.00 PAYABLE TO respondent Frank Tan; the petitioner later received
information that the aforesaid Maneger’s Check was deposited with the respondent
bank Associated Bank to the account of certain Julius Dizon. The petitioner asserts
that the check was payable to the order of respondent Tan. However, the Associated
Bank ordered the check to be deposited to other account without proper
indorsement.

The intended payee has other name of Julius Dizon as evidenced by the “Agreement
on Bills Purchased” and the Continuing Suretyship Agreement” executed between
Frank Tan and the Respondent bank.

Issue:
Whether the respondent banks acted negligently in depositing the proceeds to
another account without prior indorsement.

Held:
No, the respondent bank did not act negligently and never committed any violation of
its duties and responsibilities as the proceeds of the check went and credited to
respondent Frank Tan, a.k.a. Julius Dizon.

The petitioner failed to establish that the proceeds of the check were intended
wrongfully paid by the respondent banks to a person other than the intended payee.
In addition, the Negotiable Instrument Law was enacted for the purpose of
facilitating, not hindering or hampering transactions in commercial papers.
Metropolitan Bank & Trust Company vs. CA February 18, 1991
Gr No. 88866

Facts:
Eduardo Gomez opened an account with Golden Savings and deposited 38 Treasury
Warrants drawn by the Philippine Fish Marketing Authority with a total value of P1,
755,228.38.
These warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden
Savings and deposited to its Saving Account in Metrobank branch in Calapan Mindoro.
They were sent for clearing by the branch office to the principle office of Metrobank,
which forwarded them to the Bureau of Treasury for special clearing.
Gloria Castillo went to the Calapan branch several times to ask whether the warrants
had been cleared. The petitioner Metrobank allowed Golden Savings to withdraw from
the proceeds of the warrants without being cleared. In turn, Golden Savings
subsequently allowed Gomez to make withdrawals from his own account.
Metrobank informed Golden Savings that 32 of the warrants had been dishonored by
the Bureau of Treasury, and demanded the refund by Golden Savings of the amount it
had previously withdrawn.

Issue:
1. Whether Metropolitan Bank and Trust Co. or Golden Savings and loan association
acted negligent.

2. Whether the contention of Metropolitan Bank that the holder of the instrument is a
holder in due course.

Held:
1. Golden Savings relied on Metrobank to determine the validity of the warrants
through its own services and such the former had no clearing facilities. It was only
when Metrobank gave the go-signal that Gomez was finally allowed by Golden Savings
to withdraw them from his own account.
Metrobank is indeed negligent which exhibited extraordinary carelessness. There was
no reason why it should not waited until the treasury warrants had been cleared; it
would not have lost a single centavo by waiting yet, despite the lack of such
clearance and notwithstanding that it had not received a single centavo from the
proceeds of the treasury warrants, as it now repeated stressed- it allowed Golden
Savings to withdraw- not once, not twice, but thrice from the uncleared treasury
warrants.

2. Petitioner is not a holder in good faith and for value of a negotiable instrument and
is not entitled to the rights and privileges of a holder in due course, which is free
from defenses.
Treasury warrants is not within the scope of the NIL. For one thing, the document
bearing on its face the words “payable from the appropriation for food
administration”, is actually an order for payment out of “a particular fund,” and is
not unconditional and does not fulfill one of the essential requirement of a negotiable
instrument
Sec. 1- Form of Negotiable Instrument- An instrument to be negotiable must conform
to the following requirements:
X
Must contain an unconditional promise or order to pay a a sum certain in money;
X