G.R. Nos. L-21000, 21002-21004, and 21006        December 20, 1924 account current.
account current. When the goods stored by the warehouse receipts were sold and
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
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. Whereas, the hemp and maguey covered by said quedans is to a considerable extent
No. A-157 for 250 bales hemp. commingled.
No. A-132 for 1,878 bales maguey.
No. A-133 for 1,574 bales maguey. Nos. 131, 132 and 133 all bear date Now, therefore, it is hereby agreed subject to the rights of any other claimants hereto and
November 6, 1920, and No. 157, November 19, 1920. 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
QUEDANS OR WAREHOUSE RECEIPTS OF THE HONGKONG & SHANGHAI adjudicated to them proportionately by grades in accordance with the quedans held by
BANKING CORPORATION 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.
No. 130 for 490 bales hemp and 321 bales maguey.
No. 134 for 1,970 bales hemp. Manila, P.I., July 20, 1921.
No. 135 for 1,173 bales hemp.
No. 137 for 237 bales hemp. GIBBS, MCDONOUGH & JOHNSON

QUEDANS OR WAREHOUSE RECEIPTS OF THE ASIA BANKING By A. D. GIBBS

CORPORATION Attorneys for the Chartered Bank
of India, Australia & China
No. 57 issued May 22, 1920, 360 bales hemp.
No. 93 issued July 8, 1920 bales hemp. FISHER & DEWITT
No. 103 issued August 18, 1920, 544 bales hemp.
No. 112 issued September 15, 1920, 250 bales hemp. By C.A. DEWITT
No. 111 issued September 15, 1920, 2,007 bales maguey. Attorneys for the Hongkong & Shanghai
Banking Corporation
QUEDANS OR WAREHOUSE RECEIPTS OF THE BANK OF THE PHILIPPINE
ISLANDS WOLFSON, WOLFSON & SCHWARZKOFF

No. 147 issued November 13, 1920, 393 bales hemp. Attorneys for the Asia Banking Corporation
No. 148 issued November 13, 1920, 241 bales hemp.
No. 149 issued November 13, 1920, 116 bales hemp.
HARTIGAN & WELCH
No. 150 issued November 13, 1920, 217 bales hemp.
Attorneys for the Bank of the Philippine Islands
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 Claims for hemp and maguey covered by the respective warehouse receipts of the banks
transferred by means of quedans to one of the parties hereto has also been transferred by mentioned in the foregoing stipulation were presented by each of said banks. Shortly
means of other quedans to one or more of the other parties hereto and 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
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
owner of the merchandise total. Tanto el almacenaje como el seguro se cobraran por
herein described. meses vencidos, y con arreglo a los dias devengados
(Sgd.) "UMBERTO DE siendo el minimo para los efectos del cobro 10 dias.
POLI
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
QUEDAN No. A-112 trabajadores, o pagando los que le sean facilitados, con
Almacen Yangco ———— arreglo a los tipos que tengo convenido con los mios.

Por ——————— Valor del Seguro P9,500. Manila, 15 de sept. de 1920.

V.º B.º El Encargado,
(Sgd.) UMBERTO DE (Sgd.) I. MAGPANTAY
Marcas Bultos Clase de las "Quedan  depositados en estos almacenes por orden del
mercancias POLI
UDP 250 Sr. U. de Poli la cantidad de doscientos cincuenta fardos
Fardos
abaca abaca segun marcas detalladas al margen, y con arreglo a
las condiciones siguientes: The receipt is not marked "nonnegotiable" or "not negotiable," and is endorsed "Umberto
de Poli."
1.a Estan asegurados contra riesgo de incendios
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.
G.R. No. L-16510             January 9, 1922
PHILIPPINE NATIONAL BANK, plaintiff-appellant,
vs.
PRODUCERS' WAREHOUSE ASSOCIATION, defendant-appellee.
Roman Lacson for appellant.
Ross & Lawrence and Ewald E. Selph for appellee.
JOHNS, J.:
The plaintiff is a corporation organized under the banking laws of the Philippine Islands
with its principal office in the city of Manila. The defendant is a domestic corporation
doing a general warehouse business and domiciled at Manila, and the Philippine Fiber
and Produce Company, to which we will hereafter refer as the Produce Company, is
another domestic corporation with its principal office also at Manila. In May, 1916, the
defendant, as party of the first part, entered into a written contract with the Produce
Company, as party of the second part, in and by which "the above-named party of the
second part is hereby named, constituted, and appointed as the general manager of the
business of the party of the first part, in all of the branches thereof, with the duties,
powers, authority and compensation hereinafter provided." "The said party of the second
part shall exercise a general and complete supervision over and management of the
business of the party of the first part," and "shall direct, manage, promote and advance
the said business, subject only to the control and instructions of the board of directors of
the party of the first part." That said party of the second part, as general manager, shall
have all powers and authorities necessary, proper or usual for the due transaction of the
business of the party of the first part, including the power to sign the company's name,
save and except such power or authority as shall have been expressly reserved to itself,
by the board of directors of the party of the first part, provided "that such reservations by
the board of directors shall not be employed to unreasonably hamper or interfere with the
due management of said business and shall, at no time, reduce the powers and authorities
of said general manager below the usual and ordinary standard in business of like kind."
It is then agreed that the Produce Company shall have an annual salary of P7,500 for its
services as general manager, and that the defendant will also pay the local agents of the
Produce Company P300 per month for their services. The agreement also provides that it
shall remain in force and effect ten years from date, with the right of the Produce
Company to renew it for a further period of one to ten years at its option. In the months
of November and December, 1918, and while the contract was in force and effect, the
defendant duly issued to the Produce Company its negotiable quedans Nos. 1255, 1266,
1273, 1275, 1277, 1279, and 1283 for 15,699.34 piculs of copra in and by which, subject
to the terms and conditions therein stated, it agreed to deliver that amount of copra to the
Produce Company or its order.
Section 4 of the conditions printed on the back provides:
This Association will deliver the package, noted hereon, on surrender to the
Association of this warrant endorsed by the party who shall be for the time
registered in the books of the Association as the owner of the packages
described hereon; and the production by the Association of this warrant shall at
all times be conclusive proof that the packages hereon noted have been properly
delivered by the Association and shall exempt the Association from all
responsibility in connection with the said packages or goods.
Section 5 provides:
No transfer of interest and/or ownership will be recognized by the Association
unless registered in the books of the Association, and/or all charges for storage
and/or insurance due to the Association paid. Such storage and/or insurance
shall constitute a lien against the packages herein noted until paid and aid
package shall remain undelivered until such lien or lien is/are satisfied.
Each quedan gave the number of sack, piculs, warehouse number, gross weight in kilos
and its declared value, and recited thereon that the copra was insured for the full amount
of its declared value, and across the face of the quedan were the words "Negotiable
Warrant" in red ink. They were all of the printed form entitled "Producers' Warehouse
Association." Each recited in red ink "This warrant is of no value unless signed by an
officer of the Association," and were signed "Producers' Warehouse Association by
George B. Wicks, Treasurer, and Producers' Warehouse Association by R. Torres,
Warehouseman." Each receipt was also numbered, and stated the number of the
warehouse and where situated, and recited that storage charges were at the rate of P0.04
per picul per month, and that the insurance rate was 1/3 per cent per month on the
declared value.
The Produce Company arranged for an overdraft with the plaintiff of P1,000,000. To
secure such overdraft, and as collateral from and after the dates of their issuance, the
quedans in question were endorsed in blank by the Produce Company, and delivered to
the plaintiff, which became and is now the owner and holder thereof. Without making a
tender of any charges, on March 21, 1919, the plaintiff requested the delivery of the
copra described in the respective quedans, and, for its failure to do so, commenced this
action on April 23, 1919, to recover its value alleged to be P240,689, with interest from
March 21, 1919, at the rate of 6 per cent per annum. July 10, 1919, an amended
complaint was filed, and on August 9, 1919, a second amended complaint was filed, in
which it is alleged that, in good faith, the plaintiff purchased these quedans, and that it is
the owner, and recites all of the conditions printed on the back, and made a part of the
quedans. It is then alleged that on July 30, 1919, the plaintiff requested the defendant to
register the quedans in the name of the plaintiff, and to deliver to it the 14,587.19 piculs
of copra, and, upon that date, that it had offered to satisfy any lien that defendant might
have, to surrender the receipts with such indorsement that it might require, and the
receipt therefor, when the goods were delivered, if such signature is requested by the
defendant. "That the defendant refused to comply with the demands of the plaintiff,
stating that it could not deliver the goods mentioned in the receipts as said goods are not
in the warehouse, said defendant still refusing to make such delivery." That on July 30,
1919, copra was of the value of P21 per picul. That by reason of such refusal, plaintiff
has been damaged in the amount of P306,330.99. It is also alleged that in January, 1919,
with the consent of the plaintiff, the Produce Company removed from the warehouse of
the defendant 1,112.15 piculs of copra described in receipt No. 1255, of the declared
value of P18,350.
For amended answer, the defendant admits that the Produce Company deposited copra in
defendant's warehouse, and that warehouse receipts were issued therefor to the Produce
Company, "signed by one George B. Wicks and one R. Torres, but denies that either of
the said George B. Wicks or the said R. Torres had any authority to issue such receipts in
the name of the defendant," or that the receipts set out in plaintiff's complaint are
complete and correct copies of those issued, and, as a further answer and defense, pleads
that at the time alleged, the Produce Company was the manager of the defendant's
warehouse; that all the copra deposited by the Produce Company "in the defendant's
warehouse" was, by and with the consent and knowledge of plaintiff, sold and delivered
to the Laguna Cocoanut Oil Company, and all the proceeds thereof deposited to the
account of the said Philippine Fiber and Produce Company with plaintiff, before the
filing of the said second amended complaint; that by and with the consent of plaintiff,
said delivery was made by the Philippine Fiber and Produce Company, the manager of
the defendant's warehouse, without the surrender of the receipts referred to in the
complaint; that said receipts were issued without defendant's authority, as hereinbefore
set out; that said receipts were never transferred to plaintiff on the books of defendant, as
provided in the terms thereof; and that they were issued without the copra described
therein being deposited in the defendant's warehouse. Testimony was taken on such
issues during which the plaintiff offered in evidence the described quedans as Exhibits C
to I, inclusive, and the defendant admitted that the signature appearing on the lower left-
hand corner of each exhibit is the signature of George B. Wicks, and that at the time he
signed the quedans "he was the duly elected, qualified and appointed treasurer of
defendant," that the signature on the lower right-hand corner of each quedan was signed
by R. Torres; and that he was a warehouseman of the defendant at the time, and in the
employ of the Produce Company. After the taking of testimony, the lower court rendered
judgment for the defendant, from which the plaintiff appeals, claiming in substance that
the court erred in not giving plaintiff judgment for the full amount prayed for in its
complaint.
On March 21, 1919, the plaintiff notified the defendant that the Produce Company had
endorsed to plaintiff the above described quedans, and asked that it should be informed
"as to when we can take possession of the goods represented by the above quedans."
This was answered by a letter from the secretary and attorney for the defendant, known
in the record as Exhibit B, and which the trial court refused to receive in evidence. But it
does appear from the record that in response to that letter, the then secretary and attorney
for the defendant went to the bank, and that the only matter which was then and there
discussed between the parties was the amount which the defendant should pay the
plaintiff for the copra that it could not deliver. That nothing was ever said about the lien
or the surrender of the quedans, or that the receipts should be signed for the copra when
delivered. It also appears that on the 30th of July, after the court sustained the demurrer
to the complaint, the attorney for the bank went direct to the defendant and then offered
to pay any lien or charges that it might have on the quedans, and offered it all the
quedans indorsed in blank by the Produce Company, and "to place on them any
indorsement that would make them negotiable," and to sign for the bank the receipts for
the copra when delivered. That Mr. Wicks, who was then acting for the defendant,
refused to take up the quedans, stating that the copra which they represented was not in
the warehouse, and that "we cannot give you the copra because it is not there." The
bank's attorney then had the quedans with him and exhibited them to Mr. Wicks. It
further appears that on July 29, 1919, and in answer to its letter of the 28th, the Produce
Company wrote the defendant as follows:
We regret to state that we are unable to return to you the warrant referred to in
your letter for the reason that, in December, 1918, we deposited these warrants
with the Philippine National Bank as security for loans and said bank refuses to
return same to us. As all the copra, less shrinkage and other losses, has been
delivered by you, we hereby authorize you to cancel such warrants and hereby
agree to hold you free and harmless for so doing.
The attorney further testified: "I have seen the overdraft agreement and, if I remember
right, it was for a million pesos." The Produce Company "signed one of the printed forms
of the bank for overdraft agreement." When plaintiff rested, the defendant moved for
judgment against the plaintiff for want of sufficient evidence. The motion was denied
and exception duly taken. The defendant then called J. Mclaughlin, who, as a public
accountant, audited the books of the Produce Company for the period of six months
ending December 31, 1918. A copy of his report made from the books of the Produce
Company was offered in evidence, from which it appears that on December 31, 1918, it
owed the plaintiff P887,856.66. George E. Kauffman testified that he was president of
both the defendant and the Produce Company and held that position in October, 1916, at
the time the contract was made between the two companies. That it was voluntarily
surrendered and cancelled in April, 1919, also that the contract was duly ratified by the
director of both corporations, and after its ratification, the Produce Company assumed
the active management of defendant's business, under the terms and provisions of the
contract. He also testified that Mr. Lacson presented quedans for a certain amount of
copra to Mr. Wicks, and asked for the delivery of the copra. Mr. Wicks told Mr. Lacson
"the copra did not exist because the copra has been delivered — by the Philippine Fiber
and Produce Company." Mr. Kauffman further testified that he owned 98 per cent of the
capital stock of the Produce Company, and that Mr. Wicks had only one share.
Q. What was the balance show by your books? — A. I reserve the right, in
answering these questions, — because I am not prepared to answer in amounts.
They run into large amounts of money.
A. I can say what caused the controversy, and that is that the bank showed an
overdraft of some five hundred and some odd thousand pesos as to the
Philippine Fiber and Produce Company, while my books show an overdraft of
some hundred and thirty-nine thousand pesos, — caused by the fact that I have
charged the Philippine National Bank with the entire expenditure for the
purchase of hemp made for their account and risk during the year of 1918. I
have so notified the bank, but they haven't seen fit to reply to my letter.
He further testified that Mr. Wicks was treasurer of the defendant at the time the quedans
were issued, and that the printed forms used are like those held by the bank.
Q. And they have been from the very beginning, haven't they? — A. Yes, sir.
Mr. Wicks testified that he was vice-president of the Produce Company from October,
1916, until February, 1919, and that he was treasurer of the company "from July 1, 1917,
up until this year." He further testified that R. Torres was actually in charge of the
warehouse itself, and that the Produce Company was managing the warehouse. That it
was selling copra between December 1, 1918, and February 1, 1919, and that the
proceeds were deposited in the Philippine National Bank; that during that period the
warehouse receipts were hypothecated with the plaintiff; that under the practice at the
end of each week, the warehouse would notify him of the amount of copra delivered; and
that "I would then withdraw from the Philippine National Bank the corresponding
number of warrant for cancellation. Sometimes I would go personally and withdraw
them; and at other times I would send the cashier down with a note to the Philippine
National Bank, asking them to release these warrants for cancellation." The warehouse
receipts were delivered to me regularly "until about the end of January or early in
February." This procedure was a matter of convenience to both parties.
Q. What reason did you give to Philippine National Bank for not delivering the
copra to Mr. Lacson, or any other representative of the bank? — A. The reason
was that the copra was not in the warehouse; having been delivered to its
owners.
Q. While you were treasurer of the Producers' Warehouse Association, all the
quedans issued by the warehouse were signed by you as treasurer, were they
not? — A. Yes, sir.
Q. Even by Mr. Kauffman — now haven't they? — A. So far as I know, they
have.
The record shows that Mr. Kauffman was absent from about March 15, 1918, until May,
1919.
Q. And during that period you had full authority to act for the Philippine Fiber
and Produce Company? — A. Yes.
Q. Was that authority ever questioned by anyone; by Mr. Kauffman or anyone?
— A. Not to my knowledge.
The testimony is conclusive that the quedans in question were duly executed by Wicks,
as treasurer, and Torres, as warehouseman, for and on behalf of the defendant, and as its
act and deed. That it appears from its own books that on December 31, 1918, the
Produce Company was indebted to the plaintiff in the sum of P887,856.66, and Mr.
Kauffman, president of the defendant, testified that the Produce Company had an
indebtedness; "they run into large amounts of money." The testimony is also conclusive
that amounts money." The testimony is also conclusive that after the quedans described
in the complaint were issued to the Produce Company, they were endorsed in blank, and
physical possession delivered to the plaintiff as collateral security for the overdraft of the
Produce Company, and that each of them is in form negotiable.
That on March 21, 1919, plaintiff notified the defendant of such facts and requested the
delivered of the copra. At that time no claim was made on account of conditions, liens or
charges, and the plaintiff did not offer to pay the charges or comply with the conditions,
and the only question discussed was the amount of copra to which plaintiff was entitled.
In July, 1919, and after the sustaining of the defendant's demurrer to the complaint,
plaintiff, for the first time, made a formal tender of all such conditions, and then filed its
second amended complaint in which tenders were alleged. In its answer, the defendant
denies that Wicks and Torres had any authority to issue the quedans for, or in the name
of, the defendant, and, as further and separate defense, alleges that the Produce Company
was the manager of the defendant's warehouse, and that all copra deposited in it by the
Produce Company was, with the knowledge and consent of plaintiff, sold to the Laguna
Cocoanut Oil Company, and the proceeds of the sale were duly deposited with the
plaintiff to the account of the Produce Company, before the filing of the second amended
complaint; that with the consent of the plaintiff, delivery was made by the Produce
Company, as manager of the defendant's warehouse, without the surrender of the
quedans described in the complaint; that such receipts were issued without authority and
they were never transferred to the plaintiff on the books of the defendant corporation;
and that they "were issued without the copra described therein being deposited in
defendant's warehouse." The defendant, having alleged that the quedans were invalid and
wrongfully issued, and that the copra therein described was not in defendant's
warehouse, is now estopped do claim or assert that the plaintiff did not comply with any
conditions precedent. In this kind of an action, a person has no legal right to deny the
existence of the instruments on which it is based, and then claim that plaintiff has not
complied with the provisions of the instruments. This question is squarely decided in
Wyatt vs. Henderson (31 Ore., 48; 48 Pac., 790), where the court says:
. . . The only possible object defendants could have had in seeking to show that
storage was due on this grain was to insist upon the maintenance of a statutory
lien thereon, under which they expected to hold the oats until their charges had
been paid, and thus defeat the action for the recovery of possession; but, by
denying the plaintiff's ownership, the lien given by statute was waived, and the
title to and the quantity of the grain being the only issues for trial, the amount
due for storage was immaterial. . . .
This case was again followed and approved in Anderson vs. Portland Flouring-Mills Co.
(60 Pac., 839). The same rule is also laid down in Cyc., vol. 38, p. 135, where it is said:
. . . Similarly a tender is waived where the tenderee makes any declaration
which amounts to a repudiation of the contract, or takes any position which
would render a tender, so long as the position taken by him is maintained, a vain
and idle ceremony. . . .
Ruling Case Law, vol. 26. p. 624, says:
Since the law does not require any one to do vain or useless things, a formal
tender is never required where it appears that if it had been made, the money
would not have been received, as where a creditor states that an actual tender
will be useless because he will not accept it, or where one party to a contract
states that he will not comply with its terms.
. . . Where a contract calls for the performance by the parties of concomitant
acts, neither party being obliged to perform unless the other is ready to perform
the correlative act, a tender is not necessary by the one if the other is not willing
to perform his part. . . . (Citing numerous authorities.)
Again, in the inception of this dispute nothing was ever said about any condition
precedent, or about any claim on account of liens or charges, and it is very apparent that
at that time the defendant did not contemplate any such a defense. When the point was
first raised, the formal tender or offer was promptly made, and the defendant then, for the
first time, denied the authenticity of the quedans, and claimed that they were wrongfully
and illegally issued. If the copra evidence by the quedans was in the bodegas, defendant's
contention would be tenable, but upon the facts shown, the defendant has no legal right
to make that defense.
Complaint is made that the quedans were not transferred on the books of the company in
accord with their provisions. Here again, it is shown that the plaintiff produced them and
requested their transfer to the bank, which the defendant requested their transfer to the
bank, which the defendant refused to make. It is not now in a position to urge that point
as a defense.
The stubborn fact remains that, under the written contract between them, the Produce
Company was the general manager of the defendant's warehouse business, and that it had
authority to issue quedans in its name, and as its corporate act and deed. That the
quedans in question are duly authenticated, and were duly issued by the defendant to,
and in the name of, the Produce Company, and when issued were duly endorsed, and
delivered to the plaintiff for value. For aught that appears in the record, the bank was D. F. Macaranas and S. V. Pampolina Jr. for defendants and appellants.
acting in good faith, and the quedans were duly issued, endorsed and delivered to it as San Juan, Laig and Associates for plaintiff and appellee.
collateral in the ordinary course of business. Although there may have been fraud, there
is no allegation or proof that the bank was a party to it, or had any knowledge of it, and BENGZON, J. P., J.:
this court has no right to assume that the bank was a party to a fraud. Giving to the
quedans their legal force and effect, it must follow that at the time the demand was made, The present suit was filed by Lua Kian against the Manila Railroad Co. and Manila Port
the bank was the owner and entitled to the possession of the copra therein described. The Service for the recovery of the invoice value of imported evaporated "Carnation" milk
receipts call for 15,699.34 piculs of copra, but plaintiff admits that, with its consent, alleged to have been undelivered. The following stipulation of facts was made:
1,112.15 piculs of copra, of the declared value of P18,350, were delivered to the Produce
Company from and out of receipt No. 1255. This would leave 14,587.19 piculs of copra
1. They admit each other's legal personality, and that during the time material to
evidenced by the quedans.
this action, defendant Manila Port Service as a subsidiary of defendant Manila
Railroad Company operated the arrastre service at the Port of Manila under and
As in the case of the Philippine Trust Company vs. Philippine National Bank,1 recently pursuant to the Management Contract entered into by and between the Bureau of
decided, there is no direct evidence of the market value of the copra. But each quedan Customs and defendant Manila Port Service on February 29, 1956;
specified the amount of its declared value. That being specified in the quedans, in the
absence of other proof, and upon the fact shown, the declared value will be deemed and
2. On December 31, 1959, plaintiff Lua Kian imported 2,000 cases of Carnation
treated as the market value. Deducting the 1,112.15 piculs, which were surrendered by
Milk from the Carnation Company of San Francisco, California, and shipped on
the plaintiff out of quedan No. 1255, the declared value of the copra remaining was
Board SS "GOLDEN BEAR" per Bill of Lading No. 17;
P240,689.
3. Out of the aforesaid shipment of 2,000 cases of Carnation Milk per Bill of
The decision of the lower court is reversed, and judgment will be entered here in favor of
Lading No. 17, only 1,829 cases marked `LUA KIAN 1458' were discharged
the plaintiff and against the defendant for P240,689, with interest thereon from March
from the vessel SS `GOLDEN BEAR' and received by defendant Manila Port
21, 1919, at the rate of 6 per cent per annum, and costs in this and the lower court. So
Service per pertinent tally sheets issued by the said carrying vessel, on January
ordered.
24, 1960;
Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor and Romualdez, JJ.,
4. Discharged from the same vessel on the same date unto the custody of
concur.
defendant Manila Port Service were 3,171 cases of Carnation Milk marked
"CEBU UNITED 4860-PH-MANILA" consigned to Cebu United Enterprises,
per Bill of Lading No. 18, and on this shipment, Cebu United Enterprises has a
pending claim for short-delivery against defendant Manila Port Service;
G.R. No. L-23033           January 5, 1967
5. Defendant Manila Port Service delivered to the plaintiff thru its broker,
LUA KIAN, plaintiff and appellee, Ildefonso Tionloc, Inc. 1,913 cases of Carnation Milk marked "LUA KIAN
vs. 1458" per pertinent gate passes and broker's delivery receipts;
MANILA RAILROAD COMPANY and MANILA PORT SERVICE, defendants
and appellants.
 6. A provisional claim was filed by the consignee's broker for and in behalf of
the plaintiff on January 19, 1960, with defendant Manila Port Service;
7. The invoice value of the 87 cases of Carnation Milk claimed by the plaintiff
to have been short-delivered by defendant Manila Port Service is P1,183.11
while the invoice value of the 87 cases of Carnation Milk claimed by the
defendant Manila Port Service to have been over-delivered by it to plaintiff is
P1,130.65;
8. The 1,913 cases of Carnation mentioned in paragraph 5 hereof were taken by
the broker at Pier 13, Shed 3, sometime in February, 1960, where at the time,
there were stored therein, aside from the shipment involved herein, 1000 cases
of Carnation Milk bearing the same marks and also consigned to plaintiff Lua
Kian but had been discharged from SS `STEEL ADVOCATE' and covered by
Bill of Lading No. 11;
9. Of the shipment of 1000 cases of Carnation Milk which also came from the
Carnation Company, San Francisco, California, U.S.A. and bearing the same
marks as the shipment herein but had been discharged from S/S "STEEL
ADVOCATE" and covered by Bill of Lading No. 11, Lua Kian as consignee
thereof filed a claim for short-delivery against defendant Manila Port Service,
and said defendant Manila Port Service paid Lua Kian plaintiff herein, P750.00
in settlement of its claim;
10. They reserve the right to submit documentary evidence;
11. They submit the matter of attorney's fees and costs to the sound discretion of
the Court.
On these facts and documentary evidence subsequently presented, the Court of First
Instance of Manila ruled that 1,829 cases marked Lua Kian (171 cases less than the
2,000 cases indicated in the bill of lading and 3,171 cases marked "Cebu United" (171
cases over  the 3,000 cases in the bill of lading were discharged to the Manila Port
Service. Considering that Lua Kian and Cebu United Enterprises were the only
consignees of the shipment of 5,000 cases of "Carnation" milk, it found that of the 3,171
cases marked "Cebu United", 171 should have been delivered to Lua Kian. Inasmuch as
the defendant Manila Port Service actually delivered 1,913 cases to plaintiff,1 which is
only 87 cases short of 2,000 cases as per bill of lading the former was ordered to pay Lua
Kian the sum of P1,183.11 representing such shortage of 87 cases, with legal interest
from the date of the suit, plus P500 as attorney's fees.
Defendants appealed to Us and contend that they should not be made to answer for the
undelivered cases of milk, insisting that Manila Port Service was bound to deliver only
1,829 cases to Lua Kian and that it had there before in fact over-delivered to the latter.
The bill of lading in favor of Cebu United Enterprises indicated that only 3,000 cases
were due to said consignee, although 3,171 cases were marked in its favor. Accordingly,
the excess 171 cases marked "Cebu United" placed the defendant arrastre operator in a
dilemma, for should it deliver them to Lua Kian the goods could be claimed by the
consignee Cebu United Enterprises whose markings they bore, and should it deliver
according to markings, to Cebu United Enterprises, it might be sued by the consignee,
Lua Kian whose bill of lading indicated that it should receive 171 cases more. The
dilemma itself, however, offered the solution. The legal relationship between an arrastre
operator and the consignee is akin to that of a depositor and warehouseman.2 As
custodian of the goods discharged from the vessel, it was defendant arrastre operator's
duty, like that of any ordinary depositary, to take good care of the goods and to turn them
over to the party entitled to their possession.3 Under this particular set of circumstances,
said defendant should have withheld delivery because of the discrepancy between the bill
of lading and the markings and conducted its own investigation, not unlike that under
Section 18 of the Warehouse Receipts Law, or called upon the parties, to interplead, such
as in a case under Section 17 of the same law, in order to determine the rightful owner of
the goods.
It is true that Section 12 of the Management Contract exempts the arrastre operator from
responsibility for misdelivery or non-delivery due to improper or insufficient marking.
We cannot however excuse the aforestated defendant from liability in this case before Us
now because the bill of lading showed that only 3,000 cases were consigned to Cebu
United Enterprises. The fact that the excess of 171 cases were marked for Cebu United
Enterprises and that the consignment to Lua Kian was 171 cases less than the 2,000 in
the bill of lading, should have been sufficient reason for the defendant Manila Port
Service to withhold the goods pending determination of their rightful ownership.
We therefore find the defendants liable, without prejudice to their taking whatever
proper legal steps they may consider worthwhile to recover the excess delivered to Cebu
United Enterprises.
With respect to the attorney's fees awarded below, this Court notices that the same is
about 50 per cent of the litigated amount of P1,183.11. We therefore deem it reasonable
to decrease the attorney's fees to P300.00.
Wherefore, with the aforesaid reservation, and with the modification that the attorney's
fee is reduced to P300.00, the judgment appealed from is affirmed, with costs against
appellants. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and
Castro, JJ., concur.
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+.£ªwph!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.£îhqwâ£
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. 1äwphï1.ñët