Week 14 Nego

Nego
Week 14

1. Siy Bong Bieng v. HSBC Jed
Emergency: Ranft purchased hemp and was given a warehouse receipt by BIENG. RANFT HOWEVER HAS NOT PAID YET
but BIENG still sent the receipts (FATAL MOVE). On the same day, Ranft died and thereafter, BIENG wanted the receipt
back or the purchase price however they found out Ranft had already pledged the same to HSBC. RTC ruled in favor of
BIENG. SC reversed: if owner of the goods permit another to have the possession or custody of negotiable warehouse
receipts running to the order of the latter, or to bearer, it is a representation of title upon which bona fide purchasers
for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner.
BIENG ESTOPPED: the plaintiff had voluntarily clothed Ranft with all the attributes of ownership and upon which the
defendant bank relied.
Facts:
-Initial action in CFI for sum of 31,645, the value of 464 bales of hemp deposited in certain bonded
warehouses as evidenced by quedans (warehouse receipts).
-They were delivered to HSBC as pledge for Otto Ranfts preexisting debt.
-June 25, 1926: Ranft called the office to purchase hemp (abaca). The receipt was delivered with the
understanding that BIENG would be paid a day or two after deliver as was the same set up as previous
transactions.
-That night, on the same day the warehouse receipts were pledged by Ranft. ALSO ON THAT NIGHT!!! He died.
(funny right? He died suddenly in their house in Manila)
-BIENG immediately asked for the return of the quedans or their value but found out that they were already
pledged.
-BIENG filed a claim for 31,645 in the intestate proceedings of Ranft which was allowed by the CFI.
-In the meantime, BIENG also demanded from HSBC for the return of the quedans or their value but was
refused stating that they are holders in due course.
-Complaint was filed BIENG stated they allegedly attempted to sell to Ranft for cash but Rnaft did not fulfill
he conditions of the sale. (Initial statement was they sold it but then they changed it ti attempted to sell)
-TRIAL COURT: ruled in favor of BIENG on the ground that HSBC could not have been in good faith because
according to the witness, a certain Thiele, the bank, based on the circumstance knew that they werent paid
yet. Also, the belief that Ranft was the owner was contrary to the facts proven.
Issue: W/N BIENG can recover the quedans
Held: HELLZ TO THE NO

We regret that the plaintiff in this case has suffered the loss of the quedans, but as far as we can see,
there is now no remedy available to the plaintiff. The bank is not responsible for the loss; the negotiable
quedans were duly negotiated to the bank and as far as the record shows, there has been no fraud on the part
of the defendant.
Ratio:
- First, that the quedans in question were negotiable in form;
-Second, that they were pledge by Otto Ranft to the defendant bank to secure the payment of his preexisting
debts to said bank (paragraph 3 of the Stipulation of Facts);

LEX. ANGEL. JOBEN. GEORGE. NORBY. KEITH. MAITI. KARL. MARIANA. DONDON. CJ. GASTON. ZEP. RIO. JECH. JED
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-Third, that such of the quedans as were issued in the name of the plaintiff were duly endorsed in blank by the
plaintiff and by Otto Ranft
-Fourth, that the two remaining quedans which were duly endorsed in blank by him.
-Evidence shows that the quedans were for security of 622,753 debt, no evidence that bank was
bound/promised to pay back amount of quedans
-Quedans were negotiable in form and duly endorsed in blank by the plaintiff and by Otto Ranft, it follows that
on the delivery of the qeudans to the bank they were no longer the property of the indorser unless he
liquidated his debt with the bank.
-On petitioners contention that bank should have ascertained the authority of Ranft to negotiate:

-The bank had perfect right to act under section 47, 38 and 40 of Warehouse Receipts Act:
SEC. 47. When negotiation not impaired by fraud, mistake, or duress. The validity of
the negotiation of a receipt is not impaired by the fact that such negotiation was a
breach of duty on the part of the person making the negotiation, or by the fact that the
owner of the receipt was induced by fraud, mistake, or duress to intrust the possession
or custody of the receipt was negotiated, or a person to whom the receipt was
subsequent negotiated, paid value therefor, without notice of the breach of duty, or
fraud, mistake, or duress.
SEC. 38. Negotiation of negotiable receipts by indorsement. A negotiable receipt may
be negotiated by the indorsement of the person to whose order the goods are, by the
terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a
specified person. . . . Subsequent negotiation may be made in like manner.
SEC. 40. Who may negotiate a receipt. A negotiable receipt may be negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the
terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom
the possession or custody of the receipt has been entrusted, or if at the time of such entrusting the receipt is in
such form that it may be negotiated by delivery.
-Bank is entitled to such rights under sec. 41:

SEC. 41. Rights of person to whom a receipt has been negotiated. A person to whom a negotiable
receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a
purchaser in good faith for value, and also such title to the goods as the depositor of person to whose order
the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in
good faith for value, and. . . .

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-Citing jurisprudence: By sec. 47, the negotiation of the receipt to a purchaser for value without notice is not impaired
by the fact that it is a breach of duty, or that the owner of the receipt was induced "by fraud, mistake, or duress" to
intrust the receipt to the person who negotiated it.
-Under sec. 41, one to whom the negotiable receipt has been duly negotiated acquires such title to the goods as the
person negotiating the receipt to him, or the depositor or person whose order the goods were delivered by the terms of
the receipt, either had or "had ability to convey to a purchaser in good faith for value."
-WHAT PROVISIONS ARE SAYING: if owner of the goods permit another to have the possession or custody of negotiable
warehouse receipts running to the order of the latter, or to bearer, it is a representation of title upon which bona
fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the
apparent owner.
-BIENG ESTOPPED: the plaintiff had voluntarily clothed Ranft with all the attributes of ownership and upon
which the defendant bank relied. In such case we think the principles which underlie equitable estoppel place
the loss upon him whose misplaced confidence has made the wrong possible.

2. Martinez v. PNB - Jech
Emergency Recit:
RODRIGUEZ estate was indebted to PNB in the amount of 22K, representing its crop loan
MARTINEZ, administratrix, endorsed and delivered two quedans to PNB, which covered 2,198.11 piculs sugar
o The quedans were issued by BOGO-MEDELLIN MILLING, the warehouse where the sugar was stored
Because of the war, the sugar covered by the quedans were lost
MARTINEZ contends that had she been allowed to sell the sugar, to which PNB refused, the estate could have realized the
amount of over 54K
MARTINEZ sued for the expected sales price, since it had already paid the loan amount
Issue: Is PNB liable?
SC held that MARTINEZ theory is stupid and confusing she contends that the endorsement of the quedan transferred
ownership over the sugar to PNB, but, at the same time, she wants to recover the value of the sugar
o In any case, the transfer of the quedans in the case at bar is not by sale, but merely as security by way of pledge or
mortgage. Thus, ownership was not transferred and PNB was only given a right to sell the goods to apply it to the
outstanding debt.
o Thus, the loss should be borne by the owner ESTATE
Dissent of Paras:
o PNB is liable for the 22K, not for the 54K
o Endorsement of the quedans transferred ownership to PNB, pursuant to Section 41 of the Warehouse Receipts
Law
o But since the quedans were only given as security, the case is similar to that of sale with right to repurchase
If the seller successfully repurchases (to get the property back), but the thing is lost before actual
delivery, then the buyer (who initially bought the property) is bound to deliver the purchase price; not its
value

-Facts:
February 1942: the the estate of RODRIGUEZ was indebted to the PNB in the amount of P22,128.44, which represented the
balance of the CROP LOAN obtained by the estate upon its 1941-1942 SUGAR CANE CROP
MARTINEZ, late administratrix of the RODRIGUEZ estate, endorsed and delivered to PNB two (2) QUEDANS issued by the
BOGO-MEDELLIN MILLING CO., where the sugar was stored
o MARTINEZ: The quedans covered 2,198.11 piculs
o PNB: Only 1 quedan was delivered, which covered 1,071.04 piculs
During the last Pacific war, the sugar covered by the quedans was lost while in the warehouse of BOGO

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According to MARTINEZ, she asked PNB to release the sugar so that it could be sold at a good price (P25 per picul) to avoid
possible loss at the hands of the Japanese invasion
o PNB refused and, as a result, P54,952.75, representing the value of said sugar was lost
MARTINEZ filed suit against PNB to recover the amount
CFI: Dismissed the complaint
o The transfer of the quedans representing the sugar to PNB did not transfer ownership over the goods
o The loss of the sugar should still be borne by the owner-estate
Present administrator MARTINEZ appealed
SC: CFI ruling affirmed

-Issue: Whether or not the delivery (by MARTINEZ) of the quedans in question transferred ownership (to PNB) over the sugar
covered thereby?

-Held:
The transaction was not a sale because consideration was not present

PNB, by its charter is, not authorized to engage in the business of buying and selling sugar.
o PNB only accepts sugar as security for payment of its crop loans and later, it sells said sugar for planters, or the
planters find buyers and direct them to the bank.

[BOOM] MARTINEZ contends that the endorsement and delivery of the quedans to the bank transferred the ownership of
the sugar to said bank so that as owner, the bank should suffer the loss of the sugar
o We take it that by endorsing the quedan, ESTATE was supposed to have sold the sugar to PNB for the amount of
the outstanding loan and the interest then accrued.
o That would mean that ESTATEs account with the bank has been entirely liquidated and their contractual relations
ended, the bank, suffering the loss of the amount of the loan and interest.
o But MARTINEZ, in the next breath contends that had the bank released the sugar in February 1942, ESTATE could
have sold it for P54,952.75, from which the amount of the loan and interest could have been deducted, the
balance to have been retained by the ESTATE, and that since the loan has been entirely liquidated in 1948, then
the whole expected sales price of P54,952.75 should now be paid by PNB
[PATAY] This second theory presupposes that despite the endorsement of the quedan, the estate still
retained ownership of the sugar, a position that runs counter to the first theory of transfer of ownership
to the bank.

In support of the theory of transfer of ownership of the sugar to the bank by virtue of the endorsement of the quedan,
reference was made to Section 41 of the Warehouse Receipts Law
o First, this claim is inconsistent with the very theory MARTINEZ that the sugar far from being sold to the bank was
merely given as security for the payment of the crop loan.
o Second, the jurisprudence cited do not directly apply.
In those cases, this Court held that for purposes of facilitating commercial transaction, the endorsee or
transferee of a warehouse receipt or quedan should be regarded as the owner of the goods covered by
it.
As regards the endorser or transferor, even if he were the owner of the goods, he may not take
possession and dispose of the goods without the consent of the endorsee or transferee of the
quedan or warehouse receipt
o An in some cases, the endorsee may sell the goods and apply the proceeds to the
payment of the debt
As regards third persons, the holder of a warehouse receipt or quedan is considered the owner
of the goods covered by it.
o It is obvious that where the transaction involved in the transfer of a warehouse receipt or quedan is not a sale but
pledge or security, the transferee or endorsee does not become the owner of the goods, but that he may only
have the property sold and then satisfy the obligation from the proceeds of the sale.
From all this, it is clear that at the time the sugar in question was lost sometime during the war,
RODRIGUEZ estate was still the owner thereof.
o Moreover, PNB did offer the sugar for sale, but there were no buyers.

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[DOCTRINE] Where a warehouse receipt or quedan is transferred or endorsed to a creditor only to secure the payment of a
loan or debt, the transferee or endorsee does not automatically become the owner of the goods covered by the warehouse
receipt or quedan,
o But he merely retains the right to keep and with the consent of the owner to sell them so as to satisfy the
obligation from the proceeds of the sale
o In such cases, the transaction involved is not a sale but only a mortgage or pledge; and
o If the property covered by the quedans or warehouse receipts is lost without the fault or negligence of the
mortgagee or pledgee or the transferee or endorsee of the warehouse receipt or quedan, then said goods are to
be regarded as lost on account of the real owner mortgagor or pledgor.

-Dissent by Paras:
Section 41 of Act No. 2137, otherwise known as the Warehouse Receipts Law;
"SEC. 41. Rights of person to whom a receipt has been negotiated. A person to whom a negotiable receipt has been duly
negotiated acquires thereby:
"(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in
good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be
delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value, and.
"(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the
receipt as fully as if the warehouseman had contracted directly with him."

A person to whom a negotiable receipt has been duly negotiated acquires (1) title to the goods covered by the receipt, as
well as (2) possession of the goods through the warehouseman, as if the latter had contracted directly with the person to
whom the negotiable receipt has been duly negotiated.
o Consequently, PNB, to whom the two quedans in question have been indorsed and delivered, thereby acquired
the ownership of the sugar covered by said quedans, with the logical result that the loss of the article should be
borne by it.
o The fact that the quedans were indorsed and delivered as a security for the payment of an indebtedness did not
prevent the bank from acquiring ownership, since the only effect of the transfer was that the debtor could
reacquire said ownership upon payment of his obligation.
o Section 41 of Act No. 2137 had already been construed by this court in the sense that ownership passes to the
indorsee, although the quedans are indorsed and delivered merely as a security. (Sy Cong Bieng vs. Hongkong &
Shanghai Bank, 56 Phil., 498; Philippine Trust Co. vs. Philippine National Bank, 42 Phil., 438; Bank of the Philippine
Islands vs. Herridge, 47 Phil., 57; Roman vs. Asia Banking Corporation, 46 Phil., 405.)

The relation of a pledgor of a warehouse receipt, duly indorsed and delivered to the pledgee, is substantially analogous to
the relation of a vendor and vendee, with right of repurchase.
o The seller a retro actually transfers the ownership of the property sold to the buyer, but the seller may reacquire
said ownership upon payment of the repurchase price.
If the property sold a retro is lost before being repurchased, the vendee naturally has to bear the loss,
with the seller having nothing to repurchase.
But if the loss should occur after the repurchase price has been paid but before the property sold a
retro is actually reconveyed, the buyer is bound to return to the seller only the repurchase price paid,
and not the value of the property.
o Thus, the loss of the sugar should be for the account of the PNB, which should return to the ESTATE P22,128.44,
the amount of the indebtedness of the estate, which had already been paid in 1948, without however being liable
for the difference between P54,952.75 (actual value of the sugar) and the amount of said payment.

3. Roman v. Asia Banking Maiti
In the matter of the Involuntary insolvency of U. DE POLI. FELISA ROMAN, claimant-appellee, vs. ASIA BANKING CORPORATION,
claimant-appellant.

ER:

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Umberto de Poli purchased 2,777 bales of tobacco from Felisa Roman

Of the P78,815.69 total value, de Poli paid P15,000 in cash. He then executed 4 notes of P15,953.92 to cover the balance
Subsequently, de Poli, for value received, issued a negotiable receipt (quedan) covering 576 bales of tobacco, to the Asia
Banking Corporation
de Poli then became insolvent, thus insolvency proceedings were instituted
in the said insolvency proceedings, CFI Manila held that Roman's lien over the 576 bales of tobacco was superior to that of
Asia Bank.
Hence this appeal.
WON Roman's right over the 576 bales of tobacco is superior to that of Asia Banking Corporation?
No. Sec 49 of the Warehouse Receipts Law states:
Where a negotiable receipt has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the
rights of any purchaser for value in good faith to whom such receipt has been negotiated, whether such negotiation
be prior or subsequent to the notification to the warehouseman who issued such receipt of the seller's claim to a lien
or right of stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods to
an unpaid seller unless the receipt is first surrendered for cancellation.
So if the warehouse receipt is negotiable, then Roman's lien cannot be superior to that of the Bank's
WON warehouse receipt is negotiable?
Yes. A warehouse receipt must be interpreted according to its evident intent and it is obvious that the deposit
evidenced by the receipt in this case was intended to be made subject to the order of the depositor and therefore
negotiable.
Moreover, the indorsement in blank of the receipt in controversy together with its delivery by U. de Poli to the
appellant bank took place on the very of the issuance of the warehouse receipt, thereby immediately demonstrating
the intention of U. de Poli and of the appellant bank, by the employment of the phrase "by order of Mr. U de Poli" to
make the receipt negotiable and subject to the very transfer which he then and there made by such endorsement in
blank and delivery of the receipt to the blank.
Any warehouse receipt not marked "non-negotiable" or "not negotiable" practically has 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

FACTS:

This is an appeal from an order entered by the CFI of Manila, 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.
Felisa Roman (ROMAN) claims the 576 bultos of tobacco (Exhibit A)
ROMAN notified the said Asia Banking Corporation (ASIA BANK) of her contention. Asia Banking Corporation replied
At the time the above entitled insolvency proceedings were filed, the 576 bultos of tobacco were in possession of U. de Poli
and now are in possession of the assignee.
U. de Poli, for value received, issued a quedan, covering aforesaid 576 bultos of tobacco, to the Asia Banking Corporation
That aforesaid 576 bultos of tobacco are part and parcel of the 2,777 bultos purchased by U. de Poli from Felisa
Roman.
The warehouse receipt issued by the warehouse of U. de Poli for 576 bales of tobacco.
In the left margin of the face of the receipts, U. de Poli certifies that he is the sole owner of the merchandise therein
described. The receipt is endorsed in blank "Umberto de Poli;" it is not marked "non-negotiable" or "not negotiable
In Exhibit A (which is some kind of agreement/contract between Roman and U de Poli), it says that the tobacco should
remain in the warehouse of U. de Poli as a deposit until the price was paid
however, it appears clearly from the language of the exhibit as a whole that it evidences a contract of sale

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findings of CFI also show that De Poli received from Felisa Roman, under this contract, 2,777 bales of tobacco of the
total value of P78,815.69, of which he paid P15,000 in cash and executed four notes of P15,953.92 each for the
balance
The sale having been thus consummated, the only lien upon the tobacco which Felisa Roman can claim is a vendor's
lien.
The order appealed from is based upon the theory that the tobacco was transferred to the Asia Banking Corporation as
security for a loan and that as the transfer neither fulfilled the requirements of the Civil Code for a pledge nor constituted a
chattel mortgage under Act No. 1508, the vendor's lien of Felisa Roman should be accorded preference over it.

ISSUE:
WON the warehouse receipt is negotiable? YES.
WON Roman's right over the 576 bales of tobacco is superior to that of Asia Banking Corporation? NO.

HELD: We therefore hold that the warehouse receipts in controversy was negotiable and that the rights of the indorsee (ASIA BANK)
thereof, the appellant, are superior to the vendor's (ROMAN) lien of the appellee and should be given preference over the latter

Roman's lien not superior to Bank
It is quite evident that the court below failed to take into consideration the provisions of section 49 of Act No. 2137 which
reads:
Where a negotiable receipt has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the
rights of any purchaser for value in good faith to whom such receipt has been negotiated, whether such negotiation
be prior or subsequent to the notification to the warehouseman who issued such receipt of the seller's claim to a lien
or right of stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods to
an unpaid seller unless the receipt is first surrendered for cancellation.
The term "purchaser" as used in the section quoted, includes mortgagee and pledgee.
In view of the foregoing provisions, there can be no doubt whatever that if the warehouse receipt in question is
negotiable, the vendor's lien of Felisa Roman cannot prevail against the rights of the Asia Banking Corporation as the
indorsee of the receipt.

The warehouse receipt is negotiable
The only question of importance to be determined in this case is, therefore, whether the receipt before us is negotiable.
The matter is not entirely free from doubt. The receipt is not perfect:
It recites that the merchandise is deposited in the warehouse "by order" instead of "to order" or "subject to the order"
of the depositor and it contain no other direct statement showing whether the goods received are to be delivered to
the bearer, to a specified person, or to a specified person or his order.
We think, however, that it must be considered a negotiable receipt.
A warehouse receipt, like any other document, must be interpreted according to its evident intent and it is quite obvious
that the deposit evidenced by the receipt in this case was intended to be made subject to the order of the depositor and
therefore negotiable.
That the words "by order" are used instead of "to order" is very evidently merely a clerical or grammatical error. If any
intelligent meaning is to be attacked to the phrase "Are deposited in these stores by order of Mr. U. de Poli" (google
translated) it must be held to mean "Are deposited in these stores to the order of Mr. U. de Poli" (google translated)
The phrase must be construed to mean that U. de Poli was the person authorized to indorse and deliver the receipts; any
other interpretation would mean that no one had such power and the clause, as well as the entire receipts, would be
rendered nugatory.

Moreover, the indorsement in blank of the receipt in controversy together with its delivery by U. de Poli to the appellant

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bank took place on the very of the issuance of the warehouse receipt, thereby immediately demonstrating the intention
of U. de Poli and of the appellant bank, by the employment of the phrase "by order of Mr. U de Poli" to make the receipt
negotiable and subject to the very transfer which he then and there made by such endorsement in blank and delivery of
the receipt to the blank.
As hereinbefore stated, the receipt was not marked "non-negotiable." Under modern statutes the negotiability of
warehouse receipts has been enlarged, the statutes having the effect of making such receipts negotiable unless marked
"non-negotiable."
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.

4. America Foreign Banking v. Herridge Dondon

Emergency Recitation (this should be enough, short case)
Poli, a warehouseman in Manila, had a debt (overdraft of Php40,000) with American Bank and as security he
issued a warehouse receipt (quedan) indorsed in blank representing 560 bales of Cagayan tobacco en rama
o Tobacco is stored in the bodega of Calle Azcarraga
Poli later on became insolvent so his properties are now administered by an assignee
American Bank subsequently wants the assignee to deliver the tobacco but the latter refuses stating
o The 560 bales are not in his possession
o That the quedan issued is not a negotiable warehouse receipt for failure to comply with Secs2, 4, 5 of
Warehouse receipt act
o Poli only issued it as collateral security
2 issues posed used as basis for assailing the warehouse receipt:
o Quedan stated 560 bales of tobacco, but the tobacco in the bodega of Calle Azcarraga was only 530
o American Bank claims Cagayan tobacco but the ones in the bodega is Isabela tobacco
Therefore the issue hinges on the identity of the tobacco claimed in relation to what is written in the quedan
Issue: W/N the warehouse receipt is valid despite the discrepancies Yes valid
W/N assignee must deliver goods to American Bank Yes must deliver
The facts clearly show that the identity of the tobacco Calle Azcarraga is the one referred to in the quedan,
despite the discrepancy in description. The evidence adduced:
o This lot of tobacco was the only tobacco in the warehouse.
o Poli admitted that it was the tobacco which he transferred to the claimant bank that at the time, he
notified Molina (guy in charge of his warehouses then) to set this tobacco for said security to American
Bank
o The bank sent its subaccountant, Mr. Kaintzler, to check the tobacco, and Poli pointed this lot of
tobacco to him

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Also, Poli explained that when he made the quedan, he didnt ask or give importance to the grade since
regardless of whether it was Cagayan or Isabela, he had to deliver the tobacco anyway
SC accepts explanation and evidence. Assignee must deliver the tobacco, or if sold already, the
proceeds less expenses to American Bank
The assignee stands in the shoes of the insolvent, and, while it is his duty to protect the general
creditors, he is not in the position of a judgment creditor with an unsatisfied execution.
The intention of the parties to the transaction must prevail against such a technical objection as to the
sufficiency of the description of the tobacco.

FACTS:
U. de Poli (Poli), then warehouseman in Manila, had a debt (overdraft amounting to Php40,000) to American
Foreign Banking Corporation (American Bank)
April 28, 1920 - Poli issued warehouse receipt No. A-48 (quedan) and endorsed said quedan in question (Exhibit
A) in blank and delivered it to American Bank as security on his overdraft
o Quedan represented 560 bales of tobacco, particularly described a Cagayan tabaco en rama with
specified marks thereon
o Poli certified over his signature: I certify that I am the sole owner of the merchandise herein described

Poli became insolvent and all hence all his property, including the warehouses and stuff are under the administration of
an assignee.
April 23, 1921 American Bank asked that the assignee be ordered to deliver the 560 bales of leaf tobacco
called for in said quedan upon surrender of the original of the warehouse receipt.

Assignee refused, contending:
Denied that the 560 bales of Cagayan tobacco listed in said Exhibit A are now in his possession as assignee of
said insolvent estate
Denied that said Exhibit A constitutes a negotiable warehouse receipt under the law, for the reason that it does
not comply with the provisions of sections 2, 4, or 5 of the Warehouse Receipt Act;
And that, even assuming that said 560 bales of leaf tobacco were now in his possession, he denies that the
claimant bank is the owner thereof, or has any lien thereon, or any rights therein, by virtue of said receipt;
And by his amended answer alleges that said Exhibit A was not delivered by the insolvent Poli to the claimant
for the purpose of transferring the ownership of the property described therein to it, but only as collateral
security for a pre-existing indebtedness by way of overdraft, for which purpose it is under the law invalid and
wholly ineffective as against the general creditors of the said insolvent estate

However, the facts (as also admitted by Poli in his testimony) show contrary to defences of assignee:
The authenticity of the quedan is admitted, Poli testified that he issued it to said bank as security for his said
overdraft
That the tobacco was in the bodega on Calle Azcarraga when he gave the quedan to the bank;
That the tobacco had to be stripped and booked, and for this reason there might have been a slight difference
between the quantity given in the quedan and the quantity at present in existence in the warehouse instead
of 560 bales, only 530 is present

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That he knows that the tobacco was in the warehouse at the time he became insolvent, because he had given
an order to fill an order for stripped tobacco, and
That the tobacco was taken from the pile which he had given in guaranty to American Bank;
That Vicente Molina was in charge of the warehouse, and that he (De Poli) acted upon the data furnished to him
by Mr. Molina.

2 problems posed:
1) American Bank claims 560 bales of tobacco, evidence shows that there were only 530 bales of tobacco.
2) The quedan calls for 'Cagayan tobacco,' but it was stipulated in this case that the 530 bales of tobacco claimed
by American Bank are Isabela tobacco.

The basis of the contentions therefore are based on the identity of the bales of tobacco subject of the quedan.

Poli provided sufficient explanations/justifications for both:
Poli explained this discrepancy in description by saying that he 'had the description of grade only and made the
quedan without giving importance if it was Cagayan or Isabela tobacco;'
That he asked only for grade, and did not ask whether it was Cagayan or Isabela tobacco, because he had to
deliver the security no matter whether it was Isabela or Cagayan tobacco.

Poli specifically ordered Molina (guy in charge of his warehouses then) to set aside the Isabela tobacco for this purpose
in Calle Azcarraga at the time he issued it to American Bank
The quedan in question was issued by J. Magpantay, who was 'encargado' of all the U. de Poli warehouses, but
he did not have control of the warehouses, according to Mr. De Poli.
Molina did not see the quedan when it was issued, but said that he knew of the tobacco which Mr. De Poli
transferred to the claimant bank, because Mr. De Poli told him about it; that it was tobacco from Isabela f or the
year 1919, was stored in the warehouse on Calle Azcarraga, and that there was no other tobacco in the
warehouse except the 1919 Isabela tobacco.

American Bank sent its subaccountant, Mr. Kaintzler, who verified the tobacco which was pointed out by Poli to him
In December, 1920, Mr. Kaintzler, a subaccountant of the claimant bank, went to the U. de Poli warehouse on
Calle Azcarraga to have the tobacco covered by this quedan, Exhibit A, pointed out to him;
That the then assignee (Mr. Bayne) and one of his accountants showed him (Kaintzler) the 530 bales of tobacco
with the tag A. F. B. C. on them, and these bales were pointed out to him by Mr. Bayne as the tobacco which
belonged to the American Foreign Banking Corporation. "The quedan (Exhibit A) is in the same form as quedan
No. A-155, which, in the case of Felisa Roman vs. Asia Banking Corporation, was declared by the Supreme Court
of the Philippine Islands to be a negotiable warehouse receipt conveying title to the said bank superior to that
of the vendor's lien of Felisa Roman (R. G. No. 17825)

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

2C 2015
Nego Week 14

The only question raised by the attorneys for the assignee and for the common creditors which will be considered by
the court is that as to the sufficiency of the description of the tobacco in said warehouse receipt.
This lot of tobacco was the only tobacco in the warehouse.
The debtor said that it was the tobacco which he transferred to the claimant bank.
The tobacco was pointed out by the then assignee to the claimant's representative as the tobacco covered by
said quedan, Exhibit A.
Hence, there does not appear to be any doubt about the identity of the tobacco.

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

ISSUES:
W/N the description of the tobacco in the quedan is sufficnet Yes it is
W/N the quedan is valid despite the warehouse receipt referring to Cagayan instead of Isabela Valid

HELD: CA judgment affirmed. American Bank wins.

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

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

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

5. BPI v. Herridge - Georgina

2C 2015
Nego Week 14

BPI vs Herridge- FU
ER:
POLI is an exporter and license warehouseman.
He stores his export goods in his own warehouse and indorsed the receipts to the bank.
Poli became insolvent.
Creditors (banks and unsecured creditors) were claiming against his estate and goods in his warehouse.
The unsecured creditors were saying that the receipts were not negotiable, hence the bank has no preference
of credit over them
ISSUE: WON the warehouse receipts issued by POLI were negotiable? Yes
SC: based on sec 7 of the Act, for a receipt to be non- negotiable the words not negotiable or non-
negotiable must appear on the FACE of the receipts, which do not appear here.
Also, it was an order receipt
o to the order of POLI instrument, since he owns the goods, stores them and indorsed them to the
bank.

DOCTRINE: Warehouse receipts play an important role in the commercial world, hence it must be construed
liberally in favor of the holder, so, when the words not negotiable or non negotiable does not appear on the
face of the receipts it would be considered as NEGOTIABLE RECEIPTS even if there is no statement that the
goods were to be delivered to the bearer or to a specified person.

FACTS:
Umberto de Poli (POLI) is engaged in the export business
(hemp, maguey and tobacco.)
He is also a licensed warehouseman.

To facilitate his business:
1. he opened a current account with banks (HSBC, BPI, Asia Banking Corp, Chartered Bank of India, Australia
and China, and Amercan Banking Corporation)
2. he drew checks against it
3. buys his goods
4. issues warehouse receipts for his goods,
5. indorsed the receipts to the bank
6. when the goods have been purchased, he would exchanged the warehouse receipts in lieu of
a. shipping papers,
b. Draft, drawn against the foreign purchasers in favor of the bank
c. Bill of Lading
7. Banks would receive the entire proceeds of his sale
8. Banks would credit proceeds to his current account
POLI was declared insolvent, banks (secured creditors due to the warehouse receipts) and unsecured creditors
were claiming ownership against the goods stored in POLIs warehouse
Unsecured crdiors were claiming that the receipts are
o Not negotiable
o Endoresement conveyed no title to the property
o Not pledges, no delivery of merchendise
o Hence, banks have no preference of credit over them
ISSUE: WON the warehouse receipts are negotiable? YES
RATIO:
SC: The Warehouse receipts issued by POLI are negotiable,

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Nego Week 14

Sec 7 of the Act provides that in order to be non-negotiable, the instrument must contain on its FACE the
words nonnegotiable or not negotiable nowhere in the face of the instrument were these words
stipulated
The intention to make it negotiable was clear from the receipts-
o Since POLI deposited the goods in his own warehouse, and it is stated in the receipts that he is the
owner of such, although there is no statement that the goods are to be delivered to the bearer of
the receipt or specified person, it must be PRESUMED that the goods are subject to the order of
POLI (order receipts)
Moreover, since warehouse receipts play an important role in the commercial business, it must be
construed liberally in favor of the holder
POSSIBLE questions:
Receipt was written in Spanish,
o MAGPANTAY (agent of POLI) wrote the receipts made an error in the translation.
o Por- might mean in English by, for, for the account of.- hence the court declared it must be construed
to mean by order of POLI
POLI was declared insolvent to the amount of several million pesos over his asset.

*not pertinent, but nevertheless:
Unsecured creditors made an issue regarding comingling of goods because the receipts were issued by POLI prior to
possession
GR: Warehouseman may not comingle goods, unless expressly authorized by the owner.
o Here, since POLI was also the owner of it, then the banks share in the goods would be in proportion of
the mass.

2C 2015

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Nego

Umberto de Poli purchased 2,777 bales of tobacco from Felisa Roman

Section 7 of the Uniform Warehouse Receipts Act, says:

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