G.R. Nos.

L-21000, 21002-21004, and 21006

December 20, 1924

In the matter of the involuntary insolvency of Umberto de Poli. BANK

OF THE PHILIPPINE ISLANDS, ET AL.,claimants-appellees,
vs.
J.R. HERRIDGE, assignee of the insolvent estate of U. de Poli,
BOWRING and CO., C.T. BOWRING and CO., LTD., and T.R.
YANGCO, creditors-appellants.
Crossfield and O'Brien, J.A. Wolfson and Camus and Delgado for
appellants.
Hartigan and Welch, Fisher and DeWitt and Gibbs and McDonough for
appellees.

OSTRAND, J.:
The present appeals, all of which relate to the Insolvency of U. de Poli, have
been argued together and as the principal questions involved are the same
in all of them, the cases will be disposed of in one decision.
The insolvent Umberto de Poli was for several years engaged on an
extensive scale in the exportation of Manila hemp, maguey and other
products of the country. He was also a licensed public warehouseman,
though most of the goods stored in his warehouses appear to have been
merchandise purchased by him for exportation and deposited there by he
himself.
In order to finance his commercial operations De Poli established credits
with some of the leading banking institutions doing business in Manila at that
time, among them the Hongkong & Shanghai Banking Corporation, the Bank
of the Philippine Islands, the Asia Banking Corporation, the Chartered Bank
of India, Australia and China, and the American Foreign Banking
Corporation. The methods by which he carried on his business with the
various banks was practically the same in each case and does not appear to

have differed from the ordinary and well known commercial practice in
handling export business by merchants requiring bank credits.
De Poli opened a current account credit with the bank against which he drew
his checks in payment of the products bought by him for exportation. Upon
the purchase, the products were stored in one of his warehouses and
warehouse receipts issued therefor which were endorsed by him to the bank
as security for the payment of his credit in the account current. When the
goods stored by the warehouse receipts were sold and shipped, the
warehouse receipt was exchanged for shipping papers, a draft was drawn in
favor of the bank and against the foreign purchaser, with bill of landing
attached, and the entire proceeds of the export sale were received by the
bank and credited to the current account of De Poli.itc-a1f
On December 8, 1920, De Poli was declared insolvent by the Court of First
Instance of Manila with liabilities to the amount of several million pesos over
and above his assets. An assignee was elected by the creditors and the
election was confirmed by the court on December 24, 1920. The assignee
qualified on January 4, 1921, and on the same date the clerk of the court
assigned and delivered to him the property of the estate.
Among the property taken over the assignee was the merchandise stored in
the various warehouses of the insolvent. This merchandise consisted
principally of hemp, maguey and tobacco. The various banks holding
warehouse receipts issued by De Poli claim ownership of this merchandise
under their respective receipts, whereas the other creditors of the insolvent
maintain that the warehouse receipts are not negotiable, that their
endorsement to the present holders conveyed no title to the property, that
they cannot be regarded as pledges of the merchandise inasmuch as they
are not public documents and the possession of the merchandise was not
delivered to the claimants and that the claims of the holders of the receipts
have no preference over those of the ordinary unsecured creditors.
On July 20, 1921, the banks above-mentioned and who claim preference
under the warehouse receipts held by them, entered into the following
stipulation:lawphi1.net

It is stipulated by the between the undersigned counsel, for the

Chartered Bank of India, Australia & China, the Hongkong &
Shanghai Banking Corporation, the Asia Banking Corporation and
the Bank of Philippine Islands that:
Whereas, the parties hereto are preferred creditors of the insolvent
debtor U. de Poli, as evidenced by the following quedans or
warehouse receipts for hemp and maguey stored in the
warehouses of said debtor:
QUEDANS OR WAREHOUSE RECEIPTS OF THE CHARTERED BANK
No. A-131 for 3,808 bales hemp.
No. A-157 for 250 bales hemp.
No. A-132 for 1,878 bales maguey.
No. A-133 for 1,574 bales maguey. Nos. 131, 132 and 133 all bear
date November 6, 1920, and No. 157, November 19, 1920.
QUEDANS OR WAREHOUSE RECEIPTS OF THE HONGKONG &
SHANGHAI BANKING CORPORATION
No. 130 for 490 bales hemp and 321 bales maguey.
No. 134 for 1,970 bales hemp.
No. 135 for 1,173 bales hemp.
No. 137 for 237 bales hemp.

No. 147 issued November 13, 1920, 393 bales hemp.

No. 148 issued November 13, 1920, 241 bales hemp.
No. 149 issued November 13, 1920, 116 bales hemp.
No. 150 issued November 13, 1920, 217 bales hemp.
And whereas much of the hemp and maguey covered by the above
mentioned quedans was either non-existent at the time of the issuance of
said quedans or has since been disposed of by the debtor and of what
remains much of the same hemp and maguey transferred by means of
quedans to one of the parties hereto has also been transferred by means of
other quedans to one or more of the other parties hereto and
Whereas, the hemp and maguey covered by said quedans is to a
considerable extent commingled.
Now, therefore, it is hereby agreed subject to the rights of any other
claimants hereto and to the approval of this Honorable Court that all that
remains of the hemp and maguey covered by the warehouse receipts of the
parties hereto or of any of them shall be adjudicated to them proportionately
by grades in accordance with the quedans held by each as above set forth in
accordance with the rule laid down in section 23 of the Warehouse Receipts
Law for the disposition of commingled fungible goods.
Manila, P.I., July 20, 1921.
GIBBS, MCDONOUGH & JOHNSON

QUEDANS OR WAREHOUSE RECEIPTS OF THE ASIA BANKING

CORPORATION
No. 57 issued May 22, 1920, 360 bales hemp.
No. 93 issued July 8, 1920 bales hemp.
No. 103 issued August 18, 1920, 544 bales hemp.
No. 112 issued September 15, 1920, 250 bales hemp.
No. 111 issued September 15, 1920, 2,007 bales maguey.
QUEDANS OR WAREHOUSE RECEIPTS OF THE BANK OF THE
PHILIPPINE ISLANDS

By A. D. GIBBS
Attorneys for the Chartered Bank
of India, Australia & China
FISHER & DEWITT
By C.A. DEWITT
Attorneys for the Hongkong & Shanghai
Banking Corporation
WOLFSON, WOLFSON & SCHWARZKOFF

Attorneys for the Asia Banking Corporation

HARTIGAN & WELCH
Attorneys for the Bank of the Philippine Islands
Claims for hemp and maguey covered by the respective warehouse receipts
of the banks mentioned in the foregoing stipulation were presented by each
of said banks. Shortly after the adjudication of the insolvency of the firm of
Wise & Co., one of the unsecured creditors of the insolvent on June 25,
1921, presented specific written objections to the claims of the banks on the
ground of the insufficiency of the warehouse receipts and also to the
stipulation above quoted on the ground that it was entered into for the
purpose of avoiding the necessity of identifying the property covered by each
warehouse receipt. Bowring & Co., C.T. Bowring Co., Ltd., and Teodoro R.
Yangco, also unsecured creditors of the insolvent, appeared in the case after
the decision of the trial court was rendered and joined with the assignee in
his motion for a rehearing and in his appeal to this court.
Upon hearing, the court below held that the receipts in question were valid
negotiable warehouse receipts and ordered the distribution of the hemp and
maguey covered by the receipts among the holders thereof proportionately
by grades, in accordance with the stipulation above quoted, and in a
supplementary decision dated November 2, 1921, the court adjudged the
merchandise covered by warehouse receipts Nos. A-153 and A-155 to the
Asia Banking Corporation. From these decisions the assignee of the
insolvent estate, Bowring & Co., C.T. Bowring Co., Ltd., and Teodoro R.
Yangco appealed to this court.
The warehouse receipts are identical in form with the receipt involved in the
case of Roman vs. Asia Banking Corporation (46 Phil., 705), and there held
to be a valid negotiable warehouse receipt which, by endorsement, passed
the title to the merchandise described therein to the Asia Banking
Corporation. That decision is, however, vigorously attacked by the
appellants, counsel asserting, among other things, that "there was not a
single expression in that receipt, or in any of those now in question, from
which the court could or can say that the parties intended to make them
negotiable receipts. In fact, this is admitted in the decision by the statement
"... and it contains no other direct statement showing whether the goods

received are to be delivered to the bearer, to a specified person, or to a

specified person or his order." There is nothing whatever in these receipts
from which the court can possibly say that the parties intended to use the
phrase "a la orden" instead of the phrase "por orden," and thus to make said
receipts negotiable. On the contrary, it is very clear from the circumstances
under which they were issued, that they did not intend to do so. If there was
other language in said receipts, such as would show their intention in some
way to make said receipts negotiable, then there would be some reason for
the construction given by the court. In the absence of language showing
such intention, the court, by substituting the phrase "a la orden" for the
phrase "por orden," is clearly making a new contract between the parties
which, as shown by the language used by them, they never intended to
enter into."
These very positive assertions have, as far as we can see, no foundation in
fact and rest mostly on misconceptions.
Section 2 of the Warehouse Receipts Act (No. 2137) prescribes the essential
terms of such receipts and reads as follows:
Warehouse receipts needed not be in any particular form, but every
such receipt must embody within its written or printed terms
(a) The location of the warehouse where the goods are stored,
(b) The date of issue of the receipt,
(c) The consecutive number of the receipt,
(d) A statement whether the goods received will be delivered to the
bearer, to a specified person, or to a specified person or his order,
(e) The rate of storage charges,
(f) A description of the goods or of the packages containing them,
(g) The signature of the warehouseman, which may be made by his
authorized agent,

(h) If the receipt is issued for goods of which the warehouseman is

owner, either solely or jointly or in common with others, the fact of
such ownership, and

QUEDAN No. A-112

Almacen Yangco
Por

(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.

Marcas
UDP

Bultos
250

Clase de
las
mercancia
s
Fardos
abaca

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.

1.a Estan asegurados contra riesgo de

incendios exclusivamente, segun las
condiciones de mis polizas; quedando
los demas por cuenta de los
depositantes.

Section 7 of the Act reads:

A nonnegotiable receipt shall have plainly placed upon its face by
the warehouseman issuing it "nonnegotiable," or "not negotiable."
In case of the warehouseman's failure so to do, a holder of the
receipt who purchased it for value supposing it to be negotiable,
may, at his option, treat such receipt as imposing upon the
warehouseman the same liabilities he would have incurred had the
receipt been negotiable.
All of the receipts here in question are made out on printed blanks and are
identical in form and terms. As an example, we may take receipt No. A-112,
which reads as follows:
U. DE POLI
209 Estero de Binondo
BODEGAS

"Quedan depositados en estos

almacenes por orden del Sr. U. de Poli la
cantidad de doscientos cincuenta fardos
abaca segun marcas detalladas al
margen, y con arreglo a las condiciones
siguientes:

2.a No se responde del peso, clase ni mal

estado de la mercancia depositada.
3.a El almacenaje sera de quince
centimos fardo por mes.

I certify that I am the sole

owner of the merchandise
herein described.
(Sgd.) "UMBERTO DE POLI

4.a El seguro sera de un octavo por

ciento mensual por el total. Tanto el
almacenaje como el seguro se cobraran
por meses vencidos, y con arreglo a los
dias devengados siendo el minimo para
los efectos del cobro 10 dias.
5.a No seran entregados dichos efectos
ni parte de los mismos sin la
presentacion de este "quedan" para su

correspondiente deduccion.
6.a El valor para el seguro de estas
mercancias es de pesos filipinos nueve
mil quinientos solamentes.
7.a Las operaciones de entrada y salida,
seran de cuenta de los depositantes,
pudiendo hacerlos con sus trabajadores,
o pagando los que le sean facilitados,
con arreglo a los tipos que tengo
convenido con los mios.

Valor del Seguro P9,500.

V. B.
(Sgd.) UMBERTO DE POLI

Manila, 15 de sept. de 1920.

El Encargado,
(Sgd.) I. MAGPANTAY

The receipt is not marked "nonnegotiable" or "not negotiable," and is

endorsed "Umberto de Poli."
As will be seen, the receipt is styled "Quedan" (warehouse receipt) and
contains all the requisites of a warehouse receipt as prescribed by section
2, supra, except that it does not, in express terms, state whether the goods
received are to be delivered to bearer, to a specified person or to his order.
The intention to make it a negotiable warehouse receipt appears,
nevertheless, quite clearly from the document itself: De Poli deposited the
goods in his own warehouse; the warehouse receipt states that he is the
owner of the goods deposited; there is no statement that the goods are to be
delivered to the bearer of the receipt or to a specified person and the
presumption must therefore necessarily be that the goods are in the
warehouse subject to the orders of their owner De Poli. As the owner of the
goods he had, of course, full control over them while the title remained in
him; we certainly cannot assume that it was the intention to have the goods
in the warehouse subject to no one's orders. That the receipts were intended
to be negotiable is further shown by the fact that they were not marked
"nonnegotiable" and that they were transferred by the endorsement of the

original holder, who was also the warehouseman. In his dual capacity of
warehouseman and the original holder of the receipt, De Poli was the only
party to the instrument at the time of its execution and the interpretation he
gave it at that time must therefore be considered controlling as to its intent.
In these circumstances, it is hardly necessary to enter into any discussion of
the intended meaning of the phrase "por orden" occurring in the receipts, but
for the satisfaction of counsel, we shall briefly state some of our reasons for
the interpretation placed upon that phrase in the Felisa Roman case:
The rule is well-known that wherever possible writings must be so construed
as to give effect to their general intent and so as to avoid absurdities.
Applying this rule, it is difficult to see how the phrase in question can be
given any other rational meaning than that suggested in the case mentioned.
It is true that the meaning would have been more grammatically expressed
by the word "a la orden"; the world "por preceding the word "orden" is
generally translated into the English language as "by" but "por" also means
"for" or "for the account of" (see Velazquez Dictionary) and it is often used in
the latter sense. The grammatical error of using it in connection with "orden"
in the present case is one which might reasonably be expected from a
person insufficiently acquainted with the Spanish language.
If the receipt had been prepared in the English language and had stated that
the goods were deposited "for order" of U. de Poli, the expression would not
have been in accordance with good usage, but nevertheless in the light of
the context and that circumstances would be quite intelligible and no one
would hesitate to regard "for order" as the equivalent of "to the order." Why
may not similar latitude be allowed in the construction of a warehouse
receipt in the Spanish language?
If we were to give the phrase the meaning contended for by counsel, it would
reveal no rational purpose. To say that a warehouseman deposited his own
goods with himself by his own order seems superfluous and means nothing.
The appellants' suggestion that the receipt was issued by Ireneo Magpantay
loses its force when it is considered that Magpantay was De Poli's agent and
that his words and acts within the scope of his agency were, in legal effect,
those of De Poli himself. De Poli was the warehouseman and not
Magpantay.

Counsel for the appellants also assail the dictum in our decision in the Felisa
Roman case that section 7 of the Warehouse Receipts Act "appears to give
any warehouse receipt not marked "nonnegotiable" or "not negotiable"
practically the same effect as a receipt which by its terms is negotiable
provided the holder of such unmarked receipt acquired it for value supposing
it to be negotiable." The statement is, perhaps, too broad but it certainly
applies in the present case as against the appellants, all of whom are
ordinary unsecured creditors and none of them is in position to urge any
preferential rights.
As instruments of credit, warehouse receipts play a very important role in
modern commerce and the present day tendency of the courts is towards a
liberal construction of the law in favor of a bona fide holder of such receipts.
Under the Uniform Warehouse Receipts Act, the Supreme Court of New York
in the case of Joseph vs. P. Viane, Inc.
( [1922], 194 N.Y. Supp., 235), held the following writing a valid warehouse
receipt:

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.

"Original. Lot No. 9. New York, November 19, 1918. P. Viane, Inc.,
Warehouse, 511 West 40th Street, New York City. For account of
Alpha Litho. Co., 261 9th Avenue. Marks: Fox Film Co. 557 Bdles
835- R. 41 x 54-116. Car Number: 561133. Paul Viane, Inc. E.A.
Thompson. P. Viane, Inc., Warehouse."

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:

In the case of Manufacturers' Mercantile Co vs. Monarch Refrigerating Co.

( [1915], 266 III., 584), the Supreme Court of Illinois said:

"Fungible goods" means goods of which any unit is, from its nature
or by mercantile custom, treated as the equivalent of any other unit.

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.

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, A112, dated September 15, 1920, for 250 bales of hemp and A-111, dated
September 15, 1920, for 207 bales of maguey.
The assignments of error in connection with this appeal are, with the
exception of the fourth, similar to those in the other cases and need not be
further discussed.
Under the fourth assignment, the appellants contend that warehouse
receipts Nos. A-153, A-154 and A-155 were illegal preferences on the
assumption that the claimant bank must have had reasonable reasons to
believe that De Poli was insolvent on November 18, 1920, when the three
receipts in question were received. In our opinion, the practically undisputed
evidence of the claimant bank sufficiently refutes this contention.
For the reasons hereinbefore stated the judgments appealed from are
hereby affirmed, without costs. So ordered.
Street, Malcolm, Avancea, Villamor, and Romualdez, JJ., concur.

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 abovenamed 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
acting in good faith, and the quedans were duly issued, endorsed and
delivered to it as 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 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 bank
was the owner and entitled to the possession of the copra therein described.
The receipts call for 15,699.34 piculs of copra, but plaintiff admits that, with
its consent, 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 evidenced by the quedans.
As in the case of the Philippine Trust Company vs. Philippine National
Bank,1 recently decided, there is no direct evidence of the market value of
the copra. But each quedan 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 treated as the market
value. Deducting the 1,112.15 piculs, which were surrendered by the plaintiff
out of quedan No. 1255, the declared value of the copra remaining was
P240,689.
The decision of the lower court is reversed, and judgment will be entered
here in favor of the plaintiff and against the defendant for P240,689, with
interest thereon from March 21, 1919, at the rate of 6 per cent per annum,
and costs in this and the lower court. So ordered.
Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor and
Romualdez, JJ., concur.

G.R. No. L-23033

January 5, 1967

LUA KIAN, plaintiff and appellee,

vs.
MANILA RAILROAD COMPANY and MANILA PORT
SERVICE, defendants and appellants.
D. F. Macaranas and S. V. Pampolina Jr. for defendants and appellants.
San Juan, Laig and Associates for plaintiff and appellee.
BENGZON, J. P., J.:
The present suit was filed by Lua Kian against the Manila Railroad Co. and
Manila Port Service for the recovery of the invoice value of imported
evaporated "Carnation" milk alleged to have been undelivered. The following
stipulation of facts was made:
1. They admit each other's legal personality, and that during the
time material to 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 pursuant to the
Management Contract entered into by and between the Bureau of
Customs and defendant Manila Port Service on February 29, 1956;
2. On December 31, 1959, plaintiff Lua Kian imported 2,000 cases
of Carnation Milk from the Carnation Company of San Francisco,
California, and shipped on Board SS "GOLDEN BEAR" per Bill of
Lading No. 17;
3. Out of the aforesaid shipment of 2,000 cases of Carnation Milk
per Bill of Lading No. 17, only 1,829 cases marked `LUA KIAN
1458' were discharged from the vessel SS `GOLDEN BEAR' and
received by defendant Manila Port Service per pertinent tally sheets
issued by the said carrying vessel, on January 24, 1960;
4. Discharged from the same vessel on the same date unto the
custody of 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;
5. Defendant Manila Port Service delivered to the plaintiff thru its
broker, Ildefonso Tionloc, Inc. 1,913 cases of Carnation Milk
marked "LUA KIAN 1458" per pertinent gate passes and broker's
delivery receipts;
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.