[G.R. No. L-11776. August 30, 1958.

]
RAMON GONZALES, Plaintiff-Appellee, v. GO TIONG and LUZON SURETY CO., INC., Defendants-Appellants.
Rustico V. Nazareno for Appellee.
David, Abel & Ysip for appellant Go Tiong.
Tolentino, Garcia & D. R. Cruz for appellant Luzon Surety Co., Inc.

SYLLABUS
1. WAREHOUSE RECEIPTS LAW; DEPOSIT WITH ORDINARY RECEIPT IS GOVERNED BY SAID LAW; FORM OF RECEIPT
DIRECTORY. Any deposit made with a bonded warehouseman must necessarily be governed by the provisions of Act No. 3893.
The kind or nature of the receipts issued by him for the deposits is not very material, much less decisive. Though it is desirable that
receipts issued by a bonded warehouseman should conform to the provisions of the Warehouseman Receipts Law, said provisions are
not mandatory, and indispensable in the sense that if they fell short of the requirement of the Warehouse Receipts Act, then the
commodities delivered for storage become ordinary deposits and will not be governed by the provisions of the Bonded Warehouse Act.
Under Section 1 of the Warehouse Receipts Act, the issuance of a warehouse receipt in the form provided by it is merely permissive
and directory and not obligatory.

2. COMPROMISE AND SETTLEMENT; NON-CONSUMMATED COMPROMISE DOES NOT DISCHARGE SURETY. A compromise
or settlement between the creditor or obligee and the principal, by which the latter is discharged from liability, discharges the surety. But
an unconsummated agreement to compromise, falling, short of an effective settlement, will not discharge the surety." (50 C. J. 185.)

DECISION
MONTEMAYOR, J.:

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

"In view whereof, judgment is rendered condemning defendant Go Tiong and Luzon Surety Co., jointly and severally, to pay plaintiff the
sum of P4,920 with legal interest from the date of the filing of the complaint until fully paid; judgment is also rendered against Go Tiong
to pay the sum of P3,680 unto plaintiff, also with legal interest from the date of the filing of the complaint until fully paid. Go Tiong is also
condemned to pay the sum of P1,000 as attorneys fees, plus costs."cralaw virtua1aw library

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

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

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

On or about March 15, 1953, plaintiff demanded from Go Tiong the value of his deposits in the amount of P8,600, but he was told to
return after two days, which he did, but Go Tiong again told him to come back. A few days later, the warehouse burned to the ground.
Before the fire, Go Tiong had been accepting deliveries of palay from other depositors and at the time of the fire, there were 5,847
sacks of palay in the warehouse, in excess of the 5,000 sacks authorized under his license. The receipts issued by Go Tiong to the
plaintiff were ordinary receipts, not the "warehouse receipts" defined by the Warehouse Receipts Act (Act No. 2137).

After the burning of the warehouse, the depositors of palay, including plaintiff, filed their claims with the Bureau of Commerce, and it
would appear that with the proceeds of the insurance policy, the Bureau of Commerce paid off some of the claims. Plaintiffs counsel
later withdrew his claim with the Bureau of Commerce, according to Go Tiong, because his claim was denied by the Bureau, but
according to the decision of the trial court, because nothing came from plaintiffs efforts to have his claim paid. Thereafter, Gonzales
filed the present action against Go Tiong and the Luzon Surety for the sum of P8,600, the value of his palay, with legal interest,
damages in the sum of P5,000 and P1,500 as attorneys fees. Gonzales later renewed his claim with the Bureau of Commerce (Exhibit
S).

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

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

"I. The trial court erred in finding that plaintiff-appellees claim is covered by the Bonded Warehouse Law, Act 3893, as amended, and
not by the Civil Code.
"II. The trial court erred in not exempting defendant-appellant Go Tiong for the loss of the palay deposited, pursuant to the provisions of
the New Civil Code."cralaw virtua1aw library
x x x
"I. The trial court erred in not declaring that the amicable settlement by and between plaintiff-appellee and defendant Go Tiong
constituted a material alteration of the surety bond of appellant Luzon Surety which extinguished and discharged its liability.
"II. The trial court erred in holding that the receipts for the palay received by Go Tiong, though not in the form of "quedans" or
warehouse receipts are chargeable against the surety bond filed under the provisions of the General Bonded Warehouse Act (Act No.
3893 as amended by Republic Act No. 247) as a result of a loss.
"III. The trial court erred in not holding that the plaintiff had renounced and abandoned his rights under the Bonded Warehouse Act by
the withdrawal of his claim from the Bureau of Commerce and the execution of the amicable settlement.
"IV. The trial court erred in not holding that the palay delivered to Go Tiong constitutes gratuitous deposit which was extinguished upon
the loss and destruction of the subject-matter.
"V. The trial court erred in not declaring that the transaction between defendant Go Tiong and plaintiff was more of a sale rather than a
deposit.
"VI. The trial court erred in declaring that the Luzon Surety Co., Inc., had not complied with its undertaking despite the liquidation of all
the claims by the Bureau of Commerce.
"VII. The lower court erred in adjudging the herein surety liable under the terms of the Bond."cralaw virtua1aw library

We shall discuss the assigned errors at the same time, considering the close relation between them, although we do not propose to
discuss and rule upon all of them. Both appellants urge that plaintiffs claim is governed by the Civil Code and not by the Bonded
Warehouse Act (Act No. 3893, as amended by Republic Act No. 247), for the reason that, as already stated, what Go Tiong issued to
plaintiff were ordinary receipts, not the warehouse receipts contemplated by the Warehouse Receipts Law, and because the deposits of
palay of plaintiff were gratuitous.

Act No. 3893 as amended is a special law regulating the business of receiving commodities for storage and defining the rights and
obligations of a bonded warehouseman and those transacting business with him. Consequently, any deposit made with him as a
bonded warehouseman must necessarily be governed by the provisions of Act No. 3893. The kind or nature of the receipts issued by
him for the deposits is not very material, much less decisive. Though it is desirable that receipts issued by a bonded warehouseman
should conform to the provisions of the Warehouse Receipts Law, said provisions in our opinion are not mandatory and indispensable
in the sense that if they fell short of the requirements of the Warehouse Receipts Act, then the commodities delivered for storage
become ordinary deposits and will not be governed by the provisions of the Bonded Warehouse Act. Under Section 1 of the Warehouse
Receipts Act, one would gather the impression that the issuance of a warehouse receipt in the form provided by it is merely permissive
and directory and not obligatory:jgc:chanrobles.com.ph

"SECTION 1. Persons who may issue receipts. Warehouse receipts may be issued by any warehouseman.",

and the Bonded Warehouse Act as amended permits the warehouseman to issue any receipt, thus:jgc:chanrobles.com.ph

". . . receipt as any receipt issued by a warehouseman for commodity delivered to him."cralaw virtua1aw library

As the trial court well observed, as far as Go Tiong was concerned, the fact that the receipts issued by him were not "quedans" is no
valid ground for defense because he was the principal obligor. Furthermore, as found by the trial court, Go Tiong had repeatedly
promised plaintiff to issue to him "quedans" and had assured him that he should not worry; and that Go Tiong was in the habit of issuing
ordinary receipts (not "quedans") to his depositors.

As to the contention that the deposits made by the plaintiff were free because he paid no fees therefor, it would appear that Go Tiong
induced plaintiff to deposit his palay in the warehouse free of charge in order to promote his business and to attract other depositors, it
being understood that because of this accommodation, plaintiff would convince other palay owners to deposit with Go Tiong.

Appellants contend that the burning of the warehouse was a fortuitous event and not due to any fault of Go Tiong and that
consequently, he should not be held liable, appellants supporting the contention with the ruling in the case of La Sociedad Dalisay v. De
los Reyes, 55 Phil. 452, reading as follows:jgc:chanrobles.com.ph

"Inasmuch as the fire, according to the judgment appealed from, was neither intentional nor due to the negligence of the appellant
company or its officials; and it appearing from the evidence that the then manager attempted to save the palay, the appellant company
should not be held responsible for damages resulting from said fire. . . ."cralaw virtua1aw library

The trial court correctly disposed of this same contention, thus:jgc:chanrobles.com.ph

"The defense that the palay was destroyed by fire neither does the Court consider to be good for while the contract was in the nature of
a deposit and the loss of the thing would exempt the obligor in a contract of deposit to return the goods, this exemption from the
responsibility for the damages must be conditioned in his proof that the loss was by force majeure, and without his fault. The Court does
not see from the evidence that the proof is clear on the legal exemption. On the contrary, the fact that he exceeded the limit of the
authorized deposit must have increased the risk and would militate against his defense of nonliability. For this reason the Court does
not follow La Sociedad v. De Los Santos, 55 Phil. 42 quoted by Go Tiong." (p. 3, Decision)

Considering the fact, as already stated, that prior to the burning of the warehouse, plaintiff demanded the payment of the value of his
palay from Go Tiong on two occasions but was put off without any valid reason, under the circumstances, the better rule which we
accept is the following:jgc:chanrobles.com.ph

". . . This rule proceeds upon the theory that the facts surrounding the care of the property by a bailee are peculiarly within his
knowledge and power to prove, and that the enforcement of any other rule would impose great difficulties upon the bailors. . . . It is
illogical and unreasonable to hold that the presumption of negligence in case of this kind is rebutted by the bailee by simply proving that
the property bailed was destroyed by an ordinary fire which broke out on the bailees own premises, without regard to the care
exercised by the latter to prevent the fire, or to save the property after the commencement of the fire. All the authorities seem to agree
that the rule that there shall be a presumption of negligence in bailment cases like the present one, where there is default in delivery or
accounting, for the goods is just a necessary one. . . ." (9 A.L.R. 566; see also Hanes v. Shapiro, 84 S.E. 33; J. Russel Mfg. Co. v. New
Haven, S.B. Co., 50 N.Y. 211; Beck v. Wilkins-Ricks Co., 102 S.E. 313; Fleishman v. Southern R. Co., 56 S.E. 974).

Besides, as observed by the trial court, the defendant violated the terms of his license by accepting for deposit palay in excess of the
limit authorized by his license, which fact must have increased the risk.

The Luzon Surety claims that the amicable settlement by and between Gonzales and Go Tiong constituted a material alteration of its
bond, thereby extinguishing and discharging its liability. It is evident, however, that while there was an attempt to settle the case
amicably, the settlement was never consummated because Go Tiong failed to settle the accounts of Gonzales to the latters
satisfaction. Consequently, said nonconsummated compromise settlement does not discharge the surety:jgc:chanrobles.com.ph

"A compromise or settlement between the creditor or obligee and the principal, boy which the latter is discharged from liability,
discharges the surety, . . . . But an unconsummated . . . agreement to compromise, falling short of an effective settlement, will not
discharge the surety." (50 C. J. 185)

In relation to the failure of Go Tiong to issue the warehouse receipts contemplated by the Warehouse Receipts Act, which failure,
according to appellants, precluded plaintiff from suing on the bond, reference may be made to Section 2 of Act No. 3893, defining
receipt as any receipt issued by a warehouseman for commodity delivered to him, showing that the law does not require as
indispensable that a warehouse receipt be issued. Furthermore, Section 7 of said law provides that as long as the depositor is injured
by a breach of any obligation of the warehouseman, which obligation is secured by a bond, said depositor may sue on said bond. In
other words, the surety cannot avoid liability from the mere failure of the warehouseman to issue the prescribed receipt. In the case of
Andreson v. Krueger, 212 N.W. 198, 199, it was held:jgc:chanrobles.com.ph

"The surety company concedes that the bond which it gave contains the statutory conditions. The statute . . . requires that the bond
shall be conditioned upon the faithful performance of the public local grain warehouseman of all the provisions of law relating to the
storage of grain by such warehouseman.

"The surety company thereby made itself responsible for the performance by the warehouseman of all the duties and obligations
imposed upon him by the statute; and, if he failed to perform any such duty to the loss or detriment of those who delivered grain for
storage, the surety company became liable therefor. Where the warehouseman receives grain for storage and refuses to return or pay
it, the fact that he failed to issue the receipt, when the statute required him to issue on receiving it, is not available to the surety as a
defense against an action on the bond. The obligation of the surety covers the duty of the warehouseman to issue the prescribed
receipt, as well as the other duties imposed upon him by the statute."cralaw virtua1aw library

We deem it unnecessary to discuss and rule upon the other questions raised in the appeal.

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

G.R. No. L-25748 March 10, 1975

CONSOLIDATED TERMINALS, INC., plaintiff-appellant, vs.
ARTEX DEVELOPMENT CO., INC., defendant-appellee.

Pelaez, Jalandoni and Jamir for plaintiff-appellant.

Norberto J. Quisumbing and Humberto V. Quisumbing for defendant-appellee.

AQUINO, J.:+.wph!1

Consolidated Terminals, Inc. (CTI) appealed from the order of Judge Jesus Y. Perez of the Court of First Instance of Manila, dismissing
its amended complaint for damages against Artex Development Co., Inc. (Artex for short). The dismissal was predicated on lack of
cause of action.

The following ultimate facts, which were hypothetically admitted in the motion to dismiss, were alleged in the amended complaint:

CTI was the operator of a customs bonded warehouse located at Port Area, Manila. It received on deposit one hundred ninety-three
(193) bales of high density compressed raw cotton valued at P99,609.76. It was understood that CTI would keep the cotton in behalf of
Luzon Brokerage Corporation until the consignee thereof, Paramount Textile Mills, Inc., had opened the corresponding letter of credit in
favor of shipper, Adolph Hanslik Cotton of Corpus Christi, Texas.

Allegedly by virtue of a forged permit to deliver imported goods, purportedly issued by the Bureau of Customs, Artex was able to obtain
delivery of the bales of cotton on November 5 and 6, 1964 after paying CTI P15,000 as storage and handling charges. At the time the
merchandise was released to Artex, the letter of credit had not yet been opened and the customs duties and taxes due on the shipment
had not been paid. (That delivery permit, Annex A of the complaint, was not included by CTI in its record on appeal).

CTI, in its original complaint, sought to recover possession of the cotton by means of a writ of replevin. The writ could not be executed.
CTI then filed an amended complaint by transforming its original complaint into an action for the recovery from Artex of P99,609.76 as
compensatory damages, P10,000 as nominal and exemplary damages and P20,000 as attorney's fees.

It should be clarified that CTI in its affidavit for manual delivery of personal property (Annex B of its complaint not included in its record
on appeal) and in paragraph 7 of its original complaint alleged that Artex acquired the cotton from Paramount Textile Mills, Inc., the
consignee. Artex alleged in its motion to dismiss that it was not shown in the delivery permit that Artex was the entity that presented that
document to the CTI. Artex further averred that it returned the cotton to Paramount Textile Mills, Inc. when the contract of sale between
them was rescinded because the cotton did not conform to the stipulated specifications as to quality (14-15, Record on Appeal). No
copy of the rescissory agreement was attached to Artex's motion to dismiss.

In sustaining Artex's motion to dismiss, which CTI did not oppose in writing, Judge Perez said:t.hqw

Since the plaintiff (CTI) is only a warehouseman and according to the amended complaint, plaintiff was already paid the warehousing
and handling charges of the 193 bales of high density compressed raw cotton mentioned in the complaint, the plaintiff can no longer
recover for its services as warehouseman.

The fact that the delivery of the goods was obtained by the defendant without opening the corresponding letter of credit cannot be the
basis of a cause of action of the plaintiff because such failure of the defendant to open the letter of credit gives rise to a cause of action
in favor of the shipper of the goods and not in favor of the plaintiff.

With respect to the allegation of the amended complaint that the goods were taken by the defendant without paying the customs duties
and other revenues (sic) assessed thereon, this does not give rise to a cause of action in favor of the plaintiff for the party aggrieved is
the government.

Likewise, the alleged presentation of a forged permit to deliver imported goods by the defendant did not give rise to a cause of action in
favor of the plaintiff but in favor of the Bureau of Customs and of the consignee. (18-19, Record on Appeal).

Judge Perez was guided more by logic and common sense than by any specific rule of law or jurisprudence.

CTI in this appeal contends that, as warehouseman, it was entitled to the possession (should be repossession) of the bales of cotton;
that Artex acted wrongfully in depriving CTI of the possession of the merchandise because Artex presented a falsified delivery permit,
and that Artex should pay damages to CTI.

The only statutory rule cited by CTI is section 10 of the Warehouse Receipts Law which provides that "where a warehouseman delivers
the goods to one who is not in fact lawfully entitled to the possession of them, the warehouseman shall be liable as for conversion to all
having a right of property or possession in the goods ...".

We hold that CTI's appeal has not merit. Its amended complaint does not clearly show that, as warehouseman, it has a cause of action
for damages against Artex. The real parties interested in the bales of cotton were Luzon Brokerage Corporation as depositor,
Paramount Textile Mills, Inc. as consignee, Adolph Hanslik Cotton as shipper and the Commissioners of Customs and Internal
Revenue with respect to the duties and taxes. These parties have not sued CTI for damages or for recovery of the bales of cotton or the
corresponding taxes and duties.

The case might have been different if it was alleged in the amended complaint that the depositor, consignee and shipper had required
CTI to pay damages, or that the Commissioners of Customs and Internal Revenue had held CTI liable for the duties and taxes. In such
a case, CTI might logically and sensibly go after Artex for having wrongfully obtained custody of the merchandise.

But that eventuality has not arisen in this case. So, CTI's basic action to recover the value of the merchandise seems to be untenable. It
was not the owner of the cotton. How could it be entitled to claim the value of the shipment?

In other words, on the basis of the allegations of the amended complaint, the lower court could not render a valid judgment in
accordance with the prayer thereof. It could not render such valid judgment because the amended complaint did not unequivocally
allege what right of CTI was violated by Artex, or, to use the familiar language of adjective law, what delict or wrong was committed by
Artex against CTI which would justify the latter in recovering the value of bales of cotton even if it was not the owner thereof. (See Ma-
ao Sugar Central Co., Inc. vs. Barrios, 79 Phil. 666; 1 Moran's Comments on the Rules of Court, 1970 Ed., pp. 259, 495).

WHEREFORE, the order of dismissal is affirmed with costs against the plaintiff-appellant. SO ORDERED.
[G.R. No. 119231. April 18, 1996]
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO C. SE, JR., RTC, BR. 45, MANILA; NOAHS ARK
SUGAR REFINERY; ALBERTO T. LOOYUKO, JIMMY T. GO and WILSON T. GO, respondents.

SYLLABUS

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

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

APPEARANCES OF COUNSEL

Rolan A. Nieto for petitioner.

Madella & Cruz Law Offices for private respondents.
DECISION
HERMOSISIMA, JR., J.:

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

The herein petition seeks to annul: (1) the Resolution of respondent Judge Benito C. Se, Jr. of the Regional Trial Court of Manila,
Branch 45, dated December 20, 1994, in Civil Case No. 90-53023, authorizing reception of evidence to establish the claim of
respondents Noahs Ark Sugar Refinery, et al., for storage fees and preservation expenses over sugar stocks covered by five (5)
Warehouse Receipts which is in the nature of a warehousemans lien; and (2) the Resolution of the said respondent Judge, dated
March 1, 1995, declaring the validity of private respondents warehousemans lien under Section 27 of Republic Act No 2137 and
ordering that execution of the Court of Appeals decision, dated December 13, 1991, be in effect held in abeyance until the full amount
of the warehousemans lien on the sugar stocks covered by five (5) quedans subject of the action shall have been satisfied conformably
with the provisions of Section 31 of Republic Act 2137.

Also prayed for by the petition is a Writ of Prohibition to require respondent RTC Judge to desist from further proceeding with Civil Case
No. 90-53023, except order the execution of the Supreme Court judgment; and a Writ of Mandamus to compel respondent RTC Judge
to issue a Writ of Execution in accordance with the said executory Supreme Court decision.

THE FACTS

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

Subsequently, Warehouse Receipts Nos. 18080 and 18081 were negotiated and endorsed to Luis T. Ramos; and Receipts Nos. 18086,
18087 and 18062 were negotiated and endorsed to Cresencia K. Zoleta. Ramos and Zoleta then used the quedans as security for two
loan agreements - one for P15.6 million and the other for P23.5 million - obtained by them from the Philippine National Bank. The
aforementioned quedans were endorsed by them to the Philippine National Bank.

Luis T. Ramos and Cresencia K. Zoleta failed to pay their loans upon maturity on January 9, 1990. Consequently, on March 16, 1990,
the Philippine National Bank wrote to Noahs Ark Sugar Refinery demanding delivery of the sugar stocks covered by the quedans
endorsed to it by Zoleta and Ramos. Noahs Ark Sugar Refinery refused to comply with the demand alleging ownership thereof, for
which reason the Philippine National Bank filed with the Regional Trial Court of Manila a verified complaint for Specific Performance
with Damages and Application for Writ of Attachment against Noahs Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson
T. Go, the last three being identified as the sole proprietor, managing partner, and Executive Vice President of Noahs Ark, respectively.

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

Noahs Ark and its co-defendants filed an Answer with Counterclaim and Third-Party Complaint in which they claimed that they are the
owners of the subject quedans and the sugar represented therein, averring as they did that:

9.*** In an agreement dated April 1, 1989, defendants agreed to sell to Rosa Ng Sy of RNS Merchandising and Teresita Ng of St.
Therese Merchandising the total volume of sugar indicated in the quedans stored at Noahs Ark Sugar Refinery for a total consideration
of P63,000,000.00,

*** The corresponding payments in the form of checks issued by the vendees in favor of defendants were subsequently dishonored by
the drawee banks by reason of payment stopped and drawn against insufficient funds,

*** Upon proper notification to said vendees and plaintiff in due course, defendants refused to deliver to vendees therein the quantity of
sugar covered by the subject quedans.

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

The Answer incorporated a Third-Party Complaint by Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, doing business under the
trade name and style Noahs Ark Sugar Refinery against Rosa Ng Sy and Teresita Ng, praying that the latter be ordered to deliver or
return to them the quedans (previously endorsed to PNB and the subject of the suit) and pay damages and litigation expenses.

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

On January 31, 1991, the Philippine National Bank filed a Motion for Summary Judgment in favor of the plaintiff as against the
defendants for the reliefs prayed for in the complaint.

On May 2, 1991, the Regional Trial Court issued an order denying the Motion for Summary Judgment. Thereupon, the Philippine
National Bank filed a Petition for Certiorari with the Court of Appeals, docketed as CA-G.R. SP. No. 25938 on December 13, 1991.

Pertinent portions of the decision of the Court of Appeals read:

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

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

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

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

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

On June 9, 1992, the PNB filed an appeal from the RTC decision with the Supreme Court, G.R. No. 107243, by way of a Petition for
Review on Certiorari under Rule 45 of the Rules of Court. This Court rendered judgment on September 1, 1993, the dispositive portion
of which reads:
WHEREFORE, the trial judges decision in Civil Case No. 90-53023, dated June 18, 1992, is reversed and set aside and a new one
rendered conformably with the final and executory decision of the Court of Appeals in CA-G.R SP. No. 25938, ordering the private
respondents Noahs Ark Sugar Refinery, Alberto T. Looyuko, Jimmy T. Go and Wilson T. Go, jointly and severally:

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

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

SO ORDERED.3

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

Private respondents filed a Motion Seeking Clarification of the Decision, dated September 1, 1993. We denied this motion in this
manner:

It bears stressing that the relief granted in this Courts decision of September 1, 1993 is precisely that set out in the final and executory
decision of the Court of Appeals in CA-G.R. SP No. 25938, dated December 13, 1991, which was affirmed in toto by this Court and
which became unalterable upon becoming final and executory. 4

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

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

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

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

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

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

The PNB submits that:

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

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

III.RESPONDENT RTCS ONLY JURISDICTION IS TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT DECISION. THUS,
PNB IS ENTITLED TO: (1) A WRIT OF CERTIORARI TO ANNUL THE RTC RESOLUTION DATED DECEMBER 20, 1994 AND THE
ORDER DATED FEBRUARY 7, 1995 AND ALL PROCEEDINGS TAKEN BY THE RTC THEREAFTER; (2) A WRIT OF PROHIBITION
TO PREVENT RESPONDENT RTC FROM FURTHER PROCEEDING WITH CIVIL CASE NO. 90-53023 AND COMMITTING OTHER
ACTS VIOLATIVE OF THE SUPREME COURT DECISION IN G.R. NO. 107243; AND (3) A WRIT OF MANDAMUS TO COMPEL
RESPONDENT RTC TO ISSUE THE WRIT TO EXECUTE THE SUPREME COURT JUDGMENT IN FAVOR OF PNB
The issues presented before us in this petition revolve around the legality of the questioned orders of respondent judge, issued as they
were after we had denied with finality private respondents contention that the PNB could not compel them to deliver the stocks of sugar
in their warehouse covered by the endorsed quedans or pay the value of the said stocks of sugar.

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

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

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

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

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

Of considerable relevance is the pertinent stipulation in the subject Warehouse Receipts which provides for respondent Noahs Arks
right to impose and collect warehousemans lien:

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

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

Petitioner anchors its claim against private respondents on the five (5) Warehouse Receipts issued by the latter to third-party
defendants Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. Therese Merchandising, which found their way to petitioner after
they were negotiated to them by Luis T. Ramos and Cresencia K. Zoleta for a loan of P39.1 Million. Accordingly, petitioner PNB is
legally bound to stand by the express terms and conditions on the face of the Warehouse Receipts as to the payment of storage fees.
Even in the absence of such a provision, law and equity dictate the payment of the warehouseman s lien pursuant to Sections 27 and
31 of the Warehouse Receipts Law (R.A. 2137), to wit:

SECTION 27. What claims are included in the warehousemans lien. - Subject to the provisions of section thirty, a warehouseman shall
have lien on goods deposited or on the proceeds thereof in his hands, for all lawful charges for storage and preservation of the goods;
also for all lawful claims for money advanced, interest, insurance, transportation, labor, weighing coopering and other charges and
expenses in relation to such goods; also for all reasonable charges and expenses for notice, and advertisement of sale, and for sale of
the goods where default has been made in satisfying the warehousemans lien.

xxx xxx xxx

SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a lien valid against the person
demanding the goods may refuse to deliver the goods to him until the lien is satisfied.

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

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

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

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

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

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

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

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

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

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

G.R. No. L-34655 March 5, 1932

SIY CONG BIENG & CO., INC., plaintiff-appellee, vs.
HONGKONG & SHANGHAI BANKING CORPORATION, defendant-appellant.

DeWitt, Perkins & Brandy for appellant.

Feria & La O for appellee.

OSTRAND, J.:

This action was brought in the Court of First Instance of Manila to recover the sum of P31,645, the value of 464 bales of hemp
deposited in certain bonded warehouses as evidenced by the quedans (warehouse receipts) described in the complaint, said quedans
having been delivered as pledge by one Otto Ranft to the herein defendant, the Hongkong and Shanghai Banking Corporation, for the
guarantee of a preexisting debt of the former to the latter. The record shows that both parties, through their respective counsel,
subscriber and submitted to the court below the following agreement of facts:

STIPULATION OF FACTS

(Translated into English)

Come now the parties, both the plaintiff and the defendant Hongkong & Shanghai Banking Corporation, through their respective
counsel in the above entitled case, and respectfully submit to the court the following agreed statements of facts:

1. That both the plaintiff and the defendant Hongkong & Shanghai Banking Corporation are corporations domicile in the City of Manila
and duly authorized to transact business in accordance with the laws of the Philippine Islands.
2. That the plaintiff is a corporation engaged in business generally, and that the defendant Hongkong & Shanghai Banking Corporation
is a foreign bank authorized to engage in the banking business in the Philippines.

3. That on June 25, 1926, certain negotiable warehouse receipts described below were pledge by Otto Ranft to the defendant
Hongkong & Shanghai Banking Corporation to secure the payment of his preexisting debts to the latter:

No. Warehouseman Depositor Bales

1707 Public Warehouse Co Siy Cong Bieng & Co., Inc. 27
133 W.F. Stevenson Co do 67
1722 Public Warehouse Co do 60
1723 do do 4
1634 The Philippine Warehouse Company do 99
1918 Public Warehouse Co O. Ranft 166
2 Siy Cong Bieng & Co., Inc do 2
1702 The Philippine Warehouse Company Siy Cong Bieng & Co., Inc. 39
And that the baled hemp covered by these warehouse receipts was worth P31,635; receipts number 1707,133,1722, 1723, 1634, and
1702 being endorsed in blank by the plaintiff and Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone.

4. That in the night of June 25, 1926, said Otto Ranft died suddenly at his house in the City of Manila.

5. That both parties submit this agreed statement of facts, but reserve their right to have in evidence upon other points not included
herein, and upon which they cannot come to an agreement.

Manila, August 7, 1929.

The evidence shows that on June 25, 1926, Ranft called at the office of the herein plaintiff to purchase hemp (abaca), and he was
offered the bales of hemp as described in the quedans above mentioned. The parties agreed to the aforesaid price, and on the same
date the quedans, together with the covering invoice, were sent to Ranft by the plaintiff, without having been paid for the hemp, but the
plaintiff's understanding was that the payment would be made against the same quedans, and it appear that in previous transaction of
the same kind between the bank and the plaintiff, quedans were paid one or two days after their delivery to them.

In the evening of the day upon which the quedans in question were delivered to the herein defendant, Ranft died, and when the plaintiff
found that such was the case, it immediately demanded the return of the quedans, or the payment of the value, but was told that the
quedans had been sent to the herein defendant as soon as they were received by Ranft.

Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645 in the intestate proceedings of the estate of the deceased
Otto Ranft, which on an appeal form the decision of the committee on claims, was allowed by the Court of First Instance in case No.
31372 (City of Manila). In the meantime, demand had been made by the plaintiff on the defendant bank for the return of the quedans, or
their value, which demand was refused by the bank on the ground that it was a holder of the quedans in due course. Thereupon the
plaintiff filed its first complaint against the defendant, wherein it alleged that it has "sold" the quedans in question to the deceased O.
Ranft for cash, but that the said O. Ranft had not fulfilled the conditions of the sale. Later on, plaintiff filed an amended complaint,
wherein they changed the word "sold" referred to in the first complaint to the words "attempted to sell".

Upon trial the judge of the court below rendered judgment in favor of the plaintiff principally on the ground that in the opinion of the court
the defendant bank "could not have acted in good faith for the reason that according to the statements of its own witness, Thiele, the
quedans were delivered to the bank in order to secure the debts of Ranft for the payment of their value and from which it might be
deduced that the said bank knew that the value of the said quedans was not as yet paid when the same were endorsed to it, and its
alleged belief that Ranft was the owner of the said quedans was not in accordance with the facts proved at the time"; and that,
moreover, the circumstances were such that "the bank knew, or should have known, that Ranft had not yet acquired the ownership of
the said quedans and that it therefore could not invoke the presumption that it was acting in good faith and without negligence on its
part".

In our opinion the judgment of the court below is not tenable. It may be noted, first, that the quedans in question were negotiable in
form; second, that they were pledge by Otto Ranft to the defendant bank to secure the payment of his preexisting debts to said bank
(paragraph 3 of the Stipulation of Facts); third, that such of the quedans as were issued in the name of the plaintiff were duly endorsed
in blank by the plaintiff and by Otto Ranft; and fourth, that the two remaining quedans which were duly endorsed in blank by him.

When these quedans were thus negotiated, Otto Ranft was indebted to the Hongkong & Shanghai Banking Corporation in the sum of
P622,753.22, which indebtedness was partly covered by quedans. He was also being pressed to deposit additional payments as a
further security to the bank, and there is no doubt that the quedans here in question were received by the bank to secure the payment
of Ranft's preexisting debts; it is so stated in paragraph 3 of the stipulation of the facts agreed on by the parties and hereinbefore
quoted.

It further appears that it has been the practice of the bank in its transactions with Ranft that the value of the quedans has been entered
in the current accounts between Ranft and the bank, but there is no evidence to the effect that the bank was at any time bound to pay
back to Ranft the amount of any of the quedans, and there is nothing in the record to show that the bank has promised to pay the
values of the quedans neither to Ranft nor to the herein plaintiff; on the contrary, as stated in the stipulation of facts, the "negotiable
warehouse receipts were pledged by Otto Ranft to the defendant Hongkong & Shanghai Banking Corporation secure the payment of
his preexisting debts to the latter", and taking into consideration that the quedans were negotiable in form and duly endorsed in blank
by the plaintiff and by Otto Ranft, it follows that on the delivery of the qeudans to the bank they were no longer the property of the
indorser unless he liquidated his debt with the bank.

In his brief the plaintiff insists that the defendant, before the delivery of the quedans, should have ascertained whether Ranft had any
authority to negotiate the quedans.

We are unable to find anything in the record which in any manner would have compelled the bank to investigate the indorser. The bank
had a perfect right to act as it did, and its action is in accordance with sections 47, 38, and 40 of the Warehouse Receipts Act (Act No.
2137), which read as follows:

SEC. 47. When negotiation not impaired by fraud, mistake, or duress. The validity of the negotiation of a receipt is not impaired by
the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the
receipt was induced by fraud, mistake, or duress to intrust the possession or custody of the receipt was negotiated, or a person to
whom the receipt was subsequent negotiated, paid value therefor, without notice of the breach of duty, or fraud, mistake, or duress.

SEC. 38. Negotiation of negotiable receipts by indorsement. A negotiable receipt may be negotiated by the indorsement of the
person to whose order the goods are, by the terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a
specified person. . . . Subsequent negotiation may be made in like manner.

SEC. 40. Who may negotiate a receipt. A negotiable receipt may be negotiated:

(a) By the owner thereof, or

(b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the
warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been
entrusted, or if at the time of such entrusting the receipt is in such form that it may be negotiated by delivery.

The question as to the rights the defendant bank acquired over the aforesaid quedans after indorsement and delivery to it by Ranft, we
find in section 41 of the Warehouse Receipts Act (Act No. 2137):

SEC. 41. Rights of person to whom a receipt has been negotiated. A person to whom a negotiable receipt has been duly negotiated
acquires thereby:

(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for
value, and also such title to the goods as the depositor of person to whose order the goods were to be delivered by the terms of the
receipt had or had ability to convey to a purchaser in good faith for value, and. . . .

In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank & Trust Co. (239 U.S., 520), Chief Justice
Hughes said in regard to negotiation of receipts:

It will be observed that "one who takes by trespass or a finder is not included within the description of those who may negotiate."
(Report of Commissioner on Uniform States Laws, January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of
warehouse receipts as documents of title. Under sec. 40, the person who may negotiate the receipt is either the "owner thereof", or a
"person to whom the possession or custody of the receipt has been intrusted by the owner" if the receipt is in the form described. The
warehouse receipt represents the goods, but the intrustion of the receipt, as stated, is more than the mere delivery of the goods; it is a
representation that the one to whom the possession of the receipt has been so intrusted has the title to the goods. By sec. 47, the
negotiation of the receipt to a purchaser for value without notice is not impaired by the fact that it is a breach of duty, or that the owner
of the receipt was induced "by fraud, mistake, or duree" to intrust the receipt to the person who negotiated it. And, under sec. 41, one to
whom the negotiable receipt has been duly negotiated acquires such title to the goods as the person negotiating the receipt to him, or
the depositor or person whose order the goods were delivered by the terms of the receipt, either had or "had ability to convey to a
purchaser in good faith for value." The clear import of these provisions is that if the owner of the goods permit another to have the
possession or custody of negotiable warehouse receipts running to the order of the latter, or to bearer, it is a representation of title upon
which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent
owner.

In its second assignment of error, the defendant-appellant maintains that the plaintiff-appellee is estopped to deny that the bank had a
valid title to the quedans for the reason that the plaintiff had voluntarily clothed Ranft with all the attributes of ownership and upon which
the defendant bank relied. In our opinion, the appellant's view is correct. In the National Safe Deposit vs. Hibbs (229 U.S., 391), certain
certificates of stock were pledged as collateral by the defendant in error to the plaintiff bank, which certificates were converted by one of
the trusted employees of the bank to his own use and sold by him. The stock certificates were unqualified endorsed in blank by the
defendant when delivered to the bank. The Supreme Court of the United States through Justice Day applied the familiar rule of
equitable estoppel that where one of two innocent persons must suffer a loss he who by his conduct made the loss possible must bear
it, using the following language:

We think this case correctly states the principle, and, applied to the case in hand, is decisive of it. Here one of two innocent person
must suffer and the question at last is, Where shall the loss fall? It is undeniable that the broker obtained the stock certificates,
containing all the indicia of ownership and possible of ready transfer, from one who had possession with the bank's consent, and who
brought the certificates to him, apparently clothed with the full ownership thereof by all the tests usually applied by business men to gain
knowledge upon the subject before making a purchase of such property. On the other hand, the bank, for a legitimate purpose, with
confidence in one of its own employees, instrusted the certificates to him, with every evidence of title and transferability upon them. The
bank's trusted agent, in gross breach of his duty, whether with technical criminality or not is unimportant, took such certificates, thus
authenticated with evidence of title, to one who, in the ordinary course of business, sold them to parties who paid full value for them. In
such case we think the principles which underlie equitable estoppel place the loss upon him whose misplaced confidence has made the
wrong possible. . . .

We regret that the plaintiff in this case has suffered the loss of the quedans, but as far as we can see, there is now no remedy available
to the plaintiff. The bank is not responsible for the loss; the negotiable quedans were duly negotiated to the bank and as far as the
record shows, there has been no fraud on the part of the defendant.

The appealed judgment is reversed and the appellant is absolved from the plaintiff's complaint. Without costs. So ordered.

G.R. No. L-4080 September 21, 1953

JOSE P. MARTINEZ, as administrator of the Instate Estate of Pedro Rodriguez, deceased, plaintiff-appellant, vs.
PHILIPPINE NATIONAL BANK, defendant-appellee.

Delgado, Flores, & Macapagal for appellant.

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

MONTEMAYOR, J.:

As of February 1942, the estate of Pedro Rodriguez was indebted to the defendant Philippine National Bank in the amount of
P22,128.44 which represented the balance of the crop loan obtained by the estate upon its 1941-1942 sugar cane crop. Sometime in
February 1942, Mrs. Amparo R. Martinez, late administratrix of the estate upon request of the defendant bank through its Cebu branch
endorsed and delivered to the said bank two (2) quedans according to plaintiff-appellant issued by the Bogo-Medellin Milling co. where
the sugar was stored covering 2,198.11 piculs of sugar belonging to the estate, although according to the defendant-appellee, only one
quedan covering 1,071.04 piculs of sugar was endorsed and delivered. During the last Pacific war, sometime in 1943, the sugar
covered by the quedan or quedans was lost while in the warehouse of the Bogo-Medellin Milling Co. In the year 1948, the indebtedness
of the estate including interest was paid to the bank, according to the appellant, upon the insistence of land pressure brought to bear by
the bank.

Under the theory and claim the sometime in February 1942, when the invasion of the Province of Cebu by the Japanese Armed Forces
was imminent, the administratrix of the estate asked the bank to release the sugar so that it could be sold at a god price which was
about P25 per picul in order to avoid its possible loss due to the invasion, but that the bank refused that request and as a result the
amount of P54,952.75 representing the value of said sugar was lost, the present action was brought against the defendant bank to
recover said amount. After trial, the Court of First Instance of Manila dismissed the complaint on the ground that the transfer of the
quedan or quedans representing the sugar in the warehouse of the Bogo-Medellin Milling Co. to the bank did not transfer ownership of
the sugar, and consequently, the loss of said sugar should be borne by the plaintiff appellant. administrator Jose R. Martinez is now
appealing from that decision.

We agree with the trial court that at the time of the loss of the sugar during the war, sometime in 1943, said sugar still belonged to the
estate of Pedro Rodriguez. It had never been sold to the bank so as to make the latter owner thereof. The transaction could not have
been a sale, first, because one of the essential elements of the contract of sale, namely, consideration was not present. If the sugar
was sold, what was the price? We do not know, for nothing was said about it. Second, the bank by its charter is not authorized to
engage in the business of buying and selling sugar. It only accepts sugar as security for payment of its crop loans and later on pursuant
to an understanding with the sugar planters, it sell said sugar for them, or the planters find buyers and direct them to the bank. The
sugar was given only as a security for the payment of the crop loan. This is admitted by the appellant as shown by the allegations in its
complaint filed before the trial court and also in the brief for appellant filed before us. According to law, the mortgagee or pledge cannot
become the owner of or convert and appropriate to himself the property mortgaged r pledged (Article 1859, old Civil Code; Article 2088,
new Civil code). Said property continues t belong to the mortgagor or pledgor. The only remedy given to the mortgagee or pledgee is to
have said property sold at public auction and the proceeds of the sale applied to the payment of the obligation secured by the mortgage
or pledge.

The position and claim of plaintiff-appellant is rather inconsistent and confusing. First, he contends that the endorsement and delivery of
the quedan or quedans to the bank transferred the ownership of the sugar to said bank so that as owner, the bank should suffer the
loss of the sugar on the principle that "a thing perishes for the owner". We take it that by endorsing the quedan, defendant was
supposed to have sold the sugar to the bank for the amount of the outstanding loan of P22,128.44 and the interest then occured. That
would mean that plaintiff's account with the bank has been entirely liquidated and their contractual relations ended, the bank suffering
the loss of the amount of the loan and interest But plaintiff-appellant in the next breath contends that had the bank released the sugar in
February 1942, plaintiff ]could have sold it for P54,952.75, from which the amount of the loan and interest could have been deducted,
the balance to have been retained by plaintiff, and that since the loan has been entirely liquidated in 1948, then the whole expected
sale price of P54,952.75 should now be paid by the bank to appellant. This second theory presupposes that despite the indorsement of
the quedan plaintiff still retained ownership of the sugar, a position that runs counter to the first theory of transfer of ownership to the
bank.

In the course of the discussion of this case among the members of the Tribunal, one or two them who will dissent from the majority view
sought to cure and remedy this apparent inconsistency in the claim of appellant and sustain the theory that the endorsement of the
quedan made the bank the owner of the sugar resulting in the payment of the loan, so that now, the bank should return to appellant the
amount of the loan it improperly collected in 1948.
In support of the theory of transfer of ownership of the sugar to the bank by virtue of the endorsement of the quedan, reference was
made to the Warehouse Receipts Law, particularly section 41 thereof, and several cases decided by this court are cited. In the first
place, this claim is inconsistent with the very theory of plaintiff appellant that the sugar far from being sold to the bank was merely given
as security for the payment of the crop loan. In the second place, the authorities cited have not directly applicable. In those cases this
court held that for purposes of facilitating commercial transaction, the endorse of transferee of a warehouse receipt or quedan should
be regarded as the owner of the goods covered by it. In other words, as regards the endoser or transferor, even if he were the owner of
the goods, he may not take possession and dispose of the goods without the consent of the endorse or transferee of the quedan or
warehouse receipt; that in some cases the endorse of a quedan may sell the goods and apply the proceeds of the sale to the payment
of the debt; and as regards third persons, the holder of a warehouse receipt or quedan is considered the owner of the goods covered by
it. To make clear the view of this court in said court in two of these cases cited which are typical.

As to the first of action, we hold that in January, 1919, the bank became and remained the owner of the five quedans Nos. 30, 35, 38,
41, and 42; that they were in form negotiable, and that, as such owner, it was legally entitled to the possession and control of the
property therein described at the time the insolvency petition was filed and had a right to sell it and apply the proceeds of the sale to its
promissory notes, cured by the three quedans Nos. 33, 36, and 39, which the bank surrendered to the firm. (Philippine Trust Co. vs.
National Bank, 42 Phil., 413, 427).

... Section 58 provides that within the meaning of the Act "to "purchase" includes to take as mortgagee or pledgee' and clear that, as to
the legal title to the property covered by a warehouse receipt, a pledgee is on the same footing as a vendee except that the former is
under the obligation of surrendering his title upon the payment of the debt secured. To hold otherwise would defeat one of the principal
purposes of the Act, i. e., to furnish a basis for commercial credit. (Bank of the Philippine Islands vs. Herridge, 47 Phil. 57, 70).

It is obvious that where the transaction involved in the transfer of a warehouse receipt or quedan is not a sale but pledge or security, the
transferee or endorsee does not become the owner of the goods but that he may only have the property sold then satisfy the obligation
from the proceeds of the sale. From all this, it is clear that at the time the sugar in question was lost sometime during the war, estate of
Pedro Rodriguez was still the owner thereof.

It is further contended in this appeal that the defendant appellee failed to excercise due care for the preservation of the sugar, and that
the loss was due to its negligence as a result of which the appellee incurred the loss. In the first place, this question was not raised in
the court below. Plaintiff's complaint to make any allegation regarding negligence in the preservation of this sugar. In the second place,
it is a fact that the sugar was lost in the possession of the warehouse selected by the appellant to which it had originally delivered and
stored it, and for causes beyond the bank's control, namely, the war.

In connection with the claim that had the released the sugar sometime in February, 1942, when requested by the plaintiff, said sugar
could have been sold at the rate of P25 a picul or a total of P54,952.75, the amount of the present claim, there is evidence to show that
the request for release was not made to the bank itself but directly to the official of the warehouse the Bogo Medellin Milling Co. and
that bank was not aware of any such request, but that therefore April 9, 1942, when the Cebu branch of the defendant was closed, the
bank through its officials offered the sugar for sale but that there were no buyers, perhaps due to the unsettled and chaotic conditions
that obtaining by reason of the enemy occupation.

In conclusion, we hold that where a warehouse receipt or quedan is transferred or endorsed to a creditor only to secure the payment of
a loan or debt, the transferee or endorsee does not automatically become the owner of the goods covered by the warehouse receipt or
quedan but he merely retains the right to keep and with the consent of the owner to sell them so as to satisfy the obligation from the
proceeds of the sale, this for the simple reason that the transaction involved is not a sale covered by the quedans of warehouse
receipts is lost without the fault or negligence of the mortgagee or pledgee or quedan, then said goods are to be regarded as lost on
account of the real owner, mortgagor or pledgor.1wphl.nt

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

Bengzon, Padilla, Tuason, Reyes, Jugo, Bautista Angelo, and Labrador, JJ., concur.

Separate Opinions

PARAS, C. J., dissenting:

The plaintiff seeks to recover from the defendant Philippine National Bank the sum of P54,952.75, representing the value of 2,198.11
piculs of sugar covered by two quedans indorsed and delivered to the bank by the administratix of the estate of the deceased Pedro
Rodriguez to secure the indebtedness of the latter in the amount of P22,128.44. It is alleged that when the two quedans were indorsed
and delivered to the defendant bank in or about January, 1942, the sugar was in deposit at the Bogo-Medellin Sugar Co., Inc.; that said
sugar was lost during the war; that the indebtedness of P22,128.44 was liquidated in 1948 by the estate of the deceased Pedro
Rodriguez and that, notwithstanding demands, the defendant bank refused to credit the plaintiff with the value of the sugar lost.

There is no question as to the existence of the sugar covered by the two quedans, or as to the indorsement and delivery of said
quedans to the defendant bank. The Court of First Instance of Manila which decided against the plaintiff and held that the defendant
bank is not liable for the loss of the sugar in question, indeed stated that the only question that arises is whether the indorsement of the
warehouse receipts transferred the ownership f the sugar to the defendant bank; that if it did, the bank should suffer the loss, but if it did
not, the loss should be for the account of the estate of the deceased Pedro Rodriguez. In dismissing the plaintiff's action, the trial court
held that the indorsement of the quedans to the defendant bank did not carry with it the transfer of ownership of the sugar, as the
indorsement and delivery were effected merely secure the payment of an indebtedness, to facilitate the sale of the sugar, and to
prevent the debtor from disposing of it without the knowledge and consent of the defendant bank. The plaintiff has appealed.

The applicable legal provision is section 41 of Act No. 2137, otherwise as the Warehouse Receipts Law, which reads as follows:

SEC. 41. Rights of person to whom a receipt has been negotiated. A person to whom a negotiable receipt has been duly
negotiated acquires thereby:

(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for
value, and also such to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt
had or had ability to convey to a purchaser in good faith for value, and

(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if
the warehouseman had contracted directly with him.

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

The relation of a pledgor of a warehouse receipt duly indorsed and delivered to the pledge, is substantially right of repurchase. The
vendor a retro actually transfers the ownership of the property sold to the vendee, but the former may reacquire said ownership upon
payment is lost before being repurchased, the vendee naturally has to bear the loss, with the vendor having nothing to repurhase. But if
the loss should occur after the repurchase price has been paid but before the property sold a retro is actually reconveyed, the vendee is
bound to return to the vendor only the repurchase price paid, and not the value of the property. In my opinion, therefore, the loss of the
sugar should be for the account of the defendant bank, which should return to the plaintiff P22,128.44, the amount of the indebtedness
of the estate of the deceased Pedro Rodriguez which had already been paid 1948, without however being liable for the difference
between P54,952.75 (actual value of the sugar) and the amount of said payment.

The appealed judgment should therefore be reversed and the defendant bank sentenced to pay to the plaintiff the sum of
P22,128.44.1wphl.nt

Pablo, J., concurs.

G.R. No. L-22511 December 22, 1924

Involuntary insolvency of U. de Poli. FELISA ROMAN, claimant-appellee, vs.
J. R. HERRIDGE, assignee-appellant.
BOWRING and CO., C.T. BOWRING and CO., LTD., ET AL., creditors-appellants.

J.A. Wolfson, Crossfield and O'Brien, Camus and Delgado, Ross, Lawrence and Selph, Fisher & DeWitt, Gibbs and McDonough, and
Thomas Cary Welch for appellants.
Araneta and Zaragoza for appellee.

STATEMENT

Based on a proper proceeding on December 8, 1920, U. de Poli was declared insolvent by the Court of First Instance of Manila.
January 4, 1921, the claim of Felisa Roman was presented to the assignee founded upon what is known in the record as Exhibit A,
which is an agreement entered into by and between her and the insolvent on October 23, 1920. She then claimed that she had placed
in De Poli's bodegas 3, 031 quintals and 7 kilos of tobacco of the value of P78,815.69. That under the terms of the agreement, De Poli
had paid her P15,000 in cash, and had executed four promissory notes for the balance, each for the sum of P15,953.92, and maturing
in order thirty, sixty, ninety and one hundred and twenty days after their execution. She also claimed that all of the tobacco remained as
her own, except that portion represented by the cash payment of P15,000. In her petition, she prayed for an order of the court that the
option of De Poli to purchase the 2,201 bales and 57 bales of tobacco described in Exhibit A be cancelled, and that she be declared the
sole owner thereof, unless the assignee of the insolvent secure her in the payment of the purchase price.

January 15, 1921, the assignee filed an answer to her petition in which he claims, among other things, that the four promissory notes
were a valid claim against the insolvent estate and that the transaction was one of purchase and sale, and that delivery of the tobacco
had been made and that title to it has passed to the insolvent.

January 18, 1921, the lower court held in legal effect that the transaction was one of purchase and sale, and that under the provisions
of article 1922 of the Civil Code, Felisa Roman had a preference right for the amount of the unpaid purchase price on the proceeds
from the sale of the tobacco then in the hands of the assignee, and ordered him to pay her the unpaid purchase price delivered from the
proceeds of such sale.

April 19, 1921, Felisa Roman filed two other motions: (a) To declare null and void the contract of pledge between De Poli and the Asia
Banking Corporation for 576 bales of the tobacco in question, and (b) to order the assignee to sell the 2,777 fardos of tobacco for which
the court had decided that she held a preference at the rate of P10 per quintal. This gave rise to the case known as Roman vs. Asia
Banking Corporation (46 Phil., 705), decided by the Supreme Court on June 26, 1922, in which it was held in legal effect that the only
lien upon the tobacco which Felisa Roman had claim was a vendor's lien, and that the claim of the Asia Banking Corporation based
upon quedans was superior to that of Felisa Roman.lawphi1.net

August 3, 1922, through other and different counsel Felisa Roman claimed that Exhibit A made between the parties on October 23,
1920, was a notarial agreement and, as such, was a public document, and that the claim of Felisa Roman had a preference over all
other creditors which did not have such a preference. That the amount of her claim was P64.640.96, with interest at 10 per cent per
annum from August 3, 1922, ad that she be allowed such preference.

March 8, 1924, the assignee filed written objections to the allowance of the claim as a preference, and alleged that the proceeds
derived from the sale of the remainder of the tobacco had been paid over to the claimant in accordance with the order of January 18,
1921. That the question of the preference is now res judicata. That she did not have any preference and that her claim should be
denied.

March 18, 1924, and apparently without a hearing or the taking of any testimony, the lower court made an order that:

The balance still unpaid of Felisa Roman, viz: the sum of P55,218.52, with interest of 10 per cent from November 19, 1920, is hereby
allowed by this court with the preference due to its being evidenced by public document.

From this decision the assignee and numerous creditors appeal, contending that the lower court erred in failing to sustain the plea of
res judicata and applying article 1924 of the Civil Code to the claim of Felisa Roman, in holding that she had a preference over other
creditors of the insolvent estate, and in making its order without notice to the other creditors.

JOHNS, J.:

Numerous other questions are ably discussed in the briefs of opposing counsel, but the storm center of this case is the legal force and
effect of Exhibit A. Among other things, it recites that Felisa Roman is the owner of from 2,500 to 3,000 quintals of tobacco of different
classes.

2nd. That she has agreed to sell said quantity of from 2,500 to 3,000 quintals of tobacco aforementioned to the party of the second part,
which purchase and sale is to be governed by the following conditions:

(a) The party of the first part shall ship to the party of the second part, duly baled, the tobacco of which she is the owner in bales
not less than 50 kilos, all the expenses to be caused by said merchandise up to the railroad station at Tutuban to be for the account of
said party of the first part, in which station the party of the second part shall take charge of said merchandise and from that moment the
risk thereof shall be for the account of the latter.

(b) The price for which the party of the first part sells to the party of the second part the aforesaid tobacco is P26, Philippine
currency, per quintal, payable in the manner hereinafter to be stated.

(c) The party of the second part shall be the consignee of the tobacco in the City of Manila and shall take charge thereof upon
receiving the bill of shipment and the internal revenue stamp, and shall take it to his warehouse wherein the same shall be held as a
deposit until the date on which said party of the second part shall pay the price thereof, the payment of storage and insurance to be for
the account of said party of the second part.

It then recites that upon the last shipment of tobacco, it should all be weighed and that when the weight is ascertained, there should be
a liquidation of the price, on the account of which P15,000 should be paid and the balance should be divided into four promissory notes
of equal amount, the first of which should become due thirty days from date, the second after another thirty days, etc., all of which
should draw interest at the rate of ten per cent per annum. The contract then recites:

The installments granted the purchaser for the payment of the price are subject to the resolutory condition that, if before the maturity of
each installment, the purchaser should sell a part of the tobacco in corporation to the amount of any of the remaining notes not yet due,
or in case he should sell all the tobacco, the installments shall become due, for it is agreed that in this case from the moment that the
party of the second part should have sold the tobacco, the deposit thereof as security for the payment of the price is cancelled and the
amount of the part remaining unpaid shall simultaneously become demandable.

As we analyze it, the instrument is an executory contract upon which nothing becomes due and payable until such time as all of the
tobacco is shipped, received and weighed by De Poli, when the amount would then be ascertained and determined and P15,000 of the
amount paid, and the balance divided equally to be evidenced by four promissory notes. The contract also expressly recites that Felisa
Roman is the owner of from 2,500 to 3,000 quintals of tobacco which she agreed to sell to De Poli upon the conditions above specified.
In other words, the quantity of the tobacco ranges from 2,500 to 3,000 quintals, and the amount is not to be fixed or determined until
after the arrival of the last shipment, at which time it is all to be weighed. Hence, the amount which De Poli would owe Felisa Roman
was not and could not be ascertained or determined until after the last shipment was made and the tobacco was weighed.

Article 1924 of the Civil Code, among other things, provides that "With respect to the other personal and real property of the debtor, the
following credits shall be
preferred: ... ." And subdivision 3 is as follows:

Credits which without a special privilege are evidenced by:

A. A public instrument; or

B. A final judgment, should they have been the subject of litigation.

These credits shall have preference among themselves in the order of the priority of dates of the instruments and of the judgments
respectively.

Exhibit A is an executory contract. Within itself no debt was created and it is not evidence of any credit. By its express terms De Poli did
not owe Felisa Roman anything and was not to pay her anything until after the last shipment of the tobacco was received and then
weighed. Within the meaning of the word "credit," as defined by article 1924, there was no debt or liability on the part of De Poli until
after Felisa Roman complied with her part of the contract. If for any reason she had failed to deliver the tobacco, no one would contend
that she would have any claim against De Poli. Her claim would be contingent upon the delivery of the tobacco. The amount of the
tobacco which was to be delivered ranged from 2,500 to 3,000 quintals. Hence, the amount of the claim could not become certain or
definite until the last shipment was made and the tobacco weighed. In other words, the document itself does not show upon its face that
any debt is due or owing from De Poli to Felisa Roman or the amount of it. That fact should only be determined by matters outside of
the document and would be contingent upon the shipment and weighing of the tobacco, and the quantity of it which would range from
2,500 to 3,000 quintals at P26 per quintal.

As this court held, after the tobacco was delivered, under the terms of the contract, Felisa Roman had a vendor's lien, but she would
not have such a lien until after the delivery of the tobacco. A fortiori she would not have a preferred lien under the provisions of article
1924 until after such delivery. Until the contract was actually consummated by both parties, either had a right to rescind. The plaintiff
could refuse to make delivery, and De Poli could refuse to accept delivery of the tobacco. It was a contract to be performed in the
future, contingent upon delivery and acceptance.

A preference is an exception to the general rule, and is what its name implies. By it one person is given a superior right or claim over
another. For such reason the law as to preferences should be strictly construed.

The following definitions are given of the words "executory contract" in Words & Phrases, volume 3, pages 2572, 2573:

An agreement to sell is an executory contract.

xxx xxx xxx

An agreement to sell and convey lands, but which is not a conveyance operating as a present transfer of legal estate in seisin, is at law
wholly executory, and produces no effect upon the estates and parties, and creates no lien or charge on the land itself, yet it confers an
estate and right in equity.

xxx xxx xxx

"Executory agreement," as used in the law of sales, means agreement for the sale of a thing where it is not specified, or the article is
not manufactured, or the agreement is relative to a certain quantity of goods in general without any identification or appropriation of the
same to the contract, or when something remains to be done to put the goods in a deliverable state, or to ascertain the price to be paid
by the buyer.

xxx xxx xxx

Mr. Story says that an executory contract of sale is absolutely to sell at a future time, while a conditional contract of sale is conditionally
to sell. In the one case, he says, the performance of the contract is suspended and deferred to a future time; in the other the very
existence and performance of the contract depends upon a contingency.

xxx xxx xxx

The general rule for determining whether a contract of sale is executed or executory is if anything remains to be done by either party to
the transaction before delivery as, for example, to determine the price, quantity, or identity of the thing
sold the title does not vest in the purchaser, and the contract is merely executory. If the sale is complete, and the goods perish
without the fault of the seller, the purchaser is bound to pay the agreed price. (Foley vs. Felrath, 98 Ala., 176; 13 South., 485; 39 Am.
St. Rep., 39.) Thus, a contract for the sale of cotton out of a certain number of bales, nothing to be taken below middlings, the number
of bales not being ascertained, was executory, . . .
In the instant case, the contract Exhibit A was made on October 23, 1920. Neither the original nor copies of the four promissory notes
are in the record. But it is very apparent that they were executed on the 19th of November, 1920. Prior to that time there were not any
credits or existing debts between the parties within the meaning of article 1924. An examination of Exhibit A would not disclose the debt
or the amount of the notes or credits or the actual amount of the tobacco to be delivered. Such fact could only be determined by the
delivery of the tobacco, the weighing and acceptance of it. At the time Exhibit A was executed, there were no credits and there was not
any debt. All of such matters were in futuro, contingent upon the performance of the contract.

Under such a state of facts, Exhibit A was not a public document within the meaning of article 1924, and the plaintiff does not have a
preferred lien for the unpaid balance of the contract.

The judgment of the lower court is reversed, and one will be entered here that the plaintiff does not have a preference, and that her
existing claim can only be paid out of the general funds to be prorated in common with unsecured creditors. So ordered.

G.R. No. L-21005 December 20, 1924

In the matter of the involuntary insolvency of Umberto de Poli. THE AMERICAN FOREIGN BANKING CORPORATION,
claimant-appellee, vs.
J. R. HERRIDGE, assignee of the insolvent estate of U. de Poli, BOWRING and CO., C. T. BOWRING and CO., LTD., and T. R.
YANGCO, creditors-appellants.

Crossfield and O'Brien for the appellant assignee.

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

OSTRAND, J.:

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

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

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

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

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

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

The quedan in question was issued by J. Magpantay, who was "encargado" of all the U. de Poli warehouse, but he did not have control
of the warehouses, but he did not have control of the warehouses, according to Mr. de Poli. Molina did not see the quedan when it was
issued, but said that he knew of the tobacco which Mr. De Poli transferred to the claimant bank, because Mr. De Poli told him about it;
that it was tobacco from Isabela for the year 1919, was stored in the warehouse on Calle Azcarraga, and that there was no other
tobacco in the warehouse except the 1919 Isabela tobacco.
The evidence further shows that in December, 1920, Mr. Kaintzler, a sub accountant of the claimant bank, went to the U. de Poli
warehouse on Calle Azcarraga to have the tobacco covered by this quedan, Exhibit A, pointed out to him; that the then assignee (Mr.
Bayne) and one of his accountants showed him (Kaintzler) the 530 bales of tobacco with the tag A. F. B. C. on them, and these bales
were pointed out to him by Mr. Bayne as the tobacco which belonged to the American Foreign Banking Corporation.

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

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

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

The only question left for consideration is whether the use of the word "Cagayan" instead of "Isabela" in describing the tobacco in the
quedan rendered the quedan null and void as a negotiable warehouse receipt for the tobacco intended to be covered by it. The
insolvent, U. de Poli, testified positively that this quedan referred to the tobacco in the Azcarraga warehouse, and he explained the
discrepancy in the description. The then assignee (Mr. Bayne) was evidently convinced that this lot of tobacco belonged to the claimant
bank, because he pointed it out to one of the bank's employees, who noted the tags thereon bearing the initials of the claimant
bank.lawphi1.net

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

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

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

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

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

G.R. Nos. L-21000, 21002-21004, and 21006 December 20, 1924

In the matter of the involuntary insolvency of Umberto de Poli. BANK OF THE PHILIPPINE ISLANDS, ET AL., claimants-
appellees, vs.
J.R. HERRIDGE, assignee of the insolvent estate of U. de Poli, BOWRING and CO., C.T. BOWRING and CO., LTD., and T.R.
YANGCO, creditors-appellants.

Crossfield and O'Brien, J.A. Wolfson and Camus and Delgado for appellants.
Hartigan and Welch, Fisher and DeWitt and Gibbs and McDonough for appellees.

OSTRAND, J.:

The present appeals, all of which relate to the Insolvency of U. de Poli, have been argued together and as the principal questions
involved are the same in all of them, the cases will be disposed of in one decision.

The insolvent Umberto de Poli was for several years engaged on an extensive scale in the exportation of Manila hemp, maguey and
other products of the country. He was also a licensed public warehouseman, though most of the goods stored in his warehouses
appear to have been merchandise purchased by him for exportation and deposited there by he himself.

In order to finance his commercial operations De Poli established credits with some of the leading banking institutions doing business in
Manila at that time, among them the Hongkong & Shanghai Banking Corporation, the Bank of the Philippine Islands, the Asia Banking
Corporation, the Chartered Bank of India, Australia and China, and the American Foreign Banking Corporation. The methods by which
he carried on his business with the various banks was practically the same in each case and does not appear to have differed from the
ordinary and well known commercial practice in handling export business by merchants requiring bank credits.

De Poli opened a current account credit with the bank against which he drew his checks in payment of the products bought by him for
exportation. Upon the purchase, the products were stored in one of his warehouses and warehouse receipts issued therefor which were
endorsed by him to the bank as security for the payment of his credit in the account current. When the goods stored by the warehouse
receipts were sold and shipped, the warehouse receipt was exchanged for shipping papers, a draft was drawn in favor of the bank and
against the foreign purchaser, with bill of landing attached, and the entire proceeds of the export sale were received by the bank and
credited to the current account of De Poli.itc-a1f

On December 8, 1920, De Poli was declared insolvent by the Court of First Instance of Manila with liabilities to the amount of several
million pesos over and above his assets. An assignee was elected by the creditors and the election was confirmed by the court on
December 24, 1920. The assignee qualified on January 4, 1921, and on the same date the clerk of the court assigned and delivered to
him the property of the estate.

Among the property taken over the assignee was the merchandise stored in the various warehouses of the insolvent. This merchandise
consisted principally of hemp, maguey and tobacco. The various banks holding warehouse receipts issued by De Poli claim ownership
of this merchandise under their respective receipts, whereas the other creditors of the insolvent maintain that the warehouse receipts
are not negotiable, that their endorsement to the present holders conveyed no title to the property, that they cannot be regarded as
pledges of the merchandise inasmuch as they are not public documents and the possession of the merchandise was not delivered to
the claimants and that the claims of the holders of the receipts have no preference over those of the ordinary unsecured creditors.

On July 20, 1921, the banks above-mentioned and who claim preference under the warehouse receipts held by them, entered into the
following stipulation:lawphi1.net

It is stipulated by the between the undersigned counsel, for the Chartered Bank of India, Australia & China, the Hongkong & Shanghai
Banking Corporation, the Asia Banking Corporation and the Bank of Philippine Islands that:

Whereas, the parties hereto are preferred creditors of the insolvent debtor U. de Poli, as evidenced by the following quedans or
warehouse receipts for hemp and maguey stored in the warehouses of said debtor:

QUEDANS OR WAREHOUSE RECEIPTS OF THE CHARTERED BANK

No. A-131 for 3,808 bales hemp.

No. A-157 for 250 bales hemp.
No. A-132 for 1,878 bales maguey.
No. A-133 for 1,574 bales maguey. Nos. 131, 132 and 133 all bear date November 6, 1920, and No. 157, November 19, 1920.

QUEDANS OR WAREHOUSE RECEIPTS OF THE HONGKONG & SHANGHAI BANKING CORPORATION

No. 130 for 490 bales hemp and 321 bales maguey.
No. 134 for 1,970 bales hemp.
No. 135 for 1,173 bales hemp.
No. 137 for 237 bales hemp.

QUEDANS OR WAREHOUSE RECEIPTS OF THE ASIA BANKING CORPORATION

No. 57 issued May 22, 1920, 360 bales hemp.

No. 93 issued July 8, 1920 bales hemp.
No. 103 issued August 18, 1920, 544 bales hemp.
No. 112 issued September 15, 1920, 250 bales hemp.
No. 111 issued September 15, 1920, 2,007 bales maguey.

QUEDANS OR WAREHOUSE RECEIPTS OF THE BANK OF THE PHILIPPINE ISLANDS

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

No. 148 issued November 13, 1920, 241 bales hemp.
No. 149 issued November 13, 1920, 116 bales hemp.
No. 150 issued November 13, 1920, 217 bales hemp.

And whereas much of the hemp and maguey covered by the above mentioned quedans was either non-existent at the time of the
issuance of said quedans or has since been disposed of by the debtor and of what remains much of the same hemp and maguey
transferred by means of quedans to one of the parties hereto has also been transferred by means of other quedans to one or more of
the other parties hereto and

Whereas, the hemp and maguey covered by said quedans is to a considerable extent commingled.

Now, therefore, it is hereby agreed subject to the rights of any other claimants hereto and to the approval of this Honorable Court that
all that remains of the hemp and maguey covered by the warehouse receipts of the parties hereto or of any of them shall be adjudicated
to them proportionately by grades in accordance with the quedans held by each as above set forth in accordance with the rule laid
down in section 23 of the Warehouse Receipts Law for the disposition of commingled fungible goods.

Manila, P.I., July 20, 1921.

GIBBS, MCDONOUGH & JOHNSON

By A. D. GIBBS
Attorneys for the Chartered Bank
of India, Australia & China

FISHER & DEWITT

By C.A. DEWITT
Attorneys for the Hongkong & Shanghai
Banking Corporation

WOLFSON, WOLFSON & SCHWARZKOFF

Attorneys for the Asia Banking Corporation

HARTIGAN & WELCH

Attorneys for the Bank of the Philippine Islands

Claims for hemp and maguey covered by the respective warehouse receipts of the banks mentioned in the foregoing stipulation were
presented by each of said banks. Shortly after the adjudication of the insolvency of the firm of Wise & Co., one of the unsecured
creditors of the insolvent on June 25, 1921, presented specific written objections to the claims of the banks on the ground of the
insufficiency of the warehouse receipts and also to the stipulation above quoted on the ground that it was entered into for the purpose
of avoiding the necessity of identifying the property covered by each warehouse receipt. Bowring & Co., C.T. Bowring Co., Ltd., and
Teodoro R. Yangco, also unsecured creditors of the insolvent, appeared in the case after the decision of the trial court was rendered
and joined with the assignee in his motion for a rehearing and in his appeal to this court.

Upon hearing, the court below held that the receipts in question were valid negotiable warehouse receipts and ordered the distribution
of the hemp and maguey covered by the receipts among the holders thereof proportionately by grades, in accordance with the
stipulation above quoted, and in a supplementary decision dated November 2, 1921, the court adjudged the merchandise covered by
warehouse receipts Nos. A-153 and A-155 to the Asia Banking Corporation. From these decisions the assignee of the insolvent estate,
Bowring & Co., C.T. Bowring Co., Ltd., and Teodoro R. Yangco appealed to this court.

The warehouse receipts are identical in form with the receipt involved in the case of Roman vs. Asia Banking Corporation (46 Phil.,
705), and there held to be a valid negotiable warehouse receipt which, by endorsement, passed the title to the merchandise described
therein to the Asia Banking Corporation. That decision is, however, vigorously attacked by the appellants, counsel asserting, among
other things, that "there was not a single expression in that receipt, or in any of those now in question, from which the court could or can
say that the parties intended to make them negotiable receipts. In fact, this is admitted in the decision by the statement "... and it
contains no other direct statement showing whether the goods received are to be delivered to the bearer, to a specified person, or to a
specified person or his order." There is nothing whatever in these receipts from which the court can possibly say that the parties
intended to use the phrase "a la orden" instead of the phrase "por orden," and thus to make said receipts negotiable. On the contrary, it
is very clear from the circumstances under which they were issued, that they did not intend to do so. If there was other language in said
receipts, such as would show their intention in some way to make said receipts negotiable, then there would be some reason for the
construction given by the court. In the absence of language showing such intention, the court, by substituting the phrase "a la orden" for
the phrase "por orden," is clearly making a new contract between the parties which, as shown by the language used by them, they
never intended to enter into."

These very positive assertions have, as far as we can see, no foundation in fact and rest mostly on misconceptions.

Section 2 of the Warehouse Receipts Act (No. 2137) prescribes the essential terms of such receipts and reads as follows:

Warehouse receipts needed not be in any particular form, but every such receipt must embody within its written or printed terms

(a) The location of the warehouse where the goods are stored,

(b) The date of issue of the receipt,

(c) The consecutive number of the receipt,

(d) A statement whether the goods received will be delivered to the bearer, to a specified person, or to a specified person or his
order,

(e) The rate of storage charges,

(f) A description of the goods or of the packages containing them,

(g) The signature of the warehouseman, which may be made by his authorized agent,

(h) If the receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the
fact of such ownership, and

(i) A statement of the amount of advances made and of liabilities incurred for which the warehouseman claims a lien. If the
precise amount of such advances made or of such liabilities incurred is, at the time of the issue of the receipt, unknown to the
warehouseman or to his agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the
purpose thereof is sufficient.

A warehouseman shall be liable to any person injured thereby, for all damage caused by the omission from a negotiable receipt of any
of the terms herein required.

Section 7 of the Act reads:

A nonnegotiable receipt shall have plainly placed upon its face by the warehouseman issuing it "nonnegotiable," or "not negotiable." In
case of the warehouseman's failure so to do, a holder of the receipt who purchased it for value supposing it to be negotiable, may, at
his option, treat such receipt as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been
negotiable.

All of the receipts here in question are made out on printed blanks and are identical in form and terms. As an example, we may take
receipt No. A-112, which reads as follows:

U. DE POLI
209 Estero de Binondo

BODEGAS

QUEDAN No. A-112

Almacen Yangco

Por

Marcas
UDP Bultos
250 Clase de las mercancias
Fardos abaca
"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:

1.a Estan asegurados contra riesgo de incendios exclusivamente, segun las condiciones de mis polizas; quedando los demas por
cuenta de los depositantes.

2.a No se responde del peso, clase ni mal estado de la mercancia depositada.

3.a El almacenaje sera de quince centimos fardo por mes.

I certify that I am the sole 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:

"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."

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

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

The provisions of Uniform Warehouse Receipts Act, sec. 2 (Hurd's Rev. St. 1913, c. 114, sec. 242), as to the contents of the receipt,
are for the benefit of the holder and of purchasers from him, and failure to observe these requirements does not render the receipt void
in the hands of the holder.

In the case of Hoffman vs. Schoyer ( [1892], 143 III., 598), the court held that the failure to comply with Act III, April 25, 1871, which
requires all warehouse receipts for property stored in Class C to "distinctly state on their face the brands or distinguishing marks upon
such property," for which no consequences, penal or otherwise, are imposed, does not render such receipts void as against an
assignee for value.

The appellants argue that the receipts were transferred merely as security for advances or debts and that such transfer was of no effect
without a chattel mortgage or a contract of pledge under articles 1867 and 1863 of the Civil Code. This question was decided adversely
to the appellants' contention in the case of Roman vs. Asia Banking Corporation, supra. The Warehouse Receipts Act is complete in
itself and is not affected by previous legislation in conflict with its provisions or incompatible with its spirit or purpose. Section 58
provides that within the meaning of the Act "to "purchase" includes to take as mortgagee or pledgee" and "purchaser" includes
mortgagee and pledgee." It therefore seems clear that, as to the legal title to the property covered by a warehouse receipt, a pledgee is
on the same footing as a vendee except that the former is under the obligation of surrendering his title upon the payment of the debt
secured. To hold otherwise would defeat one of the principal purposes of the Act, i. e., to furnish a basis for commercial credit.

The appellants also maintain that baled hemp cannot be regarded as fungible goods and that the respective warehouse receipts are
only good for the identical bales of hemp for which they were issued. This would be true if the hemp were ungraded, but we can see no
reason why bales of the same government grade of hemp may not, in certain circumstances, be regarded as fungible goods. Section
58 of the Warehouse Receipts Act defines fungible goods as follows:

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

In the present case the warehouse receipts show how many bales of each grade were deposited; the Government grade of each bale
was clearly and permanently marked thereon and there can therefore be no confusion of one grade with another; it is not disputed that
the bales within the same grade were of equal value and were sold by the assignee for the same price and upon the strength of the
Government grading marks. Moreover, it does not appear that any of the claimant creditors, except the appellees, hold warehouse
receipts for the goods here in question. Under these circumstances, we do not think that the court below erred in treating the bales
within each grade as fungible goods under the definition given by the statute. It is true that sections 22 and 23 provide that the goods
must be kept separated and that the warehouseman may not commingle goods except when authorized by agreement or custom, but
these provisions are clearly intended for the benefit of the warehouseman. It would, indeed, be strange if the warehouseman could
escape his liability to the owners of the goods by the simple process of commingling them without authorization. In the present case the
holders of the receipts have impliedly ratified the acts of the warehouseman through the pooling agreement hereinbefore quoted.

The questions so far considered are common to all of the claims now before us, but each claim has also its separate features which we
shall now briefly discuss:

R.G. Nos. 21000 AND 21004

CLAIMS OF THE BANK OF THE PHILIPPINE ISLANDS AND THE GUARANTY TRUST COMPANY OF NEW YORK

The claim of the Bank of the Philippine Islands is supported by four warehouse receipts, No. 147 for 393 bales of hemp, No. 148 for 241
bales of hemp, No. 149 for 116 bales of hemp and No. 150 for 217 bales of hemp. Subsequent to the pooling agreement these
warehouse receipts were signed, endorsed and delivered to the Guaranty Trust Company of New York, which company, under a
stipulation of October 18, 1921, was allowed to intervene as a party claiming the goods covered by said receipts, and which claim forms
the subject matter of the appeal R.G. No. 21004. All of the warehouse receipts involved in these appeals were issued on November 13,
1920, and endorsed over the Bank of the Philippine Islands.

On November 16, 1920, De Poli executed and delivered to said bank a chattel mortgage on the same property described in the
receipts, in which chattel mortgage no mention was made of the warehouse receipts. This mortgage was registered in the Office of the
Register of Deeds of Manila on November 18, 1920.

The appellants argue that the obligations created by the warehouse receipts were extinguished by the chattel mortgage and that the
validity of the claim must be determined by the provisions of the Chattel Mortgage Law and not by those of the Warehouse Receipts
Act, or, in other words, that the chattel mortgage constituted a novation of the contract between the parties.

Novations are never presumed and must be clearly proven. There is no evidence whatever in the record to show that a novation was
intended. The chattel mortgage was evidently taken as additional security for the funds advanced by the bank and the transaction was
probably brought about through a misconception of the relative values of warehouse receipts and chattel mortgages. As the warehouse
receipts transferred the title to the goods to the bank, the chattel mortgage was both unnecessary and inefficatious and may be properly
disregarded.

Under the seventh assignment of error the appellants argue that as De Poli was declared insolvent by the Court of First Instance of
Manila on December 8, 1920, only twenty-five days after the warehouse receipts were issued, the latter constituted illegal preferences
under section 70 of the Insolvency Act. In our opinion the evidence shows clearly that the receipts were issued in due and ordinary
course of business for a valuable pecuniary consideration in good faith and are not illegal preferences.

R.G. No. 21002

CLAIM OF THE HONGKONG & SHANGHAI BANKING CORPORATION

The warehouse receipts held by this claimant-appellee are numbered A-130 for 490 bales of hemp and 321 bales of maguey, No. A-
134 for 1,970 bales of hemp, No. A-135 for 1,173 bales of hemp and No. A-137 for 237 bales of hemp, were issued by De Poli and
were endorsed and delivered to the bank on or about November 8, 1920. The appellants maintain that the bank at the time of the
delivery to it of the warehouse receipts had reasonable cause to believe that De Poli was insolvent, and that the receipts therefore
constituted illegal preferences under the Insolvency Law and are null and void. There is nothing in the record to support this contention.

The other assignments of error relate to questions which we have already discussed and determined adversely to the appellants.
R.G. No. 21003

CLAIM OF THE CHARTERED BANK OF INDIA, AUSTRALIA & CHINA

This claimant holds warehouse receipts Nos. 131 for 3,808 bales of hemp, A-157 for 250 bales of hemp, A-132 for 1,878 bales of
maguey and A-133 for 1,574 bales of maguey. Nos. A-131, A-132 and A-133 bear the date of November 6, 1920, and A-157 is dated
November 19, 1920.

Under the fourth assignment of error, the appellants contend that the court erred in permitting counsel for the claimant bank to retract a
withdrawal of its claim under warehouse receipt No. A-157. It appears from the evidence that during the examination of the witness
Fairnie, who was the local manager of the claimant bank, counsel for the bank, after an answer made by Mr. Fairnie to one of his
questions, withdrew the claim under the warehouse receipt mentioned, being under the impression that Mr. Fairnie's answer indicated
that the bank had knowledge of De Poli's pending insolvency at the time the receipt was delivered to the bank. Later on in the
proceedings the court, on motion of counsel, reinstated the claim. Counsel explains that by reason of Mr. Fairnie's Scoth accent and
rapid style of delivery, he misunderstood his answer and did not discover his mistake until he read the transcript of the testimony.

The allowance of the reinstatement of the claim rested in the sound discretion of the trial court and there is nothing in the record to
show that this discretion was abused in the present instance.

Under the fifth assignment of error appellants argue that the manager of the claimant bank was informed of De Poli's difficulties on
November 19, 1920, when he received warehouse receipt No. A-157 and had reasonable cause to believe that De Poli was insolvent
and that the transaction therefore constituted an illegal preference.

Mr. Fairnie, who was the manager of the claimant bank at the time the receipt in the question was delivered to the bank, testifies that he
had no knowledge of the impending insolvency and Mr. De Poli, testifying as a witness for the assignee-appellee, stated that he
furnished the bank no information as to his failing financial condition at any time prior to the filing of the petition for his insolvency, but
that on the contrary he advised the bank that his financial condition was sound.

The testimony of the same witnesses also shows that the bank advanced the sum of P20,000 to De Poli at Cebu against the same
hemp covered by warehouse receipt No. A-157 as early as October, 1920, and that upon shipment thereof to Manila the bill of lading,
or shipping documents, were made out in favor of the Chartered Bank and forwarded to it at Manila; that upon the arrival of the hemp at
Manila, Mr. De Poli, by giving a trust receipt to the bank for the bill of lading, obtained possession of the hemp with the understanding
that the warehouse receipt should be issued to the bank therefor, and it was in compliance with that agreement previously made that
the receipt was issued on November 19, 1920. Upon the facts stated we cannot hold that the bank was given an illegal preference by
the endorsement to it of the warehouse receipt in question. (Mitsui Bussan Kaisha vs. Hongkong & Shanghai Banking Corporation, 36
Phil., 27.)

R.G. No. 21006

CLAIM OF THE ASIA BANKING CORPORATION

Claimant holds warehouse receipts Nos. A-153, dated November 18, 1920, for 139 bales of tobacco, A-154, dated November 18, 1920,
for 211 bales of tobacco, A-155, dated November 18, 1920, for 576 bales of tobacco, A-57, dated May 22, 1920, for 360 bales of hemp,
A-93, dated July 8, 1920, for 382 bales of hemp, A-103, dated August 18, 1920, for 544 bales of hemp, A-112, dated September 15,
1920, for 250 bales of hemp and A-111, dated September 15, 1920, for 207 bales of maguey.

The assignments of error in connection with this appeal are, with the exception of the fourth, similar to those in the other cases and
need not be further discussed.

Under the fourth assignment, the appellants contend that warehouse receipts Nos. A-153, A-154 and A-155 were illegal preferences on
the assumption that the claimant bank must have had reasonable reasons to believe that De Poli was insolvent on November 18, 1920,
when the three receipts in question were received. In our opinion, the practically undisputed evidence of the claimant bank sufficiently
refutes this contention.

For the reasons hereinbefore stated the judgments appealed from are hereby affirmed, without costs. So ordered.