36 and 37 Siy Cong Bieng & Co., Inc. v.

Hongkong Shanghai Banking Corporation

G.R. No. L-34655, March 1932
FACTS:
Plaintif is a corporation engaged in business generally, and that the defendant, HSBC, is a foreign bank authorized
to engage in the banking business in the Philippines.
On June 25, 1926, Otto Ranft called the office of the Plaintif to purchase hemp (abaca), and he has offered the
bales of hemp as described in the contested negotiable quedans.
The parties agreed to the aforesaid price, and on the sale date the quedans, together with the covering invoice, were
sent to Ranft by the Plaintif, without having been paid fort he hemp, but the Plaintif’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 Plaintif, quedans were paid one or two days after their delivery to them.
Immediately these quedans were pledged by Otto Ranft to the defendant HSBC to secure the payment of his pre-
existing debts to the latter.
The baled hemp covered by these warehouse receipts was worth 31,635 pesos; 6 receipts were endorsed in blank
by the plaintiff and Otto Ranft, and 2 were endorsed in blank by Otto Ranft alone.
On the evening of the said delivery date, Otto Ranft died in Manila.
When the plaintiff found out such event, it immediately demanded the return of the quedans, or the payment of the
value, but it was told that the quedans has been sent to HSBC as soon as they were received by Ranft.
Shortly thereafter, the plaintiff filed a claim for the aforesaid sum in the intestate proceedings of the estate of the
deceased Otto Ranft. 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.
ISSUE:
Whether or not the quedans endorsed in blank gave the HSBC rightful and valid title to the goods?
HELD:
Yes.
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.

Here, it may be noted that: first, the quedans in question were negotiable in form; second, the quedans were pledged by Otto
Ranft to the defendant bank to secure the payment of pre-existing debt to said bank; third, such quedans were issued in the name of the
plaintiff and by Otto Ranft; and fourth, the two remaining quedans which were duly endorsed in blank was made to the bank.

Therefore, the bank had a perfect right to act as it did, and its action is in accordance with the Warehouse Receipt law.