Siy Cong Bieng & Co. vs.

Hongkong & Shanghai Bank

Plaintiff sold certain quantity of hemp to one by the name of Otto Ranft by quedans and sent the
quedans, together with the covering invoice, to Ranft, without having been paid for, but
plaintiff's understanding was that the payment would be made against the quedans. Ranft on the
same day turned over the quedans to the defendant bank to secure payment of his preexisting
debts. Ranft died on the evening of the day the quedans were delivered to the bank. Plaintiff
brought this action to recover the quedans or their values.

Held: 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 delivery of the quedans to the bank,
they were no longer the property of the indorser unless he liquidated his debts with the bank.

The bank had a perfect right to accept the quedans in security of preexisting debts without
investigation of the authority of the person negotiating them. (Sections 47, 38 and 40 of the
Warehouse Receipts Act No. 2137.)

Since plaintiff had voluntarily clothed the person who negotiated the quedans with all the
attributes of ownership and upon which the bank relied, it is estopped to deny that the bank had a
valid title to the quedans.

Bank of the Philippine Islands vs. Herridge

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. The merchandise consisted principally of
hemp, maguey and tobacco. 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
lading attached, and the entire proceeds of the export sale were received by the bank and credited
to the current account of De Poli.

De Poli was declared insolvent. The dispute now ensued between the banks who held the receipt
issued by De Poli and other creditors. The banks then made stipulation to pool remaining goods
in the warehouse and divide them among themselves proportionately.

Issue 1: Whether or not the receipt is negotiable since the receipt is not marked "nonnegotiable"
or "not negotiable," and is endorsed "Umberto de Poli."

Held: 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 re ceived 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.

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.

Issue 2: 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.

Issue 3: 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.
Held: 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.

Roman vs. Asia Banking Corporation

De Poli received from Felisa Roman, under this contract, 2,777 bales of tobacco of the total
value of P78,815.69, of which he paid P15,000 in cash and executed four notes of P15,953.92
each for the balance. De Poli issued a receipt to ABC for 576 bultos of tobacco which forms part
of the bales purchased from Roman.

In the left margin of the face of the receipt, U. de Poli certifies that he is the sole owner of the
merchandise therein described. The receipt is endorsed in blank "Umberto de Poli;" it is not
marked "non-negotiable" or "not negotiable."

The sale having been thus consummated, the only lien upon the tobacco which Felisa Roman
can claim is a vendor's lien. The order appealed from is based upon the theory that the tobacco
was transferred to the Asia Banking Corporation as security for a loan and that as the transfer
neither fulfilled the requirements of the Civil Code for a pledge nor constituted a chattel
mortgage under Act No. 1508, the vendor's lien of Felisa Roman should be accorded preference
over it.

"Where a negotiable receipt has been issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the rights of any purchaser for value in good faith to whom such receipt has
been negotiated, whether such negotiation be prior or subsequent to the notification to the
warehouseman who issued such receipt of the seller's claim to a lien or right of stoppage in
transitu. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods to
an unpaid' seller unless the receipt is first surrendered for cancellation." The term "purchaser" as
used in the section quoted, includes mortgagee and pledgee. (See section 58 (a) of the same Act.)
In view of the foregoing provisions, there can be no doubt whatever that if the warehouse
receipt in question is negotiable, the vendor's lien of Felisa Roman cannot prevail against the
rights of the Asia Banking Corporation as the indorsee of the receipt.

Issue: The only question of importance to be determined in this case is, therefore, whether the
receipt before us is negotiable.

Held:
The matter is not entirely free from doubt. The receipt is not perfect: It recites that the
merchandise is deposited in the warehouse "por orden" instead of "a la orden" or "sujeto a la
orden" of the depositor 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.

We think, however, that it must be considered a negotiable receipt. A warehouse receipt, like
any other document, must be interpreted according to its evident intent (Civil Code, arts. 1281
et seq.) and it is quite obvious that the deposit evidenced by the receipt in this case was intended
to be made subject to the order of the depositor and therefore negotiable. That the words "por
orden" are used instead of "a la orden" is very evidently merely a clerical or grammatical error. If
any intelligent meaning is to be attached to the phrase "Quedan depositados en estos almacenes
por orden del Sr. U. de Poli" it must be held to mean "Quedan depositados en estos almacenes a
la orden del Sr. U. de Poli." The phrase must be construed to mean that U. de Poli was the person
authorized to endorse and deliver the receipt; any other interpretation would mean that no one
had such power and the clause, as well as the entire receipt, would be rendered nugatory.

Moreover, the endorsement in blank of the receipt in controversy together with its delivery by U.
de Poli to the appellant bank took place on the very date of the issuance of the warehouse receipt,
thereby immediately demonstrating the intention of U. de Poli and of the appellant bank, by the
employment of the phrase "por orden del Sr. U. de Poli" to make the receipt negotiable and
subject to the very transfer which he then and there made by such endorsement in blank and
delivery of the receipt to the bank.

As hereinbefore stated, the receipt was not marked "nonnegotiable." Under modern statutes the
negotiability of warehouse receipts has been enlarged, the statutes having the effect of making
such receipts negotiable unless marked "non-negotiable." (27 R. C. L., 967 and cases cited.)

Section 7 of our own Warehouse Receipts Act (No. 2137) which is a copy of the Uniform
Warehouse Receipts Act, says: "A non-negotiable receipt shall have plainly placed upon its face
by the warehouseman issuing it 'non-negotiable,' or 'not negotiable.' In case of the
warehouseman's failure so to do, a holder of the receipt who purchased it for value supposing it
to be negotiable may, at his option, treat such receipt as imposing upon the warehouseman the
same liabilities he would have incurred had the receipt been negotiable.

"This section shall not apply, however, to letters, memoranda, or written acknowledgments of an
informal character."

This section appears to give any warehouse receipt not marked "non-negotiable" or "not
negotiable" practically the same effect as a receipt which, by its terms, is negotiable provided
the holder of such unmarked receipt acquired it for value supposing it to be negotiable,
circumstances which admittedly exist in the present case.