In Re: Umberto de Poli Bank of the

Philippine Island, et al. vs. J. R. Herridge,

et al.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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.

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:

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 Bultos Clase de las "Quedan depositados en estos almacenes por orden del Sr. U. de Poli la cantidad de
UDP 250 mercancias doscientos cincuenta fardos abaca segun marcas detalladas al margen, y con arreglo a
Fardos abaca 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 4.a El seguro sera de un octavo por ciento mensual por el total. Tanto el almacenaje
the merchandise herein described. como el seguro se cobraran por meses vencidos, y con arreglo a los dias devengados
(Sgd.) "UMBERTO DE POLI 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
quinientossolamentes.

7.a Las operaciones de entraday 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. Manila, 15 de sept. de 1920.

V.º B.º El Encargado,
(Sgd.) UMBERTO DE POLI (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" (seeVelazquez 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 835-½ 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.

Street, Malcolm, Avanceña, Villamor, and Romualdez, JJ., concur.