PNB v.

Producers Warehouse Association, 42 Phil 602

FACTS:
PWA and PFPC entered into a written contract, wherein PFPC would act as the general
manager of the business of PWA, and that PFPC would exercise a general and complete
supervision over the management of the business of PWA (subject only to the control of
PWA’s board of directors).

PWA issued seven (7) negotiable quedans to PFPC for 15k++ piculs of Copra, which the terms
states that. . .
o PWA agreed to deliver that amount of copra to PFPC or its order
o PWA will deliver the packages noted therein upon the surrender of the warrant to PWA
o No transfer of interest/ownership will be recognized unless registered in the books of PWA
o The words “negotiable warrant” were printed in red ink in the quedan
"This warrant is of no value unless signed by an officer of the association," and were signed
“PWA by Mr. Wicks, Treasurer, and by R. Torres, Warehouseman."
Each receipt was also numbered, and stated the number of the warehouse and where situated
and recited that storage charges were at the rate of P0.04 per picul per month, and that the
insurance rate was 1/3% per month of the declared value.

PFPC then arranged for overdraft with PNB (bank) for P1M and to secure it, the subject quedans
were endorsed in blank and delivered by PFPC to PNB [COLLATERAL SECURITY], which became
the owner and holder thereof (received the quedans in good faith).

ISSUE: WoN the quedans were validly negotiated to PNB?

HELD:
Yes.

The quedans have legal force and effect.

o They were duly EXECUTED by Wicks, as TREASURER and Torres as WAREHOUSEMAN, for and
in behalf of the defendant.
o The said quedans were ENDORSED IN BLANK and PHYSICAL POSSESSION WAS DELIVERED to
PNBas COLLATERAL SECURITY for the overdraft of PFPC and
o That the quedans were in NEGOTIABLE FORM.

Where the defendant entered into a written contract appointing PFPC, another corporation,
as general manager of its business for a term of years, with full power to manage its business,
subject only to the control of the defendant's board of directors, and under such power PFPC
issued the quedans of the defendant in its own name and pledged them as collateral with a
bank, which received them in good faith, the defendant is bound by the acts of its general
manager, and estopped to deny its authority to issue such quedans.
5. CORPORATION BOUND BY ACTS OF ITS GENERAL MANAGER. — Where one corporation
appoints another corporation its general manager with authority to issue quedans in the name
of the former, and the latter issued quedans of the former in its own name and pledged them
for value to a bank as collateral, in the absence of fraud or collusion to which the bank was a
party, the quedans are valid and binding, and the former is liable to the bank for the property
therein described or its value.

Bank of P.I. v. Herridge, G.R. Nos. L-21000, 21002-21004, and

21006
FACTS:

The insolvent Umberto de Poli was for several years engaged on an extensive scale in the
exportation of 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. 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.

De Poli was declared insolvent by the Court of First Instance of Manila with liabilities to the
amount of several millionpesos over and above his assets. An assignee was elected by the
creditors and the election was confirmed by the court. 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.

ISSUE: Whether or not the warehouse receipts issued are negotiable?

HELD:

 
Yes, a warehouseman who deposited merchandise in his own warehouse, issued a
warehouse receipts therefore and thereafter negotiated the receipts by endorsement.

The receipt recites that the goods were deposited “pororden”of the depositor, the
warehouseman, but contained no statement that the goods were to be delivered to the bearer
of the receipts or to a specified person. It is in the form of a warehouse receipts and was not
mark “nonnegotiable”.
 
Therefore the receipts was negotiable warehouse receipts and the words “pororden” must be
construed to mean “to the order”.

LUA KIAN v. MANILA RAILROAD COMPANY and MANILA PORT SERVICE

G.R. No. L-23033 January 5, 1967

FACTS: The present suit was filed by Lua Kian against the Manila Railroad

Co. and Manila Port Service for the recovery of the invoice value of Imported evaporated
"Carnation" milk alleged to have been undelivered. Defendant Manila Port Service as
a subsidiary of defendant Manila Railroad Company operated the arrastre service at the Port of
Manila under and pursuant to the Management Contract entered into by an between the
Bureau of Customs and defendant Manila Port Service

.Plaintiff Lua Kian imported 2,000 cases of Carnation Milk from the Carnation Company of San

Francisco, California, and shipped on Board SS "GOLDEN BEAR" per Bill of Lading No.
17.Out of the aforesaid shipment of 2,000 cases of Carnation Milk per Bill of Lading No. 17,only
1,829 cases marked `LUA KIAN 1458' were discharged from the vessel S`GOLDEN BEAR' and
received by defendant Manila Port Service per pertinent tally sheets issued by the said carrying
vessel.
Discharged from the same vessel on the same date unto the custody ofdefendant Manila Port
Service were 3,171 cases of Carnation Milk marked "CEBU UNITED 4860-PH-MANILA" consigned
to Cebu United Enterprises, per Bill of Lading No. 18.Defendant Manila Port Service delivered to
the plaintiff thru its broker, Ildefonso Tionloc, Inc. 1,913 cases of Carnation Milk market"LUA
KIAN 1458" per pertinent gate passes and broker's deliverreceipts. A provisional claim was
filed by the consignee's broker for and in behalf of theplaintiff with defendant Manila Port
Service.
The invoice value of the 87 cases of Carnation Milk claimed by the plaintiff to have been short-
delivered by defendant Manila Port Service is P1,183.11 while the invoice value of the 87 cases
of Carnation Milk claimed by the defendant Manila Port Service to have been over-delivered by
it to plaintiff is P1,130.65.
The 1,913 cases of Carnation mentioned in paragraph 5 hereof were taken by the broker at Pier
13, Shed 3, sometime in February, 1960where at the time, there were stored therein, aside
from the shipmen involved herein, 1000 cases of Carnation Milk bearing the same marks and
also consigned to plaintiff Lua Kian but had been discharged from SS `STEEL ADVOCATE' and
covered by Bill o
Lading No. 11.Lua Kian as consignee thereof filed a claim for short-delivery againdefendant
Manila Port Service, and said defendant Manila Port Service paid Lua Kian plaintiff herein,
P750.00 in settlement of its claim.

CFI: ruled that 1,829 cases marked Lua Kian (171 caseslessthan the 2,000 cases indicated in the

bill of lading and 3,171 casemarked "Cebu United" (171 casesoverthe 3,000 cases in the bill of
lading were discharged to the Manila Port Service.Considering that Lua Kian
and Cebu United Enterprisewere the only consignees of the shipment of 5,000 cases
o"Carnation" milk,it found that of the 3,171 cases marked"Cebu United", 171 should have been
delivered to LuaKian.Inasmuch as the defendant Manila Port Service actuallydelivered 1,913
cases to plaintiff,which is only 87 casesshort of 2,000 cases as per bill of lading the former was
ordered to pay Lua Kian the sum of P1,183.11 representingsuch shortage of 87 cases, with legal
interest from the dateof the suit, plus P500 as attorney's fees.

Defendants appealed to the Supreme Court and contend that theyshould not be made to

answer for the undelivered cases of milk,insisting that Manila Port Service was bound to deliver
only
1,829 cases to Lua Kian and that it had there before in fact over-delivered to the latter.
 
ISSUE: Whether defendant Manila Port Service is liable for the undeliveredcases of “Carnation”
milk to petitioner due to improper marking.
 
RULING: Yes The bill of lading in favor of Cebu United Enterprises indicated that
only 3,000 cases were due to said consignee, although 3,171 caseswere marked in its favor. Lua
Kian whose bill of lading on the otherhand indicated that it should receive 171 cases more.
The legal relationship between an arrastre operator and theconsignee is akin to that of a
depositor and warehouseman. Ascustodian of the goods discharged from the vessel, it was
defendantarrastre operator's duty, like that of any ordinary depositary, to takegood care of the
goods and to turn them over to the party entitled totheir possession. The said defendant
should have withheld delivery becauseof the discrepancy between the bill of lading and the
markings and conducted its own investigation, not unlike thatunder Section 18 of the
Warehouse Receipts Law, or calledupon the parties, to interplead, such as in a case
underSection 17 of the same law, in order to determine the rightfulowner of the goods.It is true
that Section 12 of the Management Contractexempts the arrastre operator from responsibility
formisdelivery or non-delivery due to improper or insufficientmarking. It cannot however
excuse the defendant from liability in this casebecause the bill of lading showed that only 3,000
cases were
consigned to Cebu United Enterprises. The fact that the excess of171 cases were marked for
Cebu United Enterprises and that theconsignment to Lua Kian was 171 cases less than the 2,000
in the bill of lading, should have been sufficient reason for the defendant Manila Port Service to
withhold the goods pending determination otheir rightful ownership.With respect to the
attorney's fees awarded below, this Court noticethat the same is about 50% of the litigated
amount of P1,183.11Attorney’s fees was decreased to P300.00.

CONSOLIDATED TERMINALS, INC., plaintiff-appellant, vs. ARTEX

DEVELOPMENT CO., INC., defendant-appellee.
[G.R. No. L-25748. March 10, 1975.]

FACTS:
Petitioner Consolidated Terminals, Inc. (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, respondent Artex Development Co., Inc. 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.

To which, Artex filed a motion to dismiss.

RESPONDENT’S ARGUMENTS: 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 specificationsas to quality (14-15, Record on
Appeal). No copy of the rescissory agreement was attached to Artex's motion to dismiss.

COURT OF FIRST INSTANCE OF MANILA RULING:In sustaining Artex's motion to dismiss, which
CTI did not oppose in writing, Judge Perez said: "Since the plaintiff (CTI) is only a warehouseman
and according to theamended complaint, plaintiff was already paid the warehousing
andhandling charges of the 193 bales of high density compressed rawcotton mentioned in the
complaint, the plaintiff can no longer recover forits 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.Therefore, the lower court dismissedCTI’s amended complaint for damages
against Artex, predicated on lack of cause of action.

PETITIONER’S ARGUMENTS: 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 . . ."

CTI appealed the case directly to the SC.

ISSUE: Whether or not as a warehouseman, CTI has a cause of action for damages against
Artex?
SC RULING: NO.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 cottonwere 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 thecotton. How could it be
entitled to claim the value of the shipment?