Philippine National Bank v.

Producers’ Warehouse Association

G.R. No. 16510 (1922)

FACTS:
Producers’ Warehouse Association (PWA) entered into a contract with Philippine Fiber
and Produce Co. (Fiber Co.) where the latter was appointed as the general manager of
PWA’s warehouse business.
Fiber Co. had all the power and authority needed to conduct PWA’s business,
including the authority to sign PWA’s name.
While such contract was in force, the PWA issued to Fiber Co. seven Negotiable
Quedans for ~15,700 piculs of copra. The Negotiable Quedans (Spanish for warehouse
receipts) had the following features:
(1) It was deliverable to Fiber Co, or its order.
(2) It was subject to the terms and conditions printed therein.
(i) Section 4 stated that the PWA will deliver the copra upon surrendering the quedan.
(ii) Section 5 stated that no transfer of interest/ownership will be recognized by the
PWA unless they are registered in the books of PWA, and that all charges for the storage
and insurance due has been paid.
(3) Each gave the number of sacks, piculs, warehouse number, gross weight in kilos, and
declared value.
(4) Declared that the copra was insured for the full amount of its declared value.
(5) It had across its face the words, “Negotiable Warrant”
(6) It had in red the words, “This warrant is of no value unless signed by an officer of the
Association.”
(7) Each were actually signed by two PWA officers.
(i) George Wicks (Treasurer)
(ii) R. Torres (Warehouseman)
Fiber Co. entered into an Overdraft Agreement with the Philippine National Bank
(PNB) to have the latter extend a credit of P1M. To secure the agreement, the
mentioned Negotiable Quedans were endorsed in blank and delivered to PNB. 4.
On March 21 – PNB eventually made a letter requesting the delivery of the copra
described in the quedans. PWA’s secretary-attorney went to PNB and only discussed the
amount PWA should pay for the copra it cannot deliver to PNB. The secretary-attorney
never brought up as an issue the dues for the storage/insurance, nor as an issue the
signatures.
On April 23 – PNB commenced an action to recover the value.
On July 30 – PNB requested PWA to register the quedans in the name of PNB and to
deliver the copra. PNB even offered to settle the necessary dues. But PWA still refused
and said that there were no such copra in their warehouse.
On August 9 – the complaint was amended.
These are the allegations of PWA:
(1) Fiber Co. did deposit copra in PWA’s warehouse, and quedans were issued signed by
two officers.
(i) But PWA did not authorize these two officers to issue receipts in the name of Fiber
Co.
(ii) The receipts held by PNB are not the same ones issued by PWA for the copra.

(2) Just before the filing of the amended complaint, the PNB consented to have all the
copra deposited by Fiber Co. in PWA’s warehouse be sold and delivered to Laguna
Coconut Oil Co. Moreover, this delivery was done without PNB surrendering their
quedans.
(3) The quedans were never considered transferred to the PNB because such was not
recorded in PWA’s books pursuant to Section 5 of the terms.
(4) The quedans were issued without the copra described therein being deposited in the
warehouse.
During trial, the following testimonies were made:
➢ Fiber Co.’s indebtedness to PNB for around P888K was affirmed by the President (of
both PWA & Fiber Co.) and the auditor of PWA’s books.
➢ For convenience, the procedure between PWA and Fiber Co. for issuing quedans was
to have them all pass through George Wicks (Treasurer). His authority to issue all the
quedans were never questioned.
The lower court rendered a judgement in favor of PWA.
Now, the case is being appealed to the Supreme Court.

ISSUE:
W/N the PWA is still liable to honor the quedans issued in favor of PNB?
HELD:
YES.
On the issue of PWA’s counter allegations, the Court held that PWA is ESTOPPED from
claiming that PNB did not comply with the conditions printed on the quedan.
➢ REASON 1: PNB can’t claim that the instrument does not exist, but at the same time
claim that the PNB did not comply with the conditions printed on the quedan
➢ REASON 2: PWA never raised the issue about non-compliance with the conditions
when the dispute was first raised.
➢ REASON 3: PWA was the one who refused to record the transfer of quedans when
PNB requested for it.
ADDITIONALLY: “Since the law does not require any one to do vain or useless things, a
formal tender [of payment for charges due] is never required where it appears that if it
had been made, the money would not have been received, as where the creditor states
that an actual tender will be useless because he will not accept it, or […] that he will not
comply with its terms.”
(i.e. where by the provisions of the quedans the property was to be delivered upon
payment of certain charges, it is not necessary to tender such charges where the other
party denies liability and is not willing to perform its part or deliver the property.)
On the issue of PWA’s liability to pay, the Court held that PWA is LIABLE to
pay PNB.
➢ The facts cannot be disputed:
(1) Fiber Co. was the general manager of PNB and was thus duly authorized to issue
quedans in PWA’s name.
(2) The quedans were duly issued and authenticated.
(3) PNB was acting in good faith, and the quedans were issued to it as collateral in the
ordinary course of business.
(4) Even if there was fraud between PWA and Fiber Co., PNB is not a party to such.

The Court ruled that since there was no direct evidence of the market value of the copra,
the liability of PWA will be based on the amount declared in the quedans (with interest
at 6% per annum).