TOPIC Warehouse Receipts

CASE NO. G.R. No. 16510 (1922)

CASE NAME Philippine National Bank v. Producers’ Warehouse Association
MEMBER Lead Dampil

DOCTRINE
Note: I reworded the doctrines for clarity.
1. [Estoppel]
In an action to recover the value of property, the defendant can’t claim that a quedan is invalidly issued, but at the
same time allege that the plaintiff did not comply with the conditions of the quedan.

2. [Tender of Charges and Liens When not Necessary]

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.

3. [Agency]
Where one corporation appoints another corporation as its general manager with the authority to issue quedans in
the name of the former, in the absence of fraud or collusion to which the payee is a party, the quedans are valid and
binding, with the principal is liable to pay for the property described or its value.

RECIT-READY DIGEST

PWA entered into a contract with Fiber Co. to have the latter act as the general manager of PWA’s warehouse
business, with this authority came the power to sign in the name of PWA. Later on, PWA issued to Fiber Co. several
negotiable quedans (warehouse receipts) for the copra Fiber Co. deposited. The quedans were signed by two PWA officers,
and contained conditions such as: (1) the need to surrender the quedan upon request to deliver the copra, (2) the transfer of
the quedans must be recorded in PWA’s books to be acknowledged, and (3) payment of the storage and insurance fees
before delivery of the copra. Much later, Fiber Co. entered into an Overdraft Agreement with PNB to have the latter extend
a P1M credit. To secure this agreement, Fiber Co. endorsed the quedans in blank and delivered it to PNB.

Eventually, PNB requested for the delivery of the copra from PWA. As a response, PWA’s secretary-attorney went
to PNB just to discuss about how much PWA should pay PNB because the copra cannot be delivered. No other issues were
discussed. Still, no delivery of the Copra was made; so PNB instituted an action for recovery. PWA defended themselves
saying, among others, that: (1) the issuance was not authorized; (2) the conditions of the quedans were not complied with
by PNB; (3) that the quedans held by PNB are not the same ones that were issued; and (4) no copra described by the quedans
held by PNB were ever deposited in their warehouse.

The issue here is whether PWA is still liable to honor the quedans held by PNB. The Court ruled that: (1) PWA is
estopped from claiming that PNB did not comply with the conditions of the quedan because PWA can’t claim that they
were not complied with but at the same time assert that the quedans are fake; (2) when the provisions of the quedans require
payment of certain charges before delivery, it is not necessary to tender such charges where the other party denies liability;
(3) the testimonies made by the treasurer, auditor, and president of PWA all affirm that the issuance were authorized under
their books, and according to their standard operating procedures with Fiber Co; and (4) PWA is liable to pay PNB in so far
as the validity of the quedans cannot be disputed.

FACTS
Note: I changed the nicknames from the ones mentioned in the case because it got confusing. The true names are the original
ones though.
1. 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.

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 2. 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)
3. 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. 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.
5. April 23 – PNB commenced an action to recover the value.
6. 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.
7. August 9 – the complaint was amended.
8. 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 (See: Facts #7), 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.
9. 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.
10. The lower court rendered a judgement in favor of PWA.
11. Now, the case is being appealed to the Supreme Court.

ISSUE/S and HELD

1. W/N the PWA is still liable to honor the quedans issued in favor of PNB? – YES

RATIO
1. 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 (See Facts #8, (1.ii) v. (3)).
➢ REASON 2: PWA never raised the issue about non-compliance with the conditions when the dispute was
first raised (See: Facts #21).

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 ➢ REASON 3: PWA was the one who refused to record the transfer of quedans when PNB requested for it
(See: Facts #7).

➢ 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.)

2. 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 (See: Facts #1).
(2) The quedans were duly issued and authenticated (See: Facts #9).
(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.

3. Note: 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 anum).

DISPOSTIVE PORTION
The decision of the lower court is reversed, and the judgement will be entered here in favor of the plaintiff and against the
defendant for P240,689, with interest thereon from March 31, 1919 [Note: Date of Extrajudicial Demand], at the rate of 6
per cent per anum, and costs in this and the lower court. So ordered.