G.R. No. 17825 ; June 26, 1922
In the matter of the Involuntary insolvency of U. DE POLI. FELISA ROMAN, claimant-appellee, vs. ASIA BANKING CORPORATION, claimant-appellant.

FACTS

Umberto de Poli purchased 2,777 bales of leaf tobacco from Felisa Roman under a contract (Exhibit A) which stipulated that the tobacco would be stored in De Poli’s warehouse as a deposit to secure the unpaid purchase price, creating a vendor’s lien in favor of Roman. De Poli paid part of the price and issued notes for the balance. Subsequently, De Poli obtained a loan from Asia Banking Corporation and, as security, issued a warehouse receipt (Exhibit D) covering 576 bales of the tobacco, endorsing it in blank and delivering it to the bank. The warehouse receipt stated the goods were deposited “por orden del Sr. U. de Poli” and was not marked “non-negotiable.” De Poli was later declared insolvent. Both Roman and the bank claimed priority over the 576 bales of tobacco. The Court of First Instance ruled in favor of Roman’s vendor’s lien, holding the transfer to the bank was neither a valid pledge nor chattel mortgage. The bank appealed.

ISSUE

Whether the rights of Asia Banking Corporation, as an endorsee for value of the warehouse receipt, are superior to the vendor’s lien of Felisa Roman.

RULING

Yes. The Supreme Court reversed the order of the lower court. The warehouse receipt was negotiable. Although it used the phrase “por orden,” this was construed as a clerical error for “a la orden,” indicating the depositor’s (De Poli’s) intent to make the receipt negotiable and transferable by endorsement. Furthermore, the receipt was not marked “non-negotiable.” Under the applicable principles (citing Section 7 of the Uniform Warehouse Receipts Act and Section 49 of Act No. 2137 ), a warehouse receipt not marked non-negotiable may be treated as negotiable by a holder who acquired it for value in good faith, as the bank did. Consequently, the bank’s rights as a bona fide holder of the negotiable warehouse receipt are superior to and defeat Roman’s vendor’s lien. The bank’s claim is given preference.