G.R. No. L-20499 - Balanga Power Plant Co. vs. Commissioner of Internal Revenue

Bartolome Picornell, acting on behalf of Hyndman, Tavera & Ventura, purchased 1,735 bales of tobacco in Cebu.
Picornell obtained from the Cebu branch of Philippine National Bank the sum of P39,529.83 – representing the value of the tobacco plus his commission – and drew a bill of exchange in favor of the bank against the firm Hyndman, Tavera & Ventura (now dissolved).
The transaction was accompanied by the delivery of an invoice and bill of lading for the tobacco shipment on board the boat Don Ildefonso.

The bill was presented to Hyndman, Tavera & Ventura at the central office of the bank in Manila on March 3, 1920.
The firm accepted the bill, with its acceptance signed by J. Pardo de Tavera, stating a due date and re-accepting the instrument with an extension request made subsequently by Picornell.
A further extension was granted when Picornell requested a 30-day extension to the central office, leading to a re-acceptance with a new due date of May 2, 1920.

Upon the arrival of the due date, Hyndman, Tavera & Ventura refused to pay the bill, alleging noncompliance of the contract by Picornell regarding the quality of the shipped tobacco.
Immediately following the refusal, the bank protested the bill for non-payment, took possession of the tobacco pursuant to the “D/P” (documents against payment) instruction marked on the bill, and had the tobacco appraised on May 12, 1920 at P28,790.72.

The bank sold the tobacco around September 1921, obtaining proceeds of P6,708.82 from the sale.
The action was filed by the bank to recover the value of the bill of exchange amounting to P28,790.72, less the deducted proceeds from the sale.
The Court of First Instance of Manila rendered a decision sentencing the defendants to pay the full value of the bill (adjusted for the proceeds), holding Picornell secondarily liable as the drawer and J. Pardo de Tavera (successor of Hyndman, Tavera & Ventura) primarily liable as the drawee-acceptor.

Joaquin Pardo de Tavera argued that the bill was without consideration and contended that judgment should not have been rendered against him.
Bartolome Picornell maintained that he acted merely as an agent of Hyndman, Tavera & Ventura and raised issues concerning:

The quality of the tobacco, which he claimed was not inferior.
The proper execution of the “D/P” condition.
The bank’s authority to hold and dispose of the tobacco without proper notice.
The requirement for notice of dishonor under section 89 of the Negotiable Instruments Law.

The bank’s actions in retaining the documents (invoice and bill of lading) and the subsequent appraisal of the tobacco’s value were in accordance with the “D/P” condition.
The sale of the tobacco was within the bank’s legal right under Act No. 2938, even without prior notice in certain cases.
The protest and subsequent mailing of the notice to Picornell satisfied the statutory requirements for notice of dishonor.

Whether the acceptance of the bill by Hyndman, Tavera & Ventura (or their successor, Pardo de Tavera) created primary liability for the value of the bill despite issues relating to the quality and consideration of the underlying tobacco transaction.
Whether Bartolome Picornell, as the drawer of the bill and an alleged commission agent for Hyndman, Tavera & Ventura, could be held liable for the full amount of the bill irrespective of any agency defense.
Whether the actions taken by the Philippine National Bank—specifically, retaining the bill of lading under the “D/P” condition and selling the tobacco without prior notice—were legally justified and did not violate any statutory or procedural requirements.
Whether the bank’s protest and the sending of a copy of the protest to Picornell effectively met the statutory notice requirements concerning the dishonor of the bill.