G.R. No. L-3383 - Tan Leonco vs. Go Inqui

Plaintiff/Appellee: Tan Leonco
Defendant/Appellant: Go Inqui, representative of the mercantile company “J. C.”
The plaintiff initiated an action against the defendant in the Court of First Instance of Sorsogon for recovery of 800 pesos, evidenced by a bill of exchange.

The bill of exchange was executed and delivered by the company “J. C.” on March 3, 1901, drawn upon one Lim Uyco of Manila.
Upon presentation of the bill to Lim Uyco, payment was refused following instructions from the company.
The draft or check served as proof of indebtedness rather than as a negotiable instrument subject to protest under the usual commercial formalities.

On August 15, 1906, the defendant filed an answer, admitting the complaint's facts while setting up a counterclaim for P2,369 with interest at 6 percent.
The plaintiff filed a reply denying the counterclaimed facts and concurrently set up a counterclaim for an amount of P5,500.

On October 26, 1904, Judge Grant Trent of the Court of First Instance appointed arbitrators under the Civil Code to settle the differences between the parties.
A report on the facts was submitted by the arbitrators on March 31, 1905.
On June 5, 1905, upon petition by the attorneys of both parties, the matter was set for hearing before the judge without the arbitrators’ intervention.
On November 6, 1905, Judge Trent dictated a sentence in favor of the plaintiff against the defendant, ordering payment equivalent to 800 pesos in Mexican currency (calculated at a rate of P1.30) with 6 percent interest from March 3, 1901, plus costs including fees for the arbitrators.
The lower court dismissed the defendant’s counterclaim.

In 1897, the plaintiff left the Philippines for China and, prior to his departure, turned over the management of his abaca (hemp) plantations in Sorsogon to Tan Tonguan.

Tan Tonguan worked the abaca and secured fiber valued at 800 pesos.
The fiber was stored in a warehouse in Buhang by direction of the defendants.
The defendants later acknowledged by means of the bill of exchange that they had received the value for the abaca.

In 1896–1897, an agreement was entered with the head of “J. C.” wherein the plaintiff transferred his shops at San Isidro and Buhang to certain Chinamen (Tan Tonguan, Lim Joco, and Tim Bico) in exchange for assuming liabilities of approximately 600 pesos and 400 pesos respectively.

This agreement established that the plaintiff would not be liable for the amounts claimed by the defendants in their counterclaim.

When the bill of exchange was presented for payment in Manila upon the plaintiff’s subsequent return from China, payment was suspended by the defendant.
The draft or check was not protested in the manner prescribed by the Code of Commerce.

The lower court held that this draft should be regarded as mere evidence of indebtedness, thereby exempting the plaintiff from the protest formality.

Prior to the execution of the bill of exchange, the plaintiff had deposited a quantity of abaca in the defendant’s warehouse in Buhang, valued at 800 pesos.
The warehouse, as evidence, belonged to the defendant.
Subsequent to the deposit and before its removal, the warehouse and its contents were destroyed by insurrectos.
The loss, occurring after the defendant had taken possession of the abaca pursuant to articles 1462 and 1463 of the Civil Code, was deemed the loss of the defendant.

Whether the delivery of the abaca (hemp) to the defendant’s warehouse constituted valid consideration for the bill of exchange despite the subsequent destruction of the commodity.
Whether the property, once delivered and stored in the defendant’s warehouse, passed into the defendant’s possession and risk, thereby making him liable for its loss.

Whether the absence of a formal protest against the bill of exchange (or draft/check) nullified or affected the plaintiff’s right to recover the indebtedness.
Whether the defendant’s action in ordering the drawee not to pay the bill rendered the protest unnecessary.

Whether the evidence supported the defendant’s counterclaim, which alleged that no consideration was received for the bill of exchange.
Whether the plaintiff was liable for additional debts claimed by the defendant relating to other agreements involving shop transfers.