Case Summary (G.R. No. 51770)
Key Dates
- February 27, 1920: Tobacco shipped from Cebu on the Don Ildefonso.
- February 28, 1920: Picornell drew the bill (Exhibit A) for P39,529.83 in Cebu in favor of Philippine National Bank.
- March 3, 1920: Hyndman, Tavera & Ventura accepted the bill (initially due April 2, 1920).
- March 13–26, 1920: Correspondence about alleged damaged tobacco; Picornell requested extension.
- Reaccepted for thirty days; accepted with new due date May 2, 1920.
- May 2, 1920: Bill matured and was not paid.
- May 4, 1920: Hyndman, Tavera & Ventura refused payment and placed the tobacco at bank’s disposal.
- May 12, 1920: Bank had tobacco appraised at P28,790.72.
- September 1921: Bank sold the tobacco and received P6,708.82.
- Trial court decision (January 9, 1922; amended Feb. 18) and appeal to the Supreme Court decision rendered September 26, 1922.
Applicable Law and Procedural Rules
- Negotiable Instruments Law (relevant sections cited in the decision: secs. 20, 28, 61, 62, 84, 89, 105–106).
- Act No. 2938 (statutory authority regarding bank’s power to accept security and sale without prior notice in certain cases; section 33 invoked).
- Rules of the Court of First Instance, Rule 16 (procedural contention by appellee regarding requirements for raising factual issues on appeal).
- Procedural posture: Trial court rendered judgment ordering solidary (joint) liability for specified sums; appellants appealed.
Undisputed Core Facts
- Picornell purchased 1,735 bales of tobacco in Cebu per instructions from Hyndman, Tavera & Ventura; he obtained from the Philippine National Bank branch in Cebu P39,529.83 (plus commission) and delivered to the bank the bill of exchange, invoice, and bill of lading, with the export documents delivered on condition “D/P” (documents against payment).
- The central office in Manila presented the draft to Hyndman, Tavera & Ventura, which accepted it (first due April 2, then extended to May 2). The drawee-acceptor did not pay at maturity and formally refused payment, placing the tobacco at the bank’s disposal.
- The bank protested the dishonored bill, took possession of the tobacco, had it appraised at P28,790.72, later sold the tobacco and recovered P6,708.82; these figures were used in calculating recoverable amounts.
Procedural Claims and Defenses Raised on Appeal
- Pardo de Tavera: Claimed the bill was without consideration; therefore, no liability should attach to him (as acceptor/successor).
- Picornell: Asserted he was merely an agent (commission agent) of the firm in the purchase; contested allegations that tobacco was inferior; argued the D/P condition was not modified; complained that the bank permitted the firm to take possession before payment; contended the bank acted as mere depositary and lacked authority to sell; asserted that he should have proof of notice of dishonor under section 89 (Negotiable Instruments Law) before being held liable.
Court’s Legal Issues for Resolution
- Whether the plaintiff-bank, as holder of the bill, could enforce payment against the acceptor and the drawer notwithstanding alleged defects between the drawer and acceptor (i.e., whether the bank was a holder in due course and protected from defenses arising out of the drawer-acceptor relationship).
- Whether Picornell’s status as commission agent for the purchaser relieved him of personal liability on the bill.
- Whether the bank violated the D/P instruction, and whether it lawfully retained, appraised, and sold the tobacco as security for the dishonored bill.
- Whether proper notice of dishonor was given to the drawer, as required for recourse.
- Whether the bank properly deducted proceeds of the sale from the judgment.
Court’s Findings of Fact
- The bank advanced full value on the bill to Picornell and retained the invoice and bill of lading under the “D/P” understanding.
- Hyndman, Tavera & Ventura accepted the bill and later refused payment, notifying the bank and placing the tobacco at the bank’s disposal.
- The appraisal fixing the tobacco’s value at P28,790.72 was uncontested and reasonable.
- The bank sold the tobacco in September 1921, obtaining P6,708.82.
- A protest for nonpayment was made and a copy was mailed to Picornell in good season; the statutory presumption of receipt (Negotiable Instruments Law secs. 105–106) stood unrebutted.
Legal Reasoning and Application of Law
- Holder in Due Course and Consideration: The Court applied the principle that a payee or holder who gives value for an instrument and is ignorant of equities between the drawer and acceptor takes the instrument free from defenses that arise solely between those two parties (citing authority and section 28 of the Negotiable Instruments Law). Because the bank advanced full value and was not party to any alleged defect between Picornell and Hyndman, Tavera & Ventura, the bank’s right to recover from the acceptor and, on recourse, from the drawer was protected. Partial or defective consideration as between drawer and acceptor does not defeat the holder’s claim where the holder gave full value in good faith.
- Liability of the Acceptor and Drawer: Under the Negotiable Instruments Law, the acceptor (Hyndman, Tavera & Ventura, or its successor J. Pardo de Tavera) is primarily liable on the accepted draft (sec. 62), and the drawer (Picornell) is secondarily liable on dishonor and recourse (sec. 61, sec. 84). The firm’s unconditional acceptance established primary liability; its refusal to pay made the instrument dishonored and authenticated the bank’s right to proceed.
- Picornell’s Agency Argument: The Court held that Picornell’s role as commission agent in purchasing the tobacco did not automatically make him agent in the drawing of the bill or relieve him from liability on the instrument. A separate obligation arises from negotiation and delivery of a negotiable instrument; absent an explicit notation on the bill indicating that the drawer was signing in a representative capacity, the drawer warrants responsibility (sec. 20 referenced). Thus Picornell’s mere agency in the purchase did not negate his drawer liability.
- D/P Condition, Possession, Pledge, and Sale: The bank retained the invoice and bill of lading under the D/P condition and thus held pledge-like rights over the tobacco as security for the bill. When the drawee-acceptor refused payment and placed the tobacco at the bank’s disposal, the bank’s title as pledgee and right to treat the tobacco as discount security were established. The Court found the bank acted within statutory authority (Act No. 2938) and section 33 was applicable to allow sale without prior notice in the circumstances; moreover, there was no challenge that the sale price was not the be
Case Syllabus (G.R. No. 51770)
Procedural History
- The Court of First Instance of Manila rendered a decision January 9, 1922, later amended by an order of February 18, 1922, against the defendants.
- The trial court sentenced the defendants to pay solidarily to the plaintiff bank the sum of P28,790.72 with interest at 9% per annum from May 3, 1921, and costs.
- The trial court further ordered defendant Bartolome Picornell to pay the plaintiff the sum of P10,739.11 with interest at 9% per annum from May 3, 1921, subject to a deduction of P6,708.82 from the amounts to be paid by the defendants.
- The defendants appealed from the trial court judgment. The present decision affirms the judgment appealed from, with costs against the defendants.
Parties and Roles
- Plaintiff and appellee: The Philippine National Bank (the bank, central office in Manila; branch in Cebu).
- Defendants: Bartolome Picornell; the firm Hyndman, Tavera & Ventura (dissolved); Joaquin Pardo de Tavera (successor of the dissolved firm; appellant in one appeal).
- Picornell: acted in the purchase of tobacco in Cebu and drew a bill of exchange in favor of the National Bank.
- Hyndman, Tavera & Ventura: consignee at Manila, accepted the bill but later refused payment and placed the tobacco at the bank’s disposal.
- Joaquin Pardo de Tavera: member of the firm who signed the acceptance and later was sued as successor to the firm.
Core Facts — Purchase, Instrument and Delivery of Documents
- Picornell, following instructions of Hyndman, Tavera & Ventura, purchased in Cebu 1,735 bales of tobacco.
- Picornell obtained from the branch of the National Bank in Cebu the sum of P39,529.83 — the value of the tobacco together with his commission of 1 real per quintal (stipulated in Exhibit 4).
- Picornell drew and delivered to the Cebu branch a bill of exchange (Exhibit A) dated "CEBU, 28 febrero, 1920" for P39,529.83, containing the endorsement "Value received" and ordering payment to the order of Philippine National Bank.
- The invoice and bill of lading for the tobacco were delivered to the bank together with the bill of exchange, with the expressed condition "D/P" (documents for payment), i.e., the bank was to deliver the documents to Hyndman, Tavera & Ventura only upon payment of the bill.
- The tobacco was shipped aboard the vessel Don Ildefonso on February 27, 1920, consigned to Hyndman, Tavera & Ventura at Manila.
Acceptance, Reacceptance, and Non-Payment — Timeline of Key Dates
- March 3, 1920: The central office of the National Bank in Manila presented the bill to Hyndman, Tavera & Ventura, who accepted it. The acceptance on the face of the bill reads: "Accepted, 3d March, 1920. Due, 2d April, 1920. Hyndman, Tavera & Ventura, by (Sgd.) J. Pardo de Tavera, member of the firm."
- Between shipment and acceptance, the shipowner (Tambunting), upon arrival at Manila, requested Hyndman, Tavera & Ventura to send for the goods, which the firm did without the knowledge of the National Bank. The bank nevertheless retained the invoice and bill of lading until trial.
- Upon examination at the firm’s warehouses in Manila, Hyndman, Tavera & Ventura notified Picornell by letters and cable that part of the tobacco was damaged and of no use.
- March 13, 1920: Picornell acknowledged receipt of communications and samples, requested exact number of deteriorated bales, and asked that no bale be sold until the matter was settled, indicating his knowledge that the firm had possession of the tobacco.
- March 26, 1920: Picornell wrote the bank requesting that the central office extend thirty days the time for payment of the bill for P39,529.83 against Hyndman, Tavera & Ventura.
- The bank granted the extension; the firm reaccepted the bill for thirty days: "Accepted for thirty days. Due May 2d, 1920. Hyndman, Tavera & Ventura, By (Sgd.) J. Pardo de Tavera, member of the firm."
- May 2, 1920: Bill matured and was not paid.
- May 4, 1920: Hyndman, Tavera & Ventura notified the bank that they refused to pay draft No. 2 for P39,529.83, alleging noncompliance of the contract by the drawer, and placed the Leaf Tobacco at the bank’s disposal at their go-down No. 26-36 Calle Soler.
- May 12, 1920: The bank protested the bill, took possession of the tobacco, and had it appraised at P28,790.72 (valuation not contested).
- About September, 1921: The bank sold the tobacco and obtained P6,708.82 from the sale.
Documentary Evidence — Text of the Bill and Related Papers
- Exhibit A (bill of exchange) bears:
- Date and place: "No. 2-A. CEBU, 28 febrero, 1920."
- Amount: "For P39,529.83"
- Order/payment clause in mixed English/Spanish: "At treinta (30) days sight please pay this first of exchange ( second unpaid) to the order of Philippine National Bank treinta y nueve mil quinientos veintinueve pesos con 83/100. Value received."
- Drawer signature: "(Sgd.) B. Picornell"
- Addressed to: "Sres. HYNDMAN, TAVERA Y VENTURA, Calle Soler 26 y 28."
- Invoice and bill of lading were delivered to the bank subject to "D/P" (documents for payment).
Contentions of the Appellants
- Joaquin Pardo de Tavera: argued that the bill was without consideration and that judgment should not have been rendered against him.
- Bartolome Picornell:
- Claimed he acted merely as an agent (commission agent) of Hyndman, Tavera & Ventura in the purchase and thus should not be personally liable.
- Contended the tobacco was not of inferior quality as alleged by the consignee firm.
- Asserted that the "D/P" condition attached to the transaction was not modified.
- Complained that the bank consented to the company taking possession of the tobacco before payment.
- Maintained that the bank held the tobacco as a deposit, and that the bank was not authorized to sell the tobacco (sale