CAPACIDAD DE ORIENTACION

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FACTS

-On 4 different occasions in 1961, De Reny through Aurora Carcereny (aka Aurora Gonzales), president and Aurora Tuyo, secretary of the corporation, applied to the BPI for 4 irrevocable commercial letters of credit (L/C) to cover the purchase of goods such as dyestuffs from their supplier J. B. Distributing Co.

-All the applications of the corporation were approved and the corresponding commercial L/C agreements were executed pursuant to banking procedures.

-Under the agreements, the aforementioned officers bound themselves personally as joint and solidary debtors with the corporation.

-As per bank regulations then in force, De Reny delivered to BPI peso marginal deposits as each L/C was opened.

-BPI then issued irrevocable commercial L/Cs addressed to its correspondent banks in the US with uniform instructions for them to notify the beneficiary thereof, JB Distributing Co, that they have been authorized to negotiate the latter’s sight drafts up to the amounts mentioned therein, if accompanied upon presentation, by full set of negotiable clean “on board” ocean bills of lading, covering the merchandise appearing on the L/Cs (ie dyestuffs).

-Consequently, the corresponding banks debited the account of BPI w/ them up to the full value of the drafts presented by the JB Dist. Co. plus commission thereon, and thereafter, endorsed and forwarded all documents to BPI.

-As each of the shipments arrived, De Reny made partial payments to BPI however, further payments were discontinued subsequently as a result of the chemical test wherein it was found that the goods that arrived in Manila were not dyestuffs but were colored chalks.

-De Reny refused to take possession of the goods so BPI caused them to be deposited w/ a bonded warehouse and sued De Reny.

-The lower court ordered the defendants to pay BPI w/ interest.

ISSUE

WON it was the duty of the correspondent banks of BPI to take the necessary precaution to ensure that the goods shipped under the covering L/C conformed w/ the item appearing therein TF having failed to do so, no claim for recoupment could be had against the defendants

HELD: NO, defendants are liable for recoupment.

-Under the terms and conditions of their commercial L/C agreement with BPI, the defendants agreed that BPI shall not be responsible for the

“existence, character, quality, quantity, conditions, packing, value or delivery of the property purporting to be represented by documents; for any difference in character, quality, quantity, condition, or value of the property from that expressed in documents,” or for “partial or incomplete shipment, or failure or omission to ship any or all the property referred to in the Credit,” as well as “for any deviation from instructions, delay, default, or fraud by the shipper or anyone else in connection with the property the shippers or vendors and ourselves(purchasers) or any of us.”

-Having agreed to these terms, the defendants have to comply w/ their covenant.

-But even w/o said stipulation, they are still liable because banks, in providing financing in int’l business transactions such as those entered into by the defendants, do NOT deal with the property to be exported or shipped to the importer but deal only with documents (as per Art 10 of the Uniform Customs and Practices for Commercial Documentary Credits Fixed for the 13th Congress of Int’l Chamber of Commerce)

-Having proved that there exists a custom in int’l banking and financing circles negating any duty on the part of a bank to verify whether what has been described in the L/Cs or drafts or shipping docs actually tallies with what was loaded in the ship, the defendants are bound by said established usage.

Disposition Judgment affirmed.

SANTAMARIA V HSBC

Naftaly, a stock brokerage firm and paid therefore the sum of P8,014.20 as shown by receipt Exh.

“B.” The buyer received Stock Certificate No.

517, Exh. “E,” issued in the name of Woo Uy-Tioco & Naftaly and indorsed in blank by this firm.

On March 9, 1937, Mrs. Santamaria placed an order for the purchase of 10,000 shares of the Crown Mines Inc. with R.J. Campos & Co. a brokerage firm and delivered Certificate No. 517 to the latter as security therefor with the understanding that said certificate would be returned to her upon payment of the 10,000 Crown Mines, Inc. shares. Exh. “D” is the receipt of the certificates in question signed by one Mr.

Coscolluela, manager of the R.J. Campos & Co., Inc. According to certificate, Exh. “E,” R.J. was later written in lead pencil on the upper right hand corner thereof.

-Two days later, on March 11, Mrs. Santamaria went to R.J. Campos & Co., Inc. to pay for her order of 10,000 Crown Mines shares and to get back Certificate No. 517. Coscolluela then informed her that R.J. Campos & Co., Inc. was no longer allowed to transact business due to the prohibition order from the Securities and Exchange Commission. She was also informed that her stock certificate was in the possession of the Hongkong & Shanghai Banking Corporation (HSBC). Certificate No. 517 came into the possession of the HSBC because R.J. Campos &

Co., Inc. had opened an overdraft account with this bank and to this effect it had executed on April 16, 1936 a document of hypothecation, Exh.

“I,” by the term of which pledged to the said bank all the stocks, shares, and securities which I/We may hereafter come into their possession on my/our account and whether originally deposited for sale custody or for any other purpose whatever or which may hereafter be deposited by me/us in lieu of or in addition to the Stocks,

Inc. with the request that the same be cancelled and a new certificate be issued in the name of R.W. Taplin as trustee and nominee of the banking corporation. Taplin was an officer of this institution in charge of the securities belonging to or claimed by the bank. As per this request the Batangas Minerals, Inc. on March 12, 1937, issued Certificate No. 715 in lieu of Certificate No. 517, in the name of Taplin as trustee and nominee of the HSBC.

-Mrs. Santamaria said she made the claim to the bank for her certificate, though she did not remember Taplin, the bank’s representatives, she informed him that the certificate belonged to her and she demanded that it be returned to her. Taplin then replied that the bank did not know anything about the transaction had between her and and R.J.

Campos & Co., Inc. and that he could not do anything until the case of the bank with Campos shall have been terminated. This declaration was not contradicted by the adverse party.

-In Civil Case No. 51224, R.J. Campos & Co., Inc.

was declared insolvent, and on July 12, 1937, the HSBC asked permission in the insolvency courts to sell the R.J. Campos & Co., Inc. securities listed in its motion by virtue of the document of hypothecation, court granted this motion.

-On June 13, 1938, the 10,000 shares of Batangas Minerals, Inc. represented by Certificate No. 715 were sold to the same bank by the Sheriff for P300.00 at the foreclosure sale authorized by said order. R.J. Campos, the president of R.J.

Campos & Co., Inc. was prosecuted for estafa and found guilty of this crime and was sentenced by the Manila Court of First Instance in Criminal Case No. 54428, to an imprisonment and to indemnify the offended party, Mrs. Josefa Santamaria, in the amountof P8,041.20 representing the value of the 10,000 shares of Batangas Minerals, Inc. (Exhs. “I” and “J”). The offended party and RW Taplin were among the witnesses for the prosecution in this criminal case No. 54428.

-When Mrs. Santamaria failed in her efforts to force the civil judgment rendered in her favor in the criminal case because the accused became insolvent, she filed her complaint in this case on October 11, 1940. At the trial both parties agreed that the 10,000 Batangas Minerals shares formerly represented by Certificate No. 517 and thereafter by Certificate No. 715, have no actual market value. Defendants-appellants contend in the first place that the trial court erred in finding

that the plaintiff-appellee was not chargeable with negligence in the transaction which gave rise to this case.

ISSUE

WON defendant bank was obligated to inquire who the real owner of the shares represented by the certificate of stock was

HELD: NO.

-The certificate of stock in question was issued in the name of the brokerage firm—Woo, Uy-Tioco &

Naftaly and that said indorsement was guaranteed by R.J. Campos & Co., Inc., which in turn indorsed it in blank. This certificate is what is known as street certificate. Upon its face, the holder was entitled to demand its transfer into his name from the issuing corporation. The Bank was not obligated to look beyond the certificate to ascertain the ownership of the stock at the time it received the same from R.J. Campos & Co., Inc.

for it was given to the Bank pursuant to their letter of hypothecation. Even if said certificate had been in the name of the plaintiff but indorsed

in blank, the Bank would still have been justified in believing that R.J. Campos & Co. Inc. had the title thereto for the reason that it is a well-known practice that a certificate of stock, indorsed in blank, is deemed quasi negotiable, and as such the transferee thereof is justified in believing that it belongs to the holder and transferor.

-A mere claim of ownership does not establish the fact of ownership. The right of the plaintiff in such a case would be against the transferor. The fact that on the right margin of said certificate the name of the plaintiff appeared written, granting it to be true, cannot be considered sufficient reason to indicate that its owner was the plaintiff considering that said certificate was indorsed in blank by R.J. Campos & Co., Inc. and was transferred in due course by the latter to the Bank under their letter of hypothecation. Said indicium could at best give the impression that the plaintiff was the original holder of the certificate.

Disposition Decision modified in the sense of ordering the defendant to deliver to the plaintiff certificate of stock No. 715

DELOS SANTOS V McGRATH indorsement in blank appears on the back of said certificates. The certificates except one, covering 55k shares, are in plaintiff's possession.

-Santos claims he bought the shares from different persons (Campos and Hess) in 1942. Ownership of said shares was vested in the Alien Property Custodian of the US by virtue of an order in 1945.

The Administrator denied plaintiff's claim on the ground that the stocks were bought by Madrigal in trust for and for the benefit of Mistui Busaan Kaisha (a Japanese corp); that Mitsui kept the certificates in its office in Manila until liberation;

and that the certificates were never sold or otherwise disposed of so that they were probably stolen during the war.

-Plaintiff couldn't produce as witnesses the persons from whom he bought the stocks because they died in the war.

ISSUES

1. WON plaintiff had purchased the shares of stock 2. WON stock certificates are negotiable instruments HELD

1. NO.

-Even if Campos and Hess did sell the shares, the result, insofar as plaintiff is concerned, would be

the same. The shares were registered, and are still, in the name of Madrigal. It was not disputed that he was a mere trustee. It was proven that Mitsui never sold or otherwise disposed of the shares.

-According to the Corporation Law, a share of stock may be transferred by endorsement of the corresponding stock certificate, coupled with its delivery. However, the transfer shall not be valid, except as between the parties, until it is entered and noted upon the books of the corporation.

Therefore, the alleged sale by Campos and Hess is not valid except as between them and plaintiff.

It doesn't bind Madrigal of Mitsui.

2. NO

-Although a stock certificate is sometimes regarded as quasi-negotiable, in the sense that it may be transferred by endorsement, coupled with delivery, the instrument is non-negotiable, because the holder thereof takes it without prejudice to such rights or defenses as the registered owner may have under the law, except if the circumstances properly call for application of estoppel.

-Even if the owner of the certificate has endorsed it in blank, and it is stolen from him, no title is acquired by an innocent purchaser for value.

-The title of the true owner of a lost or stolen certificate may be asserted against any one subsequently obtaining possession although the holder may be a bona fide purchaser.

CAPCO V MACASAET