The Warehouse Receipts Law Final

Comments and Cases of Credit transactions Atty. Hector De Leon

The Warehouse Receipts LawAct no. 2137 as amendedSecs. 1-61

Scope:It covers warehouses whether public or private, bonded or not. Thus it has been held to be applicable to a warehouseman licensed under ACT no. 8393 ( as amended by R.A. No. 247, known as the General Bonded Warehouse Act , of special application to those engaged in the business of receiving commodities for storage

When Civil Code Applicable:The act applies to warehouse receipts issued by a warehouseman as defined in section 58(a) of the act, while the civil code refers to the other cases where the receipts are not issued by a warehouseman as defined in this section.

Purposes of the Law: To regulate the status, rights, and liabilities of the parties in the warehousing contract;To protect those who, in good faith and for value acquire negotiable warehouse receipts by negotiation;To facilitate the use of warehouse receipts as documents of title; To render the title to, and right of possession of, property stored in warehouses more easily convertible; andIn order to accomplish these, to place a much greater responsibility on the warehouseman (93 C.J.S. 400)

I. The issue of Warehouse Receipts

Section 1. Person who may issue receipts – warehouse receipts may be issued by any WAREHOUSEMAN.WAREHOUSEMAN – a person lawfully engaged in the business of storing goods for profit. (Section 58 a)

Note: if a warehouse receipts was issued by someone else other than a warehouseman, it would not be considered as the former receipt except if that person was authorized to act as the agent of the warehouseman.

Warehouse – the law does not define what a warehouse is. As used, however, in the act, warehouse means the building or place where the goods are deposited and stored for profit.

Section 2. Form of receipts; essential terms. – Warehouse receipts need not be in any particular form but every such receipt must embody within its written or printed terms:

a. The location of the warehouse where the goods are stored

b. The date of issue of the receipt

c. The consecutive number of the receipt

d. A statement whether the goods received will be delivered to the bearer, to a specified person or to a specified person or his order;

e. The rate of storage charges

4 This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped must be personal property actually sold or bartered, on a credit. Page 1


f. A description of the goods or package containing them

g. The signature of the warehouseman which may be made by his authorized agent

h. If the receipts is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership and;

i. A statement of the amount of advances made of liabilities incurred for which the warehouseman claim as lien. If the precise amount of such advances made or of such liabilities incurred is, at the same time of the issue of the receipt, unknown to the warehouseman or to his agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient.

A warehouseman shall be liable to any person injured thereby for all damages caused by the omission from a negotiable receipt of any of the terms herein required.

DEFINITION AND NATURE OF WAREHOUSE RECEIPT

The act does not define the warehouse receipt.It has been defined as written acknowledgment by a warehouseman that he has received and holds certain goods therein describe in store for the person to whom it is issued. (Vanett vs. Reilly- Hertz automobile co., 173 N.W. 466)It is a simple written contract between the owner of the goods and the warehouseman to pay the compensation for that service. ( Hale vs. Milwaukee Dock Co. , 29 Wis. 482, 67 C.J. 463.)A warehouse receipt is a bilateral contract. – it imports that goods are in the hands of the warehouseman and is symbolical representation of the property itself.A warehouse receipt is not negotiable instrument within the meaning of negotiable instrument law in the technical sense that a bill of exchange or promissory note is negotiable , even though the warehouse receipts act declares it negotiable. Negotiability is provided for by the act.

FORM AND CONTENTS:

(SEE ENUMERATED ITEMS IN SEC. 2)

EFFECT OF OMMISSION OF ANY ESSENTIAL TERMS.

NOTE: the terms prescribed in the Section 2 are required for the protection of the depositor and those succeeding to his right.



Validity of receipt not affected – the omission of any of the requirements will not affect the validity of the warehouse receipt.Warehouseman liable for damages – it will only render the warehouseman liable for damages to those injured by his omission. (Wordson vs. Davenport Mill and Elevator Co. , 13 P. (2d) 478)Negotiability of receipt not affected – neither is the negotiability affected. Section 2 does not deal with negotiability of warehouse receipts.Contract converted to ordinary deposit – the issuance of a warehouse receipt in the form provided by law is merely permissive and directory and not mandatory in the sense that if the requirements are not observed, then the goods are delivered for the storage become ordinary deposits. (Gonzales vs. Go Ting and Luzon Surety Co., 104 PHIL. 492{1958})Section 3. Form of Receipts. – What terms may be inserted. – A warehouseman may insert in a receipt, issued by him, any other terms and conditions provided that such terms and conditions shall not:Be contrary to the provision of this act.In any wise impair his obligation to exercise that degree of care in the safekeeping of the goods entrusted to him which reasonably careful man would exercise in regard to similar goods of his own.

Note: the stipulations must not be contrary to law, morals, good customs, public order or public policy (ART. 1306, Civil Code)

TERMS THAT CAN NOT BE INCLUDED IN A WAREHOUSE RECEIPT:

1. Exemption from liability for misdelivery – under subsection (a), a warehouseman is not authorized to insert any term exempting him from liability for misdelivery of goods because such would be against in section 10 of the act or for not giving statutory notice in case of sale of goods because such would be against in section 10 of the act or for not giving statutory notice in case of sale of goods because such would be contrary to section 33 and 34.

2. Exemption from liability for negligence – under subsection (b), the warehouseman can not insert any term which would relieve him from liability of his own negligence such as “for account and the risk of the depositor.”

Note: the law requires the warehouseman to exercise the degree of care in safekeeping of the goods entrusted to him which a reasonable careful man would exercise in regard to similar goods of his own.

Section 4 and 5 refers to the difference between negotiable and non negotiable receipt

Section 4. Non Negotiable receipt – a receipt which it is stated that the goods received will be delivered to the depositor or to



any other specified person, is a non negotiable receipt.

Section 5. Negotiable Receipt – A receipt which it is stated that the goods received will be delivered to the bearer or to the order of any person named in such receipt is a negotiable receipt.

No provision shall be inserted in a negotiable receipt that it is non negotiable. Such provision , If inserted shall be void.

Note: The word negotiable is used only indicating that in the passage of warehouse receipts through the channels of commerce, the law regards the property which the describe as following them and gives to their regular transfer by indorsement the effect of manual delivery of the things specified in them. (Vanett vs. Reilly- Hertz automobile co., 173 N.W. 466)

Reason why it is not a negotiable instrument: because it does not comply with section 1b of act no. 2031 (negotiable instrument law) which requires unconditional promise or order to pay sum or certain in money.

Sec. 6. Duplicate receipts must be so marked. — When more than one negotiable receipt is issued for the same goods, the word "duplicate" shall be plainly placed upon the face of every such receipt, except the first one issued. A warehouseman shall be liable for all damages caused by his failure

so to do to any one who purchased the subsequent receipt for value supposing it to be an original, even though the purchase be after the delivery of the goods by the warehouseman to the holder of the original receipt.

Sec. 7. Failure to mark "non-negotiable." — A non-negotiable receipt shall have plainly placed upon its face by the warehouseman issuing it "non-negotiable," or "not negotiable." In case of the warehouseman's failure so to do, a holder of the receipt who purchased it for value supposing it to be negotiable, may, at his option, treat such receipt as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been negotiable.

This section shall not apply, however, to letters, memoranda, or written acknowledgment of an informal character.

Application of section 6 and 7. The former refers only to negotiable instrument law while the latter refers to non negotiable instrument receipts. ( see section 52, for criminal liability of warehouseman)

EFFECT OF FAILURE TO MARK “NEGOTIABLE OR NON NEGOTIABLE”

The word “negotiable” usually is written or printed on the face of a negotiable warehouse receipt and the



failure to do so mark it does not render it non negotiable if it contains words of negotiability. (section 5)In case of non negotiable receipts, the law imposes upon the warehouseman the duty to mark them ”non negotiable” provided the holder of such unmarked receipt purchased it for value supposing it to be negotiable.

II — OBLIGATIONS AND RIGHTS OF WAREHOUSEMEN UPON THEIR RECEIPTS

Sec. 8. Obligation of warehousemen to deliver. — A warehouseman, in the absence of some lawful excuse provided by this Act, is bound to deliver the goods upon a demand made either by the holder of a receipt for the goods or by the depositor; if such demand is accompanied with:(a) An offer to satisfy the warehouseman's lien1;

(b) An offer to surrender the receipt, if negotiable, with such indorsements as would be necessary for the negotiation of the receipt; and

(c) A readiness and willingness to sign, when the goods are delivered, an acknowledgment that they have been delivered, if such signature is requested by the warehouseman.

In case the warehouseman refuses or fails to deliver the goods in compliance with a demand by the

holder or depositor so accompanied, the burden shall be upon the warehouseman to establish the existence of a lawful excuse for such refusal.

Principal Obligation of the Warehouseman:

1. To take care of the goods entrusted to his safekeeping (SECTION 21)

2. To deliver them to the holder of the receipt or the depositor provided the conditions under section 8 are fulfilled.

Lawful Exercise for Refusal to Deliver Goods:

A warehouseman may still refuse delivery of goods covered by warehouse receipt on some lawful excuses provided in this act (See section 10, 16, 18,21,31 and 36). But the existence of a lawful excuse for such refusal is an affirmative defense which the warehouseman must prove. (See section 8, paragraph 2)

Sec. 9. Justification of warehouseman in delivering. — A warehouseman is justified in delivering the goods, subject to the provisions of the three following sections, to one who is:

(a) The person lawfully entitled to the possession of the goods, or his agent;

(b) A person who is either himself entitled to delivery by the terms of



a non-negotiable receipt issued for the goods, or who has written authority from the person so entitled either indorsed upon the receipt or written upon another paper; or

(c) A person in possession of a negotiable receipt by the terms of which the goods are deliverable to him or order, or to bearer, or which has been indorsed to him or in blank by the person to whom delivery was promised by the terms of the receipt or by his mediate or immediate indorser.

Person to whom the Goods must delievered:

1. The person lawfully entitled to the possession of the goods, or his agent

2. Person entitled to deliver under a negotiable receipt or with written authority

3. Person in possession of a negotiable receipt.

Sec. 10. Warehouseman's liability for misdelivery. — Where a warehouseman delivers the goods to one who is not in fact lawfully entitled to the possession of them, the warehouseman shall be liable as for conversion to all having a right of property or possession in the goods if he delivered the goods otherwise than as authorized by subdivisions (b) and (c) of the preceding section, and though he delivered the goods as authorized by said subdivisions,

he shall be so liable, if prior to such delivery he had either:(a) Been requested, by or on behalf of the person lawfully entitled to a right of property or possession in the goods, not to make such deliver; or

(b) Had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods.

Liability of Warehouseman for Misdelivery:

Liability similar to a bank paying forged check.

Liability as for conversion2.

Sec. 11. Negotiable receipt must be cancelled when goods delivered. — Except as in section thirty-six, where a warehouseman delivers goods for which he had issued a negotiable receipt, the negotiation of which would transfer the right to the possession of the goods, and fails to take up and cancel the receipt, he shall be liable to any one who purchases for value in good faith such receipt, for failure to deliver the goods to him, whether such purchaser acquired title to the receipt before or after the delivery of the goods by the warehouseman.

Sec. 12. Negotiable receipts must be cancelled or marked when part of goods delivered. — Except as provided in section thirty-six,



where a warehouseman delivers part of the goods for which he had issued a negotiable receipt and fails either to take up and cancel such receipt or to place plainly upon it a statement of what goods or packages have been delivered, he shall be liable to any one who purchases for value in good faith such receipt, for failure to deliver all the goods specified in the receipt, whether such purchaser acquired title to the receipt before or after the delivery of any portion of the goods by the warehouseman.

Note: The above provision is not applicable to non negotiable receipt s because the warehouseman may make delivery without requiring their surrender and cancellation.

Sec. 13. Altered receipts. — The alteration of a receipt shall not excuse the warehouseman who issued it from any liability if such alteration was:(a) Immaterial,

(b) Authorized, or

(c) Made without fraudulent intent.

If the alteration was authorized, the warehouseman shall be liable according to the terms of the receipt as altered. If the alteration was unauthorized but made without fraudulent intent, the warehouseman shall be liable

according to the terms of the receipt as they were before alteration.

Material and fraudulent alteration of a receipt shall not excuse the warehouseman who issued it from liability to deliver according to the terms of the receipt as originally issued, the goods for which it was issued but shall excuse him from any other liability to the person who made the alteration and to any person who took with notice of the alteration. Any purchaser of the receipt for value without notice of the alteration shall acquire the same rights against the warehouseman which such purchaser would have acquired if the receipt had not been altered at the time of purchase.

Effects of Alteration on Liability of a Warehouseman:

1. Alteration immaterial – If the alteration immaterial (the tenor of the receipt is not changed like the substitution of the real name of the party), whether fraudulent or not, the warehouseman is liable on the altered receipt according to its original tenor.

2. Alteration material – if the alteration is material (the tenor of the receipt is changed like the erasure of the name of the party and the insertion of



another), but authorized the warehouseman is liable according to the terms of the receipt as altered

3. Material alteration innocently made – If the alteration is material but innocently made through unauthorized, the warehouseman is liable on the altered receipt according to its original tenor.

4. Material alteration through fraudulently. – If the alteration is material and fraudulently made, the warehouseman is liable according to the original tenor of the receipt to a purchaser of the receipt for value without notice and even the alterer and subsequent purchasers with notice except as regard to the last two, the warehouseman’s liability is limited only to delivery as he is excused from any liability.

Sec. 14. Lost or destroyed receipts. — Where a negotiable receipt has been lost or destroyed, a court of competent jurisdiction may order the delivery of the goods upon satisfactory proof of such loss or destruction and upon the giving of a bond with sufficient sureties to be approved by the court to protect the warehouseman from any liability or expense, which he or any person injured by such delivery may incur by reason of the original receipt remaining outstanding. The court may also

in its discretion order the payment of the warehouseman's reasonable costs and counsel fees.

The delivery of the goods under an order of the court as provided in this section, shall not relieve the warehouseman from liability to a person to whom the negotiable receipt has been or shall be negotiated for value without notice of the proceedings or of the delivery of the goods. Liability of a warehouseman in case of Lost or Destroyed Receipt:

Under section 8 and 11, the warehouseman is not liable for nondelivery without the surrender of the receipt. Indeed even if the receipt is claimed to have been lost or destroyed, it is essential that the court shall pass upon the question and make sure the receipt is really lost or destroyed.

Under section 14, a competent court may order the delivery of the goods only:

1. Upon proof of the loss or destruction of the receipt

2. Upon giving of a bond with sufficient sureties to be approved by the court.

Note: by virtue of the second paragraph, the warehouseman is still liable to a holder of the receipt for value without notice since the warehouseman can secure himself on the bond given.



Sec. 15. Effect of duplicate receipts. — A receipt upon the face of which the word "duplicate" is plainly placed is a representation and warranty by the warehouseman that such receipt is an accurate copy of an original receipt properly issued and uncanceled at the date of the issue of the duplicate, but shall impose upon him no other liability.

Liability of a warehouseman as to duplicate:

General Rule: When more than one receipt is issued for the same goods, the word duplicate must be plainly placed by the warehouseman upon the face of every such receipt except the one first issued.

The warehouseman warrants that:

1. duplicate copy is an accurate copy of the original receipt; and

2. Such original receipt is uncancelled at the date of the issue of the duplicate.

Sec. 16. Warehouseman cannot set up title in himself . — No title or right to the possession of the goods, on the part of the warehouseman, unless such title or right is derived directly or indirectly from a transfer made by the depositor at the time of or subsequent to the deposit for storage, or from the

warehouseman's lien, shall excuse the warehouseman from liability for refusing to deliver the goods according to the terms of the receipt.

The warehouseman cannot refuse to deliver the goods on the ground that he has acquired title or right to the possession of the same unless such title or right is derived:

1. derived directly or indirectly from a transfer made by the depositor at the time of deposit or subsequent thereto

2. warehouseman lien

Sec. 17. Interpleader of adverse claimants. — If more than one person claims the title or possession of the goods, the warehouseman may, either as a defense to an action brought against him for non-delivery of the goods or as an original suit, whichever is appropriate, require all known claimants to interplead.

Sec. 18. Warehouseman has reasonable time to determine validity of claims. — If someone other than the depositor or person claiming under him has a claim to the title or possession of goods, and the warehouseman has information of such claim, the warehouseman shall be excused from liability for refusing to deliver the goods, either to the depositor or person claiming under him or to the adverse claimant until the warehouseman



has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel claimants to interplead.

Duty of the warehouseman where there are several claimants:

The warehouseman must determine within the reasonable time the validity of the conflicting claims (sec 18) and to deliver to the person whom he finds is entitled to the possession of goods.

However, he is not excused from liability of mistake.

For the protection of the warehouseman, he must bring the complaint in interpleader and require the different claimants to litigate among themselves. (sec. 17)

Note: in short the warehouseman will be relived from liability in delivering the goods to the person whom the court finds to have a better right.

Liability of a warehouseman to rightful claimant:

Where a warehouseman does not compel interpleader in case requiring it, he is liable for refusal to deliver to the rightful claimant, and where he neither interpleads nor investigates, he will, after a lapse of a reasonable time, be held guilty of conversion as of the date of original demands for the goods.

What constitutes a reasonable time? Is one of fact for determination in accordance with the circumstances of the particular case.

Section 18 does not apply to cases where the warehouseman himself make a claim to the goods

Sec. 19. Adverse title is no defense except as above provided. — Except as provided in the two preceding sections and in sections nine and thirty-six, no right or title of a third person shall be a defense to an action brought by the depositor or person claiming under him against the warehouseman for failure to deliver the goods according to the terms of the receipt.

Adverse Title of Third Person is not a defense for Refusal to deliver

The warehouseman cannot set up title for himself as an excuse for his failure or refusal to deliver the goods (section 16). Neither can the warehouseman, as depositary for hire, set up an adverse title in another as an excuse for his failure to deliver property to his bailor on demand.

Sec. 20. Liability for non-existence or misdescription of goods. — A warehouseman shall be liable to the holder of a receipt for damages caused by the non-existence of the goods or by the failure of the goods to correspond with the description thereof in the receipt at the time of its issue. If,



however, the goods are described in a receipt merely by a statement of marks or labels upon them or upon packages containing them or by a statement that the goods are said to be goods of a certain kind or that the packages containing the goods are said to contain goods of a certain kind or by words of like purport, such statements, if true, shall not make liable the warehouseman issuing the receipt, although the goods are not of the kind which the marks or labels upon them indicate or of the kind they were said to be by the depositor.

Liability of a warehouseman for non existence or misdescription of goods:

General Rule: The warehouseman is under the obligation to deliver the identical property stored with him and if he fails to do so, he is liable directly to the owner. (93 C.J.S. 472)

As against a bonafide purchaser of a warehouseman receipt, the warehouseman is stopped, whether the receipt is negotiable or not, to deny that he has received the goods described in it.

But if the description consists merely of marks or labels upon the goods or upon the packages containing them, etc. The warehouseman is not liable even if the goods are not of the kind as indicated in the marks or label.

Sec. 21. Liability for care of goods. — A warehouseman shall be liable

for any loss or injury to the goods caused by his failure to exercise such care in regard to them as reasonably careful owner of similar goods would exercise, but he shall not be liable, in the absence of an agreement to the contrary, for any loss or injury to the goods which could not have been avoided by the exercise of such care.

Liability of warehouseman for loss due to lack of care.

The warehouseman is required to exercise ordinary or reasonable care in the custody of the goods, that is, the care a reasonably careful owner would exercise over similar goods of his own. It is also known as the diligence of a of father of the family.

In the absence of any agreement to the contrary, the warehouseman is not liable for any loss or injury of the goods which could not have been avoided by the exercise of such care.

Of course, what constitutes ordinary and reasonable care depends upon the circumstances such as the character and value of the property and the character and location of the warehouse. (93, C.J.S. 452)

Note: Stipulation of limiting its liability is VOID (Sec 3)

Sec. 22. Goods must be kept separate. — Except as provided in



the following section, a warehouseman shall keep the goods so far separate from goods of other depositors and from other goods of the same depositor for which a separate receipt has been issued, as to permit at all times the identification and redelivery of the goods deposited.

Sec. 23. Fungible goods may be commingled if warehouseman authorized. — If authorized by agreement or by custom, a warehouseman may mingle fungible goods with other goods of the same kind and grade. In such case, the various depositors of the mingled goods shall own the entire mass in common and each depositor shall be entitled to such portion thereof as the amount deposited by him bears to the whole.

Sec. 24. Liability of warehouseman to depositors of commingled goods. — The warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances as if the goods had been kept separate.Commingling of deposited goods:Commingling of the deposited goods:

General Rule: A warehouseman may not mingle goods belonging to depositor (sec 22). In the case of fungible goods (see section 58) like

rice sugar, etc., the warehouseman may mingle them with the goods of the same kind and grade provided that he is authorized by agreement or custom. (sec 23). In that case, the different owners became co-owners of the whole mass.

Intention of sec 22 and 23:

It is for the benefit of the holders of the receipts and not for the benefit of the warehouseman.

Remember: Authorization from the owners is a must!

Article 1976 of the NCC, “unless there is stipulation to the contrary, the depositary may commingle grain or other articles of the same kind and quality.”

Sec. 25. Attachment or levy upon goods for which a negotiable receipt has been issued. — If goods are delivered to a warehouseman by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner, and a negotiable receipt is issued for them, they can not thereafter, while in the possession of the warehouseman, be attached by garnishment or otherwise, or be levied upon under an execution unless the receipt be first surrendered to the warehouseman or its negotiation enjoined. The warehouseman shall in no case be compelled to



deliver up the actual possession of the goods until the receipt is surrendered to him or impounded by the court.

Attachment or Levy of Negotiable Receipt:

The warehouseman has the direct obligation to hold possession of the goods for the original owner or for the person to whom the negotiable receipt of title has been duly negotiated. (See section 41). While in possession of such warehouseman, the goods cannot be attached or levied upon under an execution unless:

1. document is first surrendered2. its negotiation is enjoined3. the document is impounded by

the court

Delivery of the goods covered by outstanding negotiable receipt.

The warehouseman can not be compelled to deliver up the possession of the goods until the receipt is surrendered to him or impounded by the court.

This prohibition is for the protection of the warehouseman since he could be made liable to a subsequent purchaser for value in good faith. (similar to Art. 1519 of Civil Code)

Note: applicable only to owner

Sec. 26. Creditor's remedies to reach negotiable receipts. — A

creditor whose debtor is the owner of a negotiable receipt shall be entitled to such aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching such receipt or in satisfying the claim by means thereof as is allowed at law or in equity in these islands in regard to property which can not readily be attached or levied upon by ordinary legal process.

Remedies of creditor or owner of negotiable receipt.

This article expressly gives the court full power to aid by injunction and otherwise a creditor seeking to get negotiable receipts covering such goods.

Sec. 27. What claims are included in the warehouseman's lien. — Subject to the provisions of section thirty, a warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands, for all lawful charges for storage and preservation of the goods; also for all lawful claims for money advanced, interest, insurance, transportation, labor, weighing, coopering and other charges and expenses in relation to such goods, also for all reasonable charges and expenses for notice, and advertisements of sale, and for sale of the goods where default had been made in satisfying the warehouseman's lien.



Extent of warehouseman’s Lien:

The warehouseman lien over the goods deposited with him is his security, just like pledge or motgage, for the payment of the charges, money advanced and other expenses enumerated in section 27.

Sec. 28. Against what property the lien may be enforced. — Subject to the provisions of section thirty, a warehouseman's lien may be enforced:(a) Against all goods, whenever deposited, belonging to the person who is liable as debtor for the claims in regard to which the lien is asserted, and

(b) Against all goods belonging to others which have been deposited at any time by the person who is liable as debtor for the claims in regard to which the lien is asserted if such person had been so entrusted with the possession of goods that a pledge of the same by him at the time of the deposit to one who took the goods in good faith for value would have been valid.

Goods subject to Lien:

1. Goods belonging to depositor or his principal

Under section 28, the warehouseman may enforce his lien

a. Against the goods of the depositor who is liable to the warehouseman as debtor whenever such goods are deposited

b. Against the goods of other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge.

2. Goods stored in fraud of true owners rights

There is nothing in this act giving a warehouseman a lien on goods belonging to another and stored by stranger in fraud of the true owners rights.

Sec. 29. How the lien may be lost. — A warehouseman loses his lien upon goods:(a) By surrendering possession thereof, or

(b) By refusing to deliver the goods when a demand is made with which he is bound to comply under the provisions of this Act.

Sec. 30. Negotiable receipt must state charges for which the lien is claimed. — If a negotiable receipt is issued for goods, the warehouseman shall have no lien thereon except for charges for storage of goods subsequent to the date of the receipt unless the receipt expressly enumerated other charges for which a lien is claimed. In such case, there shall be a lien for the charges



enumerated so far as they are within the terms of section twenty-seven although the amount of the charges so enumerated is not stated in the receipt.

Lien where receipt negotiable:

With the exception of the charges for storage and preservation of goods for which a negotiable receipt has been issued, the lien exist only for the other charges expressly enumerated in the receipt so far as they are written within the terms of section 27 although the amount of the said charges is not stated.

As to claims not specified in the receipt, the warehouseman shares pro rata with the other creditors of the depositor of the balance of the proceeds of the sale for the satisfaction of the said claims.

Sec. 31. Warehouseman need not deliver until lien is satisfied. — A warehouseman having a lien valid against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied.

Sec. 32. Warehouseman's lien does not preclude other remedies. — Whether a warehouseman has or has not a lien upon the goods, he is entitled to all remedies allowed by law to a creditor against a debtor for the collection from the depositor of all charges and advances which the depositor

has expressly or impliedly contracted with the warehouseman to pay.

Sec. 33. Satisfaction of lien by sale. — A warehouseman's lien for a claim which has become due may be satisfied as follows:(a) An itemized statement of the warehouseman's claim, showing the sum due at the time of the notice and the date or dates when it becomes due,

(b) A brief description of the goods against which the lien exists,

(c) A demand that the amount of the claim as stated in the notice of such further claim as shall accrue, shall be paid on or before a day mentioned, not less than ten days from the delivery of the notice if it is personally delivered, or from the time when the notice shall reach its destination, according to the due course of post, if the notice is sent by mail,

(d) A statement that unless the claim is paid within the time specified, the goods will be advertised for sale and sold by auction at a specified time and place.

In accordance with the terms of a notice so given, a sale of the goods by auction may be had to satisfy any valid claim of the warehouseman for which he has a lien on the goods. The sale shall



be had in the place where the lien was acquired, or, if such place is manifestly unsuitable for the purpose of the claim specified in the notice to the depositor has elapsed, and advertisement of the sale, describing the goods to be sold, and stating the name of the owner or person on whose account the goods are held, and the time and place of the sale, shall be published once a week for two consecutive weeks in a newspaper published in the place where such sale is to be held. The sale shall not be held less than fifteen days from the time of the first publication. If there is no newspaper published in such place, the advertisement shall be posted at least ten days before such sale in not less than six conspicuous places therein.

From the proceeds of such sale, the warehouseman shall satisfy his lien including the reasonable charges of notice, advertisement and sale. The balance, if any, of such proceeds shall be held by the warehouseman and delivered on demand to the person to whom he would have been bound to deliver or justified in delivering goods.

At any time before the goods are so sold, any person claiming a right of property or possession therein may pay the warehouseman the amount necessary to satisfy his lien and to pay the reasonable expenses and liabilities incurred in serving

notices and advertising and preparing for the sale up to the time of such payment. The warehouseman shall deliver the goods to the person making payment if he is a person entitled, under the provision of this Act, to the possession of the goods on payment of charges thereon. Otherwise, the warehouseman shall retain the possession of the goods according to the terms of the original contract of deposit.

Sec. 34. Perishable and hazardous goods. — If goods are of a perishable nature, or by keeping will deteriorate greatly in value, or, by their order, leakage, inflammability, or explosive nature, will be liable to injure other property , the warehouseman may give such notice to the owner or to the person in whose names the goods are stored, as is reasonable and possible under the circumstances, to satisfy the lien upon such goods and to remove them from the warehouse and in the event of the failure of such person to satisfy the lien and to receive the goods within the time so specified, the warehouseman may sell the goods at public or private sale without advertising. If the warehouseman, after a reasonable effort, is unable to sell such goods, he may dispose of them in any lawful manner and shall incur no liability by reason thereof.

The proceeds of any sale made 4 This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped must be personal property actually sold or bartered, on a credit. Page 16


under the terms of this section shall be disposed of in the same way as the proceeds of sales made under the terms of the preceding section.

Sec. 35. Other methods of enforcing lien. — The remedy for enforcing a lien herein provided does not preclude any other remedies allowed by law for the enforcement of a lien against personal property nor bar the right to recover so much of the warehouseman's claim as shall not be paid by the proceeds of the sale of the property.

Sec. 36. Effect of sale. — After goods have been lawfully sold to satisfy a warehouseman's lien, or have been lawfully sold or disposed of because of their perishable or hazardous nature, the warehouseman shall not thereafter be liable for failure to deliver the goods to the depositor or owner of the goods or to a holder of the receipt given for the goods when they were deposited, even if such receipt be negotiable.

Enforcement of Warehouseman Lien:

The remedies available to a warehouseman for enforcing his lien are as follows :

a. By refusing to deliver the goods until the lien is satisfied (sec. 31)

b. By causing extrajudicial sale of the property and applying

the proceeds to the value of the lien ( section 33, 34); and

c. By filing Civil Action for collection of unpaid charges or by way of counterclaim in an action to recover the property for him or such other remedies allowed by law for the enforcement of a lien against property (section 35) or to creditor against his debtor of all the charges which the depositor has bound himself to pay. ( section 32)

d. A warehouseman is entitled to all the remedies allowed by law to a creditor against his debtor for the collection from the depositor of all charges which the depositor is obliged to pay (section 32)3

EFFECT OF SALE OF GOODS:

a. In case of sale of goods, the warehouseman is not liable for non delivery even if the receipt given for the goods when they were deposited be negotiated. (sec. 36). This rule necessarily qualifies the right of a purchaser of a negotiable receipt.

b. Where the sale was made without the publication require and before the time specified by law ( sec 33, paragraph 2), such sale is void and the purchaser of



the goods acquires no title in them.

ACTS FOR WHICH WAREHOUSEMAN IS LAIBLE:

1. Failure to stamp “duplicate” on copies of negotiable receipt (sec 6)

2. Failure to place non negotiable receipt or not negotiable on a non negotiable receipt (sec 7)

3. Misdelivery of goods (sec. 10)

4. Failure to effect cancellation of negotiable receipt upon delivery of the goods (sec. 11)

5. Issuing receipt for non existing goods or misdescribed goods (Sec. 20)

6. Failure to take care of goods (section 21)

7. Failure to give notice in case of sale of goods to satisfy his lien (sec. 33) or because the goods are perishable or hazardous (sec.34)

III — NEGOTIATION AND TRANSFER OF RECEIPTS

Sec. 37. Negotiation of negotiable receipt of delivery. — A negotiable receipt may be negotiated by delivery:(a) Where, by terms of the receipt, the warehouseman undertakes to deliver the goods to the bearer, or

(b) Where, by the terms of the

receipt, the warehouseman undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the receipt has indorsed it in blank or to bearer.

Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or where a negotiable receipt has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any other specified person, and, in such case, the receipt shall thereafter be negotiated only by the indorsement of such indorsee.

Negotiation of a negotiable receipt:

It is the same manner of negotiation of promissory notes and bills of exchange under the negotiable instrument Law. (ACT No. 2031)

1. A negotiable warehouse receipt is negotiable by delivery if the goods are deliverable to the bearer or when it is indorsed in blank or to the bearer by the person to whose order the goods are deliverable or by subsequent indorsee. Indorsement is in blank when the holder merely signs his name at the back of the receipt without specifying to whom the goods are to be delivered



2. If the receipt is specially indorsed, it become an order receipt and negotiation can only be effected by the indorsement of the indorsee.

A special indorsement specifies the person to whom or to whose order the goods are to be delivered. (see art. 1508 which is same as sec. 37)

Sec. 38. Negotiation of negotiable receipt by indorsement. — A negotiable receipt may be negotiated by the indorsement of the person to whose order the goods are, by the terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Subsequent negotiation may be made in like manner.

Negotiation of Negotiable Receipt by indorsement

1. If indorsed in blank or to nearer, the document becomes negotiable to delivery. (see section 37)

2. If indorsed to a specified person, it may be again negotiated by indorsement of such person in blank, to bearer or to another specified person.

Sec. 39. Transfer of receipt. — A receipt which is not in such form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or donee.

A non-negotiable receipt can not be negotiated, and the indorsement of such a receipt gives the transferee no additional right.

ADVANTAGES OF A NEGOTIABL WAREHOUSE RECEIPT:

1. It protects a purchaser per value and in good faith ( sec. 41)

2. the goods covered by the receipt cannot be garnished or levied upon under execution unless it is surrendered, or impounded or its negotiation enjoined. (sec. 25)

3. in case of negotiation, the holder acquires the direct obligation of the warehouseman to hold possession of the goods for him without notice to such warehouseman (sec. 41);

4. the goods it covers are not subject to sellers lien or stoppage in transitu4.(sec. 49)



Sec. 40. Who may negotiate a receipt. — A negotiable receipt may be negotiated:

(a) By the owner thereof, or

(b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if, at the time of such entrusting, the receipt is in such form that it may be negotiated by delivery.

THE RIGHTS ACQUIRED BY BY PERSON WHOM THE RECEIPT HAS BEEN NEGOTIATED

1. The title of the person negotiating the receipt over the goods covered by the receipt

2. The title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered over such goods; and

3. The direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him.

Sec. 41. Rights of person to whom

a receipt has been negotiated. — A person to whom a negotiable receipt has been duly negotiated acquires thereby:(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value, and

(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman and contracted directly with him.

Sec. 42. Rights of person to whom receipt has been transferred. — A person to whom a receipt has been transferred but not negotiated acquires thereby, as against the transferor, the title of the goods subject to the terms of any agreement with the transferor.

If the receipt is non-negotiable, such person also acquires the right to notify the warehouseman of the transfer to him of such receipt and thereby to acquire the direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt.

Prior to the notification of the 4 This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped must be personal property actually sold or bartered, on a credit. Page 20


warehouseman by the transferor or transferee of a non-negotiable receipt, the title of the transferee to the goods and the right to acquire the obligation of the warehouseman may be defeated by the levy of an attachment or execution upon the goods by a creditor of the transferor or by a notification to the warehouseman by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor.

RIGHTS OF PERSON TO WHOM RECEIPT HAS BEEN TRANSFERED

This section refers to the right of a person to whom the negotiable warehouse receipt( not duly negotiated) has been transferred(paragraph 1) or the transferee of a non negotiable document 9par 2 and 3). The rights of such person are:

1. The title of the goods as against to the transferor.

2. The right to notify the warehouseman of the transfer thereof

3. The right thereafter, to acquire the obligation of the warehouseman to hold the goods for him.

Note: the right of transferee is not absolute as it is subject to the terms of any agreement with the transferor.

ATTACHMENT OF GOODS COVERED BY RECEIPT:

1. Receipt non negotiable - the transfer of non negotiable document of title does not affect the delivery of the goods covered by it.

2. Receipt negotiable – the goods can not be attached or be levied in execution unless the receiptbe first surrendered to the warehouseman or its negotiation enjoined.

Sec. 43. Transfer of negotiable receipt without indorsement. — Where a negotiable receipt is transferred for value by delivery and the indorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to indorse the receipt unless a contrary intention appears. The negotiation shall take effect as of the time when the indorsement is actually made.

RIGHT S OF TRANSFEREE OF A NEGOTIABLE RECEIPT:This section specvifies the rights of a person to whom an order receipt, which may not properly be negotiated by mere delivery has been delivered, w/o indorsement. They are:

1. The rights of the goods as against to transferor (sec 42)

2. The right to compel the transferor to indorse the receipt.



Note: if the intention of the parties is that the receipt should be merely transferred, the transferee has no right to require the transferor to indorse the receipt.

RULE WHERE RECEIPT SUBSEQUENTLY INDORSED:For the purpose of determining whether the transferee is purchaser for value in good faith without notice (sec. 41) , the negotiation shall take effect as of the time when the indorsement is actually made, not at the time the receipt has been delivered

OWNERSHIP OF THE GOODS COVERED BY RECEIPT NEGOTIATED OR TRANSFERRED:

1. Indorsee or transferee – For purposes of facilitating commercial transactions, the indorsee or transferee of the warehouse receipt should be regarded as the owner of the goods covered by it.

2. Indorser or Transferor –where a warehouse receipt is indorsed or transferred to a creditor only to secure the payment of a loan or debt, the indorsee or transferre does not automatically become the owner of the goods covered by the warehouse receipt but he merely retains the right to keep and with the consent of the owner to sell them so as to satisfy the obligation from the proceeds of sale, this for a simple reason that the transaction involved is not a

sale but only a mortgage or pledge.

3. Innocent third persons – where, however, the rights of innocent third persons are involve, the indorsee-pledgee of a warehouse receipt is considered the owner of goods covered by it whenever necessary for the protection.

Sec. 44. Warranties of a sale of receipt. — A person who, for value, negotiates or transfers a receipt by indorsement or delivery, including one who assigns for value a claim secured by a receipt, unless a contrary intention appears, warrants:(a) That the receipt is genuine,

(b) That he has a legal right to negotiate or transfer it,

(c) That he has knowledge of no fact which would impair the validity or worth of the receipt, and

(d) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose whenever such warranties would have been implied, if the contract of the parties had been to transfer without a receipt of the goods represented thereby.

Sec. 45. Indorser not a guarantor. — The indorsement of a receipt shall not make the indorser liable for any failure on the part of the



warehouseman or previous indorsers of the receipt to fulfill their respective obligations.

Sec. 46. No warranty implied from accepting payment of a debt. — A mortgagee, pledgee, or holder for security of a receipt who, in good faith, demands or receives payment of the debt for which such receipt is security, whether from a party to a draft drawn for such debt or from any other person, shall not, by so doing, be deemed to represent or to warrant the genuineness of such receipt or the quantity or quality of the goods therein described.

Sec. 47. When negotiation not impaired by fraud, mistake or duress. — The validity of the negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation or by the fact that the owner of the receipt was induced by fraud, mistake or duress or to entrust the possession or custody of the receipt to such person, if the person to whom the receipt was negotiated or a person to whom the receipt was subsequently negotiated paid value therefor, without notice of the breach of duty, or fraud, mistake or duress.

Sec. 48. Subsequent negotiation. — Where a person having sold, mortgaged, or pledged goods which are in warehouse and for

which a negotiable receipt has been issued, or having sold, mortgaged, or pledged the negotiable receipt representing such goods, continues in possession of the negotiable receipt, the subsequent negotiation thereof by the person under any sale or other disposition thereof to any person receiving the same in good faith, for value and without notice of the previous sale, mortgage or pledge, shall have the same effect as if the first purchaser of the goods or receipt had expressly authorized the subsequent negotiation.

Sec. 49. Negotiation defeats vendor's lien. — Where a negotiable receipt has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to whom such receipt has been negotiated, whether such negotiation be prior or subsequent to the notification to the warehouseman who issued such receipt of the seller's claim to a lien or right of stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation. IV — CRIMINAL OFFENSES

Sec. 50. Issue of receipt for goods not received. — A warehouseman, or an officer, agent, or servant of a warehouseman who issues or aids



in issuing a receipt knowing that the goods for which such receipt is issued have not been actually received by such warehouseman, or are not under his actual control at the time of issuing such receipt, shall be guilty of a crime, and, upon conviction, shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding ten thousand pesos, or both.

Note: it is made an offense to issue receipt unless the property is actually in storage.

Sec. 51. Issue of receipt containing false statement. — A warehouseman, or any officer, agent or servant of a warehouseman who fraudulently issues or aids in fraudulently issuing a receipt for goods knowing that it contains any false statement, shall be guilty of a crime, and upon conviction, shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Sec. 52. Issue of duplicate receipt not so marked. — A warehouse, or any officer, agent, or servant of a warehouseman who issues or aids in issuing a duplicate or additional negotiable receipt for goods knowing that a former negotiable receipt for the same goods or any part of them is outstanding and uncanceled,

without plainly placing upon the face thereof the word "duplicate" except in the case of a lost or destroyed receipt after proceedings are provided for in section fourteen, shall be guilty of a crime, and, upon conviction, shall be punished for each offense by imprisonment not exceeding five years, or by a fine not exceeding ten thousand pesos, or by both.

Sec. 53. Issue for warehouseman's goods or receipts which do not state that fact. — Where they are deposited with or held by a warehouseman goods of which he is owner, either solely or jointly or in common with others, such warehouseman, or any of his officers, agents, or servants who, knowing this ownership, issues or aids in issuing a negotiable receipt for such goods which does not state such ownership, shall be guilty of a crime, and, upon conviction, shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Sec. 54. Delivery of goods without obtaining negotiable receipt. — A warehouseman, or any officer, agent, or servant of a warehouseman, who delivers goods out of the possession of such warehouseman, knowing that a negotiable receipt the negotiation of which would transfer the right to the



possession of such goods is outstanding and uncanceled, without obtaining the possession of such receipt at or before the time of such delivery, shall, except in the cases provided for in sections fourteen and thirty-six, be found guilty of a crime, and, upon conviction, shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Sec. 55. Negotiation of receipt for mortgaged goods. — Any person who deposits goods to which he has no title, or upon which there is a lien or mortgage, and who takes for such goods a negotiable receipt which he afterwards negotiates for value with intent to deceive and without disclosing his want of title or the existence of the lien or mortgage, shall be guilty of a crime, and, upon conviction, shall be punished for each offense by imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Note: Section 50 to 55 is offenses punishable by the Act.

INGREDIENTS OF OFFENSE PUNISHED BY SECTION 54

1. THERE IS DELIVERY OF GOODS OUT OF THE POSSESSION OF THE WWAREHOUSEMAN HIMSELF OR BY ANY OFFICER, AGENT

OR SERVANT OF THE WAREHOUSEMAN.

2. THE PERSON WHO CAUSES THE DELIVERY HAS KNOWLEDGE THA T A NEGOTIABLE RECEIPT FOR THE GOODS, WHICH WOULD TRANSFER THE RIGHT TO THE POSSESSION THEREOF IS OUTSTANDING AND UNACANCELLED.

3. THE PERSON CAUSING THE DELIVERY DOES SO WITHOUT OBTAINING POSSESSION OF THE RECEIPT AT OR BEFORE THE TIME OF THE DELIVERY.

V — INTERPRETATION

Sec. 56. Case not provided for in Act. — Any case not provided for in this Act shall be governed by the provisions of existing legislation, or in default thereof, by the rule of the law merchant.

Sec. 57. Name of Act. — This Act may be cited as the Warehouse Receipts Act.

Sec. 58. Definitions. — (a) In this Act, unless the content or subject matter otherwise requires:"Action" includes counterclaim, set-off, and suits in equity as provided by law in these islands.

"Delivery" means voluntary transfer of possession from one person to another.

"Fungible goods" means goods of which any unit is, from its nature



by mercantile custom, treated as the equivalent of any other unit.

"Goods" means chattels or merchandise in storage or which has been or is about to be stored.

"Holder" of a receipt means a person who has both actual possession of such receipt and a right of property therein.

"Order" means an order by indorsement on the receipt.

"Owner" does not include mortgagee.

"Person" includes a corporation or partnership or two or more persons having a joint or common interest.

To "purchase" includes to take as mortgagee or as pledgee.

"Receipt" means a warehouse receipt.

"Value" is any consideration sufficient to support a simple contract. An antecedent or pre-existing obligation, whether for money or not, constitutes value where a receipt is taken either in satisfaction thereof or as security therefor.

"Warehouseman" means a person lawfully engaged in the business of storing goods for profit.

(b) A thing is done "in good faith"

within the meaning of this Act when it is in fact done honestly, whether it be done negligently or not.

Sec. 59. Application of Act. — The provisions of this Act do not apply to receipts made and delivered prior to the taking effect hereof.

Sec. 60. Repeals. — All acts and laws and parts thereof inconsistent with this Act are hereby repealed.

Sec. 61. Time when Act takes effect. — This Act shall take effect ninety days after its publication in the Official Gazette of the Philippines shall have been completed.


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The Warehouse Receipts Law Final

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