WAREHOUSE RECEIPTS LAW

Concept of warehouse receipt: It is a written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued. Functions of a warehouse receipt: 1.It is proof of the possession or control of the goods described therein; and 2.It authorizes or purports to authorize the possessor of the receipt to transfer or receive, either by indorsement or by delivery, the goods represented by such receipt. Warehouse receipt vs. Negotiable instrument: a) In negotiable instruments, the subject is money; in warehouse receipts, the subject is merchandise (or goods) b) In negotiable instruments, the instrument itself is the object of value; in warehouse receipts, the goods are the objects of value c) In negotiable instruments, intermediate parties become secondarily liable; in warehouse receipts, intermediate parties are not liable for the warehousemans failure to deliver the goods Kinds of warehouse receipts: A. Non-negotiable one in which it is stated that the goods will be delivered to the depositor or any specified person 1) The words non-negotiable or not negotiable must be placed on the face of the receipt 2) Effect of failure to mark - it may be considered negotiable by the holder for value who supposed it to be negotiable B. Negotiable - one in which it is stated that the goods will be delivered (1) to the bearer or (2) to the order of any person named therein 1) Effect of the words Non-negotiable inserted in the receipt negotiability is not affected 2) If more than one receipt is issued for the same goods duplicate shall be placed on the face of copies other than the original Rights acquired by a person to whom a negotiable receipt is properly negotiated: He acquires: a) not only the title of the transferor to the goods, but also the title of the depositor; and b)the direct obligation of the warehouseman to hold possession of the goods for him without need of notice Rights acquired by a person to whom an order receipt is delivered without indorsement: He acquires: a) title to the goods as against the transferor; and b) the right to compel the transferor to indorse the receipt, but the effects of negotiation shall take place upon actual indorsement What are the warranties of a person negotiating a negotiable receipt? a) that the receipt is genuine; b) that he has legal right to negotiate or transfer it; c) that he has no knowledge of any 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, if such warranties have been implied Is the indorser liable for failure of the warehouseman or previous indorsers to fulfill their respective obligations? No. Example: Brando is indebted to Carlos for P100,0000. To secure its payment, Brando delivers a warehouse receipt issued to him (Brando). Thereafter, Carlos demands payment from Brando, and Daniel pays for Brando, which payment is accepted by Carlos. Carlos in turn delivers the receipt to Daniel. In case Daniel cannot obtain possession of the goods because they do not exist, will Carlos be liable to Daniel? Answer: Carlos will not be liable to Daniel. Carlos in the problem appears as an indorser of a warehouse receipt. An indorser of a warehouse receipt is not a guarantor to the party primarily liable (the warehouseman) under the said receipt. Hence, the failure of the warehousemen to deliver the goods under the receipt will not make Carlos liable to Daniel. Validity of negotiation as against the real owner: a) If the receipt is acquired from the real owners agent (regardless of how he acquired it from the owner) within his actual or apparent authority, the purchaser for value in good faith acquires title to the goods as against the real owner b) If the receipt is stolen or lost, the purchaser, who for value and in good faith acquires it from the thief or finder, does not acquire any title as against the real owner Example: Aldrin stole five bales of hemp from the pier and stored them in Arlington Warehouse. The latter issued a negotiable warehouse receipt under the terms of which the hemp is deliverable to Aldrin or order. Aldrin indorsed the receipt in blank to Charles, who paid value for it without knowing about the theft. In the meantime, Mandy, the owner of the hemp, with the help of the delivery of the same. Arlington Warehouse, after being satisfied that Mandy was the real owner of the hemp, delivered the same to him despite the fact that the negotiable warehouse receipt was outstanding and was no in Mandys possession, and therefore could to be surrendered or cancelled. Subsequently, Charles demanded delivery of the hemp and since he could not obtain it, now claims damages from Arlington Warehouse on the ground that he, Charles, was the only one entitled to the delivery because he was holder for value in good faith of the negotiable warehouse receipt covering the hemp. Is Arlington Warehouse liable to Charles for damages? Answer: Arlington Warehouse is not liable to Charles for damages. The issue by Arlington Warehouse of a negotiable receipt covering stolen goods did not vest any right of ownership over the stolen goods on the depositor named in the receipt, or on any transferee or subsequent holder of said negotiable warehouse receipt.

The depositor transfers to his transferee only those rights which he has over the goods. If as a thief who stole the goods, he had no right at all over the goods, he transferred nothing at all to his transferee. That the transferee, Charles, had no knowledge about the theft, or that he paid value fro the indorsement to him of the negotiable warehouse receipt, are of no moment. The concept of holder in due course in negotiable instrument does not apply to warehouse receipts. On vendors lien: a) No sellers lien or stoppage in transitu shall defeat the rights of a purchaser for value in good faith to whom the receipt is negotiated b) The warehouseman shall not be obliged to deliver or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation. Example: Andrew issued a warehouse receipt for 100 sacks of rice to be delivered to the order of Bart, the rice having been purchased from Matt for P100,000 which remained unpaid. Subsequently, Bart delivered the receipt to Luke, with an indorsement in blank, to secure the payment of a loan in the sum of P150,000. May Matt enforce his lien for the unpaid price on the rice covered by the aforesaid warehouse receipt pledged to Luke? Answer: No, Matt may not enforce his lien for the unpaid price on the sugar covered by the pledged receipt. Reason: No unpaid sellers lien or right of stoppage can defeat the rights of a pledgee for value. What are the rights of a transferee of a non-negotiable receipt? a) the title to the goods as against the transferor; b) the right to notify the warehouseman of the transfer thereof; and c) the right, thereafter, to acquire the obligation of the warehouseman to hold the goods for him What are the obligations of the warehouseman? a) To take care of the goods entrusted to his safekeeping b) To deliver the goods upon demand by the holder or depositor Corollarily: (Pursuant to the Bonded Warehouse Act) a) He must secure a license from the DTI b) He must file a bond equivalent to 1/3 of the market value of the maximum quantity of goods to be received for the protection of the depositors c) He must not discriminate and must open his warehouse to the public (Note: this is subject to the following considerations 1) kind of commodity as specified in his license; 2) suitable condition for warehousing; and 3) enough space available to accommodate the goods) d) In case of damage to the goods because the warehouseman accepts goods in excess of the capacity of his warehouse, the latter is liable in the amount equivalent to double the market value of the goods e) The goods must be insured against fire

What must accompany the demand? The demand must be accompanied by: 1) An offer to satisfy the warehousemans lien; 2) An offer to surrender the negotiable warehouse receipt, properly indorsed, if necessary; and 3)A readiness and willingness to sign an acknowledgement receipt of the fact of delivery if so requested by the warehouseman What constitutes warehousemans lien (Sec. 27) aa) All lawful charges for storage and preservation bb) All lawful claims for money advanced, interest, insurance, transportation, labor, weighing, cooperating, etc. in relation to the goods cc)All reasonable charges and expenses for notice and advertisements of sale, and for sale of the goods in case of default in satisfying the warehousemans lien Remedies available to a warehouseman to enforce his lien: a) To refuse to deliver the goods until his lien is satisfied (Sec. 31) b) To sell the goods and apply the proceeds thereof to the value of the lien (Secs. 33 & 34) c) By other means allowed by law to a creditor against his debtor, for the collection from the depositor of all charges and advances which the depositor expressly or impliedly contracted with the warehouseman to pay (Sec. 32) d) Such other remedies allowed by law for enforcement of a lien against personal property (Sec. 35) To whom must delivery be made? a) To the person lawfully entitled to the goods or his agent -person to whom a competent court has ordered the delivery of the goods -attaching creditor -purchaser in case of sale of the goods to enforce the warehousemans lien or where the goods are perishable or hazardous b) To the person entitled to delivery under a non-negotiable receipt or with written authority c) To the person in possession of the negotiable receipt What is misdelivery? a) Delivery to one who is not in fact lawfully entitled to the possession of the goods b) Delivery after he had been requested, by the person lawfully entitled to possession, not to make delivery c) Delivery after he had information that the delivery about to be made was to one not lawfully entitled to possession, i.e., notice of adverse claim of a third person What is the liability of the warehouseman for misdelivery? The warehouseman is liable as for conversion. ** Conversion is the unauthorized assumption and exercise of the right of ownership over goods belonging to another through the alteration of their condition or the exclusion of the owners right