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Credit Transactions: includes all transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future (Contract of Security) Two types of Credit Transactions: 1. secured transactions- those supported by a security or collateral . unsecured transactions ! those supported only by promise to pay Security: "t is something given, deposited or serving as a means to ensure the fulfillment or enforcement of an obligation or of protecting some interest in the property Bai !ent: "t is the delivery of property of one person to another in trust for a specific purpose, with a contract, e#press or implied, that the trust shall be faithfully e#ecuted and the property returned or duly accounted for when the special purpose is accomplished or $ept until the bailor reclaims it. Parties in Bai !ent: 1. bailor ! the giver, the party who delivers possession % custody of the thing bailed . bailee ! the recipient, the party who receives the possession % custody of the thing delivered "inds of Contractua Bai !ent wit# reference to co!pensation: 1. for the sole benefit of the bailor (gratuitous) e.g. gratuitous deposit, mandatum (do dome act with respect to a thing) 2. for the sole benefit of the bailee (gratuitous) e.g. commodatum, gratuitous simple loan or mutuum 3. for the benefit of both parties e.g. deposit for compensation, involuntary deposit, pledge and bailments for hire: a. hire of things ! temporary use b. hire of service ! for wor$ or labor c. hire of carriage of goods ! for carriage d. hire of custody ! for storage

LOAN
C#aracteristics 1. real !delivery is essential for perfection of the loan (&'( a promise to lend, being consensual, is binding upon the parties but it is only after delivery that the real contract of loan arises) . unilateral ! only the borrower has obligation

CREDIT TRANSACTIONS MEMORY AID

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"inds 1. co!!odatu!: where the bailor delivers to the bailee a non-consummable thing so that the latter may use it for a certain time and return the identical thing. - It may either be: i. )rdinary commodatum* or ii. +recarium (whereby the bailor may demand the thing loaned at will) . mutuum or simple loan: where the lender delivers to the borrower money or other consumable thing (when it is consumed in a manner appropriate to its purpose) upon the condition that the latter shall pay the same amount of the same $ind and ,uality. $ifferences Between t#e Two "inds: CO%%O$AT&% )rdinarily not consumable )wnership is retained by the lender .ssentially gratuitous &orrower must return the same thing loaned -ay involve real or personal property 0oan for use or temporary possession &ailor may demand the return of he thing loaned before the e#piration of the term in case of urgent need 0oss of the sub1ect matter is suffered by the bailor since he is the owner +urely personal %&T&&% 'SI%PLE LOAN( -oney or other consumable thing )wnership is transferred to the borrower /ratuitous or onerous, that is with stipulation to pay interest &orrower need only pa the same amount of the same $ind and ,uality )nly personal property 0oan for consumption 0ender may not demand its return before the lapse of the term agreed upon &orrower suffers the loss even if caused e#clusively by a fortuitous event and he is not therefore discharged from his duty to pay 2ot purely personal

Commodatum
Nature of Co!!odatu! 1. essentially gratuitous (otherwise, if there is compensation, it might be lease) . temporary use of the thing loaned 3for a certain time4 (otherwise, if the bailee is not entitled to the use of the thing, it might be deposit) 3. subject matter: a. b. consumable goods ! if the purpose of the contract is not the consumption of the ob1ect, as when merely for e#hibition (5rticle 1678) movable or immovable

9. bailor need not be the owner (it is sufficient that he has a possessory interest

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5. purely personal a. b. c. death of either party terminates the contract '20.SS there is stipulation to the contrary generally, bailee can neither lend nor lease the ob1ect to a 7rd person in the absence of some agreement to that effect use of the thing loaned may e#tend to the bailee:s household (who are not considered 7rd persons) except: 1. when there is a contrary stipulation . nature of the thing forbids such use 8. enjoyment of fruits ! a stipulation to ma$e use of fruits is valid, but it is never presumed. +;)<"=.=, it must only be incidental to the use of the thing itself, for if it is the main cause, the contract may be one of usufruct. O) i*ations of t#e Bai ee 1. pay );="25;> e#penses for the use and preservation of the thing loaned . ta$e good care of the thing with the diligence of a good father of a family 3. liable for loss, even if through a fortuitous event when: a. b. he devotes the thing to any purpose different from that for which it has been loaned he $eeps it longer than the period stipulated or after the accomplishment of the use for which the commodatum has been constituted the thing loaned has been delivered with appraisal of its value, '20.SS there is a stipulation e#empting the bailee from responsibility in case of a fortuitous event he lends or leases the thing to a third person who is not a member of his household being able to save the thing borrowed or his own thing, he chose to save the latter

c.

d. e.

9. doesn:t answer for the deterioration of the thing loaned due only to the use thereof and without his fault ?. cannot retain the thing loaned on the ground that the bailor owes him something, even if it may be by reason of e#penses* however, he may have a right to retain the thing loaned until he is reimbursed for damages only when the bailor, $nowing the flaws of the thing loaned, does not advise the bailee of the same and the latter suffer damages by reason thereof 8. when there are O) i*ations of t#e Bai or $E%AN$ +OR RET&RN: 5. cannot demand the return of the thing loaned till after: 1. the e#piration of the period stipulated or . the accomplishment of the use for which the commodatum has been constituted more bailees, they are liable solidarily

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@)A.<.;, if the bailor should have urgent need of the thing, he may demand the thing:s: a. return b. temporary use ! in which case, the contract of commodatum is suspended &. may demand the thing at will (PRE !R"#$% in the following cases: 1. neither the duration of the contract nor the use to which the thing loaned should be devoted, has been stipulated . use of the thing is merely tolerated by the bailor C. may demand the immediate return of the thing in ordinary commodatum when: 1. if the bailee should commit some offenses against the person, the honor or the property of the bailor, or of his wife or children under his parental authority . if the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude , even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife or children under his authority* and 7. if the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor E,PENSES: =. with regard to E&'R!(R)"*!R+ expenses: 1. if for the preservation of the thing loaned, the bailor shall refund the bailee, provided the bailee brings the same to the bailor:s $nowledge before incurring the, .BC.+( when they are urgent . if it arises on the occasion of the actual use of the thing, with or without fault, they shall be borned e,ually (e.g. vehicular accident) '20.SS there is a contrary stipulation .. all other expenses, which are not necessary for the use and preservation of the thing must be shouldered by the borrower $A%A-ES: C. bailor is liable for damages (with right of retention to the bailee until damages is paid% when the following re,uisites concur: 1. there is a flaw or defect in the thing loaned . the flaw or defect is hidden 7. the bailor is aware thereof 9. he does not advise the bailee of the same ?. the bailee suffers damages by reason of the flaw or defect /. bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee

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Si!p e Loan or %utuu!

ature of !utuum a. bilateral- borrower: promise to pay is the consideration for the lender:s obligation to furnish the loan b. no criminal liability upon failure to pay "ubject !atter a. fungible or consumable-depending on the intent of the parties, that the return of the thing is e,uivalent only and not the identical thing b. money c. if the transfer of ownership is on a non-fungible thing, with the obligation of the other to give things of the same $ind, ,uantity and ,uality, it is a barter #bligations of a $ebtor a. to pay the creditor an e,ual amount of money or if it is a fungible thing, the same $ind and ,uality even if it should change in value* it is impossible to deliver the same $ind, its value (monetary) at the perfection of the loans hall be paid to pay in the currency stipulated, if there is none, then in legal tender

b. Interest

-enera Ru e: no interest shall be due unless it has been e#pressly stipulated in writing E,CEPTION: 1. indemnity for damages . interest accruing from unpaid interest if 1udicially demanded -en. Ru e: interest due and unpaid shall 2)( earn interest E,CEPTION: 1. . when 1udicially demanded when there is a stipulation as to compound interest, which must be in writing (interest due and unpaid shall be added to the principal obligation and the resulting total amount shall earn interest)

"f the interest is payable in -ind, its value shall be appraised at the current price of the products or goods at the time and place of payment. Remember, that the #sury .aw is now legally inexistent such that interest rates are no longer sub/ect to any ceiling. (he rate will depend on the agreement of the parties. If interest is paid by mista-e, the debtor may recover as this would be solutio indebiti. %ut if interest is paid voluntarily because the debtor feels morally obligated to do so, there can be no recovery in accordance with natural obligations.

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ATENEO CENTRAL BAR OPERATIONS 2002

$EPOSIT 5 deposit is constituted from the moment a person receives a thing belong to another, with the obligation of safely $eeping it and of returning the same. "f the safe$eeping of the thing delivered is not t#e principa purpose of the contract, there is no deposit but some other contract. NOTE: it is essential that the depository is not the owner of the thing deposited Characteristics 1. real - because it is perfected only by the delivery of the sub1ect matter &'( an agreement to constitute a deposit is binding and enforceable, since it is merely consensual . unilateral - if gratuitous 7. bilateral - if with compensation $ifferentiate: $eposit +rincipal purpose is safe$eeping or mere custody Can demand return of the sub1ect matter at will %utuu! +rincipal purpose is consumption 0ender must wait until e#piration of period granted to debtor Co!!odatu! +rincipal purpose is transfer of use -ay demand return at will (+;.C5;"'-) or only after the e#piration of the period or accomplishment of the use of the thing sub1ect to e#ceptions &oth movable and immovable may be the ob1ect

&oth movable and immovable may be the ob1ect &ut in e#tra1udicial deposit, only s movable (corporeal) thing may be the ob1ect Creation of deposit

)nly money and any other fungible thing may be the ob1ect

1. judicially - when an attachment or seiDure of property in litigation is ordered 2. e&trajudicially a. /o untary0 delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited* depositor has complete freedom in choosing the depositor necessary0 made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns or by travelers with common carriers* depositor lac$s free choice

b.

-enera Ru e: 5 deposit is a gratuitous contract E,CEPTIONS: a. b. c. when there is a contrary stipulation where depositary is engaged in the business of storing goods where property is saved without $nowledge of the owner in involuntary deposit, the latter is bound to pay the former 1ust compensation

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ATENEO CENTRAL BAR OPERATIONS 2002

Su)1ect !atter of deposit: only corporeal (tangible) things a. b. 2o untary $eposit 5. 'eneral (ro)isions: =epositor need not be the owner of the thing deposited, in fact the depositary cannot dispute the title of the depositor to the thing deposited. Ahen there are several persons claiming the thing deposited, they may deposit it to a 7rd person who assumes the obligation to deliver it to the one whom it belongs (he action to compel the depositors to settle their conflicting claims is an interp eader. 5 contract of deposit may be entered into orally or in writing $epositary 0 incapacitated $epositor 0 capacitated =epositary does not incur the obligations of a depositary )epositary, however is liable to: a) return the thing deposited while still in his possession* 52= b) pay the depositor the amount by which he may have benefited himself with the thing or its price sub1ect to the right of any 7rd person who ac,uires the thing in good faith judicial - movable or immovable e&trajudicial - only movable (personal)

$epositary 0 capacitated $epositor 0 incapacitated =epositary is sub1ect to 500 the obligations of a depositary )epositary must return the property either to: a) the legal representative of the incapacitated, ); b) the depositor himself if he should ac,uire capacity

O) i*ations of t#e $epositary 1. (rimary obligation: 0afe-eeping with the depositary e#ercising over the thing deposited the same diligence as he would e#ercise over his property* the re,uired degree of care is greater if the deposit is for compensation* . (rimary obligation: Return of the thing when re,uired to: a. the depositor* or b. his heirs or successors* or c. the person who may have been designated in the contract* 3. (bligation not to transfer the deposit to a 3rd person #*.E00 it is stipulated *iability for loss: a. he transfers the deposit with a 7rd person without the authority although there is no negligence on his part and the 7rd person* b. he deposits the thing with a 7rd person who is manifestly careless or unfit although authoriDed, even in the absence of negligence* or

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c. the thing is lost through the negligence of his employees whether the latter are manifestly careless or not &'( he is e#empt from liability if the thing is lost without the negligence of the 7rd person with whom he was allowed to deposit the thing F such 7rd person is not 3manifestly careless or unfit4

9. (bligation not to change the way or manner of the deposit &'( under the circumstances, he may reasonably presume that the depositor would consent to the change if he $new of the facts of the situation* however, before such change, he must notify the depositor, unless delay would cause danger.

?. (bligation to things deposited earning interest: a. collect capital and interest as it becomes due b. ta$e steps as may be necessary to preserve its value F the right corresponding to it* #+,: (his doesn:t apply to contract for the rent of safety deposit bo#es because such is a special $ind of deposit. 8. (bligation not to commingle things deposited if stipulated (he /; is that the depositary is permitted to commingle articles of the same $ind and ,uality* the various depositors shall then own the entire mass in common and in proportion.

E. (bligation not to ma-e use of the thing deposited 'nless authoriDed. )therwise, the depositary shall be liable for damages. &'( he may ma$e use of the thing deposited even if unauthoriDed where such use is necessary, but in such case, the use is limited for that purpose only.

1. (bligation to return the products, accessories and accessions2 3. (bligation to pay interest on sums converted to personal use "f money is deposited, the depositary has no right to ma$e used thereof and therefore he is not liable to pay interest. &ut if he be in delay or he used the money without permission, he shall be liable for interest as indemnity on the sums he has applied to his own use from the day on which he did so, and those which he still owes after the e#tinguishment of the deposit.

45. (bligation of the depositary where the thing deposited is delivered closed and sealed: i. ii. iii. return it in the same condition, closed and sealed* pay damages should the seal or loc$ be bro$en through his fault which is presumed unless proved otherwise* and $eep the secret of the deposit when the seal or loc$ is bro$en, with or without his fault #+,: 5s for the value of the thing deposited, the statement of the depositor shall be accepted when the forcible opening is imputable to the depositary, should there be no proof to the contrary. 6owever, the courts may pass upon the creditability of the depositor with respect to the value claimed by him. #+,: 'he depositary is /ustified in opening the sealed or loc-ed things when: a. there is presumed authority ! when the $ey has been delivered to him

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b. there is necessity ! when instructions of the depositor as regards the deposit cannot be e#ecuted without opening the bo# or receptacle Ot#er I!portant %atters Concernin* a $epositary 4. "f permission to use is given, which is not presumed but must be proved, the effects are: a. non7consumable - the contract loses the character of a deposit and ac,uires that of a commodatum '20.SS safe$eeping is still the principal purpose of the contract* b. money or consumable - the contract is converted to a simple loan or mutuum. 8#' if safe-eeping is still the principal purpose of the contract, it is an irregular deposit Irre*u ar $eposit -ay be demanded at will by the irregular depositor for whose benefit the deposit has been constituted )nly benefit is that which accrues to the depositor =epositor has preference over other creditors %utuu! 0ender is bound by the provision of the contract and cannot see$ restitution until the time for payment, as provided in the contract has arisen "f with interest, benefit if both parties 2o preference

9. "nstances when depositary is liable for the loss of the thing through a fortuitous event: a. if it so stipulated b. if he uses the thing without the depositor:s permission c. if he delays its return d. if he allows others to use it, even though he himself may have been authoriDed to use the same 3. :ixed, savings and current deposits of money in ban-s and similar institutions shall be governed by the provisions concerning simple loan. ;. )epositor need not prove his ownership of the thing deposited. <. "f a 3rd person appears to be the owner of a thing: a. depositary must advise the 7rd person of the deposit if he $nows the true owner* b. if the owner, in spite of such information, does not claim it within 1 month, the depositary shall be relieved of all responsibility by returning the thing to the depositor* c. if depositary has reasonable ground to believe that the depositor is not the owner of the thing, the former may return the same -. .ight of 2 or more depositors: a. )ivisible thing and depositors are not solidar: .ach one can demand only his proportionate share

b. "ndivisible thing and depositors are solidary

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.ach one of the solidary depositors may do whatever may be useful to the others but not anything which may be pre1udicial to the latter =epositary may return the thing to any of the solidary depositors unless a demand, 1udicial or e#tra1udicial, for its return has been made by one of them in which case delivery should be made to him. -

/. +o 0hom must the return be made a. depositors, heirs, successors, or person who may have been designated in the contract b. if depositor was incapacitated or becomes incapacitated, the thing must be returned to his legal representative 1. 2here to return a. at the place agreed upon by the parties, with the depositor bearing the transportation e#penses* b. in the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made provided the transfer was accomplished without malice on the depositary:s part. 3. +ime to return -R: upon demand of the depositor, even though a period has been fi#ed* 8#' if the deposit is for compensation, the depositary is entitled to the compensation corresponding to the entire period. E,CEPTION: attachment - when the thing is 1udicially attached opposition - should the depositary have been notified of the opposition of a 7rd person to the return or removal of the thing

1H. ;ight of depositary to return the thing deposited notwithstanding a fi#ed period (does *(' apply if the deposit is for valuable consideration in which case, the depositary is bound by the period: a. when the deposit is gratuitous b. when there are 1ustifiable reasons #+,: "f the depositor refuses to receive the thing, the depositary may deposit the thing at the disposal of 1udicial authority.) 11. "f the thing is lost by force ma/eure or government order and money or another thing is received in its place, the depositary shall deliver the sum of thing to the depositor. 1 . 4lienation by depositary5s heir (depositary dies and the ob1ect of the deposit is left with his heir who sells it): a. =ood faith: a.1 return of the price received a. assign the right to collect the same if it has not been paid

#+,: "f purchaser was in bad faith, the depositor may bring an action for recovery against him.

1H

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O) i*ations of t#e $epositor 1. obligation to pay e&penses of preser)ation a. deposit is gratuitous - obliged to reimburse a depositary for e#penses of preservation whether ordinary or e#traordinary b. deposit for compensation - depositary bears the e#penses of preservation because they are deemed included in the compensation 2. obligation to pay losses suffered due to the character of the thing deposited6 &NLESS: a. depositor was not aware or was not e#pected to $now the dangerous character of the thing* b. depositor notified the depositary of the dangerous character* c. depositary was aware of the dangerous character without advice from the depositor* Ot#er %atters Concernin* a $epositor 4. )epositary has a right to retain the thing in pledge until full payment of what may be due him by reason of the deposit 2. 4 deposit is e&tinguished: a. upon the loss or deterioration of the thing deposited* b. upon the death of the depositary, )20> in gratuitous deposits* c. other provisions in the Civil Code (novation, merger, etc.) ecessary $eposit "n compliance with a legal obligation (governed by the law establishing it, and in case of deficiency, the rules on voluntary deposit e.g. 5rts. ?7G, ?G8 and 1H9) -ade on the occasion of any calamity (governed by the rules on voluntary deposit and 5rt. 18G) =eposit by travelers (transients) in hotels and inns: a. +o be liable as depositaries6 the follo0ing elements must concur: 1. . they have been previously informed about the effects brought by the guests* and the latter have ta$en the precautions prescribed regarding their safe$eeping

b. ,&tent of liability: includes those damaged in hotel anne#es e.g. vehicles in hotel:s garages c. 2hen is a hotel78eeper liable9 1. the loss or in1ury is caused by his servants or employees as well as by strangers, provided that notice has been given and proper precautions ta$en*

11

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. the loss is caused by the act of the thief or robber done without the use of arms and irresistible force of in this case, the hotel-$eeper is apparently negligent d. 2hen is a hotel78eeper not liable9 1. the loss or in1ury is caused by force ma1eure li$e flood, fire, theft or robbery by a stranger (not by hotel-$eeper:s servant or employee) with the use of arms or irresistible force, etc., unless he is guilty of fault or negligence in failing to provide against the loss or in1ury from his cause*

. the loss is due to the acts of the guests, his family, servants or visitors* 7. the loss arises from the character of the things brought into the hotel e. Posting of notices whereby the responsibility of the hotel7-eeper as set forth in !, 8, , and ) above is suppressed or diminished shall be >("). f. 'he hotel7-eeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of lodging, and supplies usually furnished to hotel guests. "n addition, non7payment constitutes estafa. , ) and E above

$eposit )y passen*ers wit# co!!on carriers: 'he rules on !, apply.

"e:uestration or ;udicial $eposit Iudicial deposit or se,uestration ta$es place when an attachment or seiDure of property in litigation is ordered by a court.

O) i*ations of depositary 'appointed )y t#e Court( of se3uestered property a. b. ourt may be applicable. 4udicia Aill of the court Security and to secure the right of a party to recover in case of a favorable 1udgment -ovable or immovable 5lways onerous "n the behalf of the person who, by the 1udgment, has a right E5tra01udicia Aill of the parties (contract) Custody and safe$eeping of the thing to ta$e care or the property with the diligence of a good father of a family cannot be relieved of his responsibility until the litigation is ended or the court so orders !s for matters not provided for in this ode, the Rules of

)nly movable -ay be compensated or not, but generally gratuitous "n behalf of the depositor or 7rd person designated

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6ARE7O&SE RECEIPTS LA6

Scope: all warehouses, whether public or private, bonded or not App ication: applies to warehouse receipts issued by a warehouseman as defined in Sec. ?G(a), while the Civil Code, to other cases where receipts are not issued by a warehouseman. T#e Issue of 6are#ouse Receipts 2ho may issue a. only a warehouseman, &'( a duly authoriDed officer or agent of a warehouseman may do so* b. c. ware#ouse!an - a person lawfully engaged in the business of storing goods for profit* receipts not issued by a warehouseman although in the form of warehouse receipts are not warehouse receipts

+or! and Content: need not be in particular form, but certain essential terms must be present: 1. other warehouses . 7. 9. )ate of issue and receipt - indicates prima facie the date when the contract of deposit is perfected and when the storage charges shall begin onsecutive number of receipt - to identify each receipt with the goods for which it was issued Person to whom goods are deliverable - determines the person or persons who shall prima facie be entitled lawfully to the possession of the goods deposited Rate of storage charges - consideration for the contract from the view of the warehouseman )escription of goods or pac-ages - for identification 0ignature of warehouseman - best evidence of the fact that the warehouseman has received the goods and has bound himself to assume all obligations in connection therewith ?arehouseman@s ownership of or interest in the goods - purpose is to prevent abuses in the past when warehouseman issued receipt on their goods 0tatement of advances made and liabilities incurred (if present% purpose is to preserve the lien of the warehouseman over the goods stores or the proceeds thereof in his hands NOTE: ,ffect of omission of any of the essential terms: a. /a idity and ne*otia)i ity of receipt is 2)( affected b. warehouseman will be liable for damages c. the contract will be converted to an ordinary deposit 17 .ocation of warehouse -because the warehouseman may have

?. 8. E.

G. 6.

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2hat terms may be inserted9 !*+ other terms or condition E,CEPT: a. those contrary to this 5ct (e.g. e#emption from liability for misdelivery in Sec. 1H, not giving statutory notice in case of sale of goods in Sec. 77 and 79) b. an e#emption from liability and negligence c. those contrary to law, morals, good customs, public order or public policy $efinitions a. negotiable receipt 7 receipt in 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 b. non7negotiable receipt 7 receipt in which it is stated that the goods received will be delivered to the depositor or to any other specified person #+,: 1. a provision in a negotiable receipt that it is non-negotiable is <)"= . a negotiable warehouse receipt is not a negotiable instrument in the same sense as in the 2"0. )uplicate receipts (applies (*.+% to negotiable warehouse receipts. Ahenever more than one negotiable receipt is issued for the same goods, the word J='+0"C5(.4 shall be placed on the face of the receipt e5cept the one 1st issued. ,ffect: the warehouseman shall be liable for damages for failing to do this to any one who purchased the subse,uent receipt (1) for value, and ( ) supposing it to be an original* even though the purchase be after delivery of the goods by the warehouseman to the holder of the original receipt.

:ailure to ma-e Anon7negotiableB (applies only to non7negotiable warehouse receipts% a. 5 non-negotiable receipt must contain the word: non-negotiable b. Effect: Cailure to do so will ma$e a holder who (1) purchased for value 52= ( ) supposing it to be negotiable, may at his option treat it as negotiable Construction of ware#ouse receipts: 0iberal construction of the law in favor of bona fide holders. &'( this has no application to actions against any party ot#er t#an a warehouseman. O) i*ation and Ri*#ts of a 6are#ouse!an upon t#eir Receipts Principal obligations of a warehouseman 1. (o ta$e care of the goods, and be liable for failure to e#ercise care (&'( he is not liable for loss or in1ury which could not have been avoided, unless there is a stipulation to the contrary)* 9. 'o deliver the goods to the holder of the receipt or the depositor upon )E$!*) accompanied with: a. an offer to satisfy the warehouseman@s lien- because a warehouseman may refuse delivery until his lien is satisfied b. an offer to surrender the receipt- for the protection of the warehouseman and to avoid criminal liability* this is sub1ect to waiver c. an offer to sign when the goods are delivered, an ac$nowledgment that they have been delivered 19

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8#' a warehouseman may still refuse delivery on the grounds of some lawful excuse li-e: a. Sec. 1H 1. he has been re,uested by the person lawfully entitled to the goods not to ma$e delivery* . he has information that the delivery about to be made was to one not lawfully entitled to the goods* b. Sec. 18: 6e has ac,uired title to the goods which was derived from 1. . transfer made by the depositor at the time of the deposit for storage or subse,uent thereto the warehouseman:s lien

c. Sec. 1G: "f there are several claimants to the goods d. Sec. 1: "f the goods were lost and he had no fault e. Sec. 78: @e has already lawfully sold the goods (ersons to 0hom the goods must be deli)ered 1. +ersons lawfully entitled to the possession of the goods or its agent . +ersons entitled to deliver under: a. a non-negotiable receipt* or b. with written authority 7. person in possession of a negotiable receipt (which was lawfully negotiated) #+,: a warehouseman does 2)( have a cause of action against a person to whom he misdelivered the thing '20.SS the depositor sues him. Acts for w#ic# a ware#ouse!an is ia) e (1) Cailure to stamp 3duplicate4 on copies of a negotiable receipt (Sec. 8 and 1?) Ahen more than one negotiable receipts are issued for the same goods, the word 3duplicate4 must be plainly placed by the warehouseman upon the face of every such receipt e#cept the 1st. "n such case, the warehouseman warrants: a. b. duplicate that the duplicate is an accurate copy of the original receipt such original receipt is uncancelled at the date of the issue of the

#+,: (he duplicate imposes no other liability upon the warehouseman. ( ) Cailure to place 3non-negotiable4 on a non-negotiable receipt (Sec. E) (7) -isdelivery of the goods (Sec. 1H) a. 'o one not lawfully entitled to possession

1?

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- 0iable for conversion (unauthoriDed assumption and e#ercise of the right of ownership over goods belonging to another through alteration or the e#clusion of the owner:s right) b. 'o a person entitled to delivery under a non7negotiable receipt or written authoriCation (R person in possession of a negotiable receipt Still liable for conversion if: 1. prior to delivery, he ad been re,uested 2)( to ma$e such delivery . he had received notice of the adverse claim or title of a 7rd person (9) Cailure to effect cancellation of a negotiable receipt upon delivery of the goods (Sec. 11) - (his is applicable )20> to negotiable receipts but 2)( to a situation where there was a valid sale in accordance with Sec. 78 a. ?hen the goods are delivered already: Cailure to cancel will ma$e him liable to any one who purchased for value in good faith such receipt b. ?hen only some of the goods were delivered: Cailure to cancel or to state plainly in the receipt that some goods were delivered will ma$e him liable to any one who purchased for value in good faith such receipt (?) "ssuing receipt for non-e#isting goods or misdescribed goods (Sec. H): '.: a warehouseman is under obligation to deliver the identical property stored with him and if he fails to do so he is liable. ,&ception: if the description consists merely of mar$s or labels upon the goods or upon the pac$ages containing them, etc., the warehouseman is 2)( liable even if the goods are not of the $ind as indicated in the mar$s or labels (8) "n case of lost or destroyed receipts (Sec. 19) ;emember that a warehouseman must deliver to the one who has the receipt but if such was lost, a co!petent court may order the delivery of the goods only: a. upon proof of the loss or destruction of the receipt* 52= b. upon giving of a bond with sufficient securities #+,: the warehouseman is still liable to a holder of the receipt for value without notice since the warehouseman can secure himself in the bond given. (E) Cailure to ta$e care of the goods (Sec. 1 ) (G) Cailure to give notice in case of sales of goods to satisfy his lien (Sec. 77) or because the goods are perishable and haDardous (Sec. 79) Effects of ALTERE$ RECEIPTS a. 4lteration immaterial: whether fraudulent or not, authoriDed or not, the warehouseman is liable on the altered receipt according to its original tenor* b. 4lteration material: but it was authoriDed, the warehouseman is liable according to the terms of the receipts as altered* c. !aterial alteration innocently made: though unauthoriDed, the warehouseman is liable on the altered receipt according to its original term*

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d. !aterial alteration fraudulently made: warehouseman is liable according to the original tenor to a: 1. purchaser of the receipt for value without notice* and . to the alterer and subse,uent purchasers with notice ( &'( his liability is limited only to delivery as he is e#cused from any other liability) K .ven a fraudulent alteration cannot divest the title of the owner of stored goods and the warehouseman is liable to return them to the owner. &'( a bona fide holder ac,uires no right to the goods under a negotiable receipt which has been stolen or lost or which the indorsement has been forged. 6it# Re*ard to Owners#ip a. (wnership is not a defense for refusal to deliver (he warehouseman cannot refuse to deliver the goods on the ground that he has ac,uired title or right to the possession of it unless such is derived: 1. directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subse,uent thereto* . from the warehouseman:s lien b. !dverse title of a 3rd person is not a defense for refusal to deliver by a warehouseman to his bailor on demand E& EP': 1. (o persons to whom the goods must be livered (Sec. 6) . (o the person who wins in the interpleader case (Sec. 1E) 7. (o the person he finds to be entitled to the possession after investigation (Sec. 1G) 9. (o the buyer in case there was a valid sale of the goods (Sec. 78) $uty of ware#ouse!an w#en t#ere are se/era c ai!ants +he 0arehouseman may either: a. "nvestigate and determine within a reasonable time the validity of the claims, and deliver to the person whom he finds is entitled to the possession of the goods Effect: @e is 2)( e#cused from liability in case he ma$es a mista$e b. @e may bring a complaint in interpleader Effect: a) he will be relieved from liability in delivering the goods to the person whom the court finds to have better right* b) he is liable for refusal to deliver to the rightful claimant when it is re3uired to have an interpleader* c. @e may not do (a) and (b) Effect: @e will be liable after a lapse of a reasonable time, of conversion as of the date of the original demand for the goods. #+,: (his does 2)( apply to cases where the warehouseman himself ma$es a claim to the goods.

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CREDIT TRANSACTIONS MEMORY AID

ATENEO CENTRAL BAR OPERATIONS 2002

Co0!in* in* of deposited *oods '.: 5 warehouseman may not co-mingle goods belonging to different depositors. ,&ception: "n case of fungible goods of the same $ind and grade provided: a. he is authoriDed by agreement b. he is authoriDed by custom ,ffects: a. each depositor shall own the entire mass in common and entitled to his portion b. warehouseman is severally liable to each depositor for the care and redelivery of their portion as if the goods had been $ept separate Attac#!ent or e/y or ne*otia) e receipts 5 warehouseman has the obligation to hold the goods for the owner or for the person to whom the negotiable receipt has been duly negotiated.

'herefore, the goods cannot be attached or levied upon under an execution #*.E00: a. b. c. the document be first surrendered* or the negotiation is en1oined, or the document is impounded by the court

'he warehouseman cannot be compelled to deliver the goods until: a. b. the receipt is surrendered to him* it is impounded by the court

#+,: (his provision does 2)( apply if the person depositing is 2)( the owner of the goods or one who has not the right to convey title to the goods binding upon the owner. Re!edy of creditor w#ose de)tor owns a ne*otia) e receipt 5ttachment of the negotiable receipt (2)( the goods) #+,: the goods themselves cannot readily be attached or levied upon by ordinary legal process E5tent of ware#ouse!an8s ien a. la0ful charges for 1. storage, and . preservation of the goods b. la0ful claims for 1. money advanced . interest 7. insurance 9. transportation ?. labor 8. weighing E. cooperating

c. other charges and expenses in relation to such goods d. reasonable charges and expenses for notice and advertisements of sale e. sale of the goods where defaults has been made in satisfying the lien E5tent of t#e ien w#en a ne*otia) e receipt #as )een issued a. charges for storage and preservation of the goods

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ATENEO CENTRAL BAR OPERATIONS 2002

b. other charges e5press y enumerated (from b, c, d and e above) although the amount is 2)( stated #+,: Cor claims not specified, the warehouseman shares pro rata with the other creditors of the depositor the balance of the proceeds of the sale for the satisfaction of the claims. -oods su)1ect to ien a. goods of the depositor who is liable to the warehouseman as debtor wherever such goods are deposited* b. goods of other persons stored by the depositor who is liable to the warehouseman as debtor with authority to ma$e a valid pledge #+,: 5 warehouseman has 2) lien on goods belonging to another and stored by a stranger in fraud of the true owner:s right. T#e ien !ay )e ost t#rou*#: a. voluntarily surrendering possession of goods - constitutes a waiver or abandonment 5 warehouseman may 2)( claim a lien on other goods of the same depositor for unpaid charges on the goods surrendered if the goods were delivered to him under different receipts. b. wrongfully refusing to deliver the goods to a person who holds the receipt or the depositor upon )E$!*) accompanied with: 1. an offer to satisfy the warehouseman:s lien (because a warehouseman may refuse delivery until his lien is satisfied) . an offer to surrender the receipt a. for the protection of the warehouseman and to avoid criminal liability b. this is sub1ect to waiver 7. an offer to sign when the goods are delivered, an ac$nowledgment that they have been delivered Re!edies for a ware#ouse!an 1. .ven if no lien, all remedies allowed by law to a creditor against his debtor for collection of charges* . &y refusing to deliver the goods until his lien is satisfied* 7. 5ll remedies allowed by law for the enforcement of a lien against personal property and recovery of any deficiency in case it e#ists after the sale of the property* 9. &y causing the e#tra1udicial sale of the property and applying the proceeds to the value of the lien (.#C,"" <#. ,=+.4;>$ICI4* "4*,: 5. ?ritten notice to the person on whose account the goods are held or to persons who claim an interest in the goods containing: a. itemiDed statement of warehouseman:s lien showing the sum due and when it became due b. brief description of the goods c. a demand that a claim be paid on or before a day mentioned, not less than 1H days from: 1. delivery of notice if personally delivered . the time when notice should reach its destination if sent by mail

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d. statement that if the claim is not paid, the goods will be advertised for sale and then sold at a specified time and place &. !fter the time for payment of the claim if the notice has elapsed, the sale will be advertised stating: a. a description of the goods to be sold b. the name of the owner or person on whose account the goods were held c. time and place of the sale C. Publication: a. if there is a newspaper published in the place of sale: once a wee$ for consecutive wee$s and the sale not held less than 1? days from the time of the 1st publication b. if there is no newspaper: posted at least 1H days before the sale in not less than 8 conspicuous places in the place of sale =. 0ale itself in: a. place where the lien was ac,uired b. if such place is manifestly unsuitable for the purpose, at the nearest suitable place .. :rom the proceeds of the sale: a. the warehouseman shall satisfy his lien b. including the reasonable charges of notice, advertisement and sale c. the balance shall be held by the warehouseman and delivered on demand to the person to whom he should deliver it C. 5ny time before the goods are sold, any person may pay the warehouseman for his lien and the other e#penses. (he warehouseman shall deliver the goods to that person if he is entitled under this 5ct, to the possession of the goods on payment of the charges. )therwise, the warehouseman shall retain ownership of the goods. ?. ?ith regard to perishable and haCardous goods Aarehouseman will give notice to owner or person in whose name the goods are stored: a. to satisfy his lien b. to remove the goods c. failure to do a Fb will give the warehouseman authority to sell the goods without advertising d. if sale is not possible, he may dispose of the goods in any lawful manner without liability K +roceeds of the sale shall be disposed of in accordance with the +;)C.SS in the sale of the goods. 8. Effects of sale a. warehouseman is 2)( liable for non-delivery even if the receipt was given for the goods when they were deposited be negotiated b. when the sale was made without the publication re,uired and before the time specified by law, such sale is void and the purchaser of the goods ac,uires no title in them Ne*otiation and Transfer of Receipts Ne*otia) e receipts ne*otia) e )y de i/ery 1. if the goods are deliverable to the bearer* or . 7. when indorsed in blan$* or person to whose order the goods are delivered or by a subse,uent indorsee indorsed it to bearer

CREDIT TRANSACTIONS MEMORY AID

ATENEO CENTRAL BAR OPERATIONS 2002

-ENERAL BON$E$ 6ARE7O&SE LA6

!ny warehouseman receiving commodities for (a% storage2 (b% milling2 (c% co7mingling must: a. obtain prior license from the &ureau of Commerce b. file a bond in an amount e,uivalent to 77 1%7 L of the capacity of the warehouse against which bond depositors may sue directly c. open to the public, no discrimination allowed d. liable for double mar$et value should he accept goods in e#cess of the capacity of warehouse if goods are damaged or destroyed 2ote: for palay and corn license, a bond with the 2ational /rains 5uthority is re,uired* also an insurance cover is re,uired.