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WAREHOUSE RECEIPT LAW

I. Nature and Function


1. One of these statements is not correct:
a. A warehouse receipt serves as proof of possession of the
warehouseman of the goods described in it and as
authorization for the possessor of the warehouse receipt
to transfer or receive the goods described in it.
b. A non-negotiable receipt is one in which it is stated that
the goods received will be delivered to the depositor or
to any other specified person.
c. A negotiable receipt is a 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 the receipt.
d. A warehouse receipt is not a document of title.
2. One of these statements is not correct:
a. When a negotiable instrument is altered, it becomes null
and void. When a negotiable warehouse receipt is
altered, it is still valid but may be enforced only in
accordance with its original tenor.
b. A negotiable instrument which is originally payable to
bearer remains so payable even if it is indorsed
specially. A negotiable receipt deliverable to bearer if
indorsed specially becomes deliverable to order.
c. The holder in due course of a negotiable instrument
may be able to obtain a title better than that of the
indorser. An indorsee of a negotiable receipt acquires
only such title as the person who negotiated had over
the goods even if he is a holder in due course.
d. Both in a negotiable instrument and in a negotiable
receipt the indorser warrants that all prior parties had
capacity to contract.
I. Duties of Warehouseman
A. Delivery of Goods
1. One of these is not required to bind the warehouseman to
deliver the goods:
a. An offer to satisfy his lien.
b. An offer to surrender the receipt, if it is negotiable, with
indorsements necessary for its negotiation.
c. A readiness and willingness to sign upon delivery of the
goods, an acknowledgment that they have been
received, if the warehouseman requests it.

d. An undertaking to hold the warehouseman harmless


from claims of third parties.
2. A warehouseman is not justified in delivering the goods to one
of the following:
a. The person lawfully entitled to the possession of the
goods or his agent.
b. A person entitled to the delivery by the terms of the
non-negotiable receipt for goods or has written authority
from such person.
c. A person in possession of a negotiable receipt for goods
deliverable to him or his order or to bearer, which has
been indorsed to him or in blank by the person to whom
delivery was promised or by his indorsee.
d. The pledgee of the goods covered by the receipt.
3. One of these statements is not correct:
a. The general rule is that a warehouseman cannot invoke
the right or title of a third person as an excuse for not
delivering the goods covered by a receipt.
b. By way of exception, the warehouseman may withhold
delivery until he has had reasonable opportunity to
ascertain the validity of the claim of the third party or to
file an action for interpleader.
c. If the goods were lawfully sold to satisfy the lien of the
warehouseman or were lawfully sold or disposed of
because of their perishable or hazardous nature, the
warehouseman is not liable for not delivering them.
d. If the warehouse receipt was fraudulently altered, the
warehouseman will be discharged from liability to
deliver the goods.
4. One of these statements is not correct:
a. A warehouseman cannot set up title in himself as an
excuse for refusing to deliver the goods unless the title
is directly or indirectly from a transfer by the depositor
or from enforcement of his lien.
b. If a warehouseman delivers goods covered by a
warehouse receipt and does not take up and cancel it,
he will be liable to anyone who purchases the
warehouse receipt in good faith and for value.
c. If a warehouseman delivers a part of the goods for
which he issued a negotiable receipt and did not take up
and cancel the receipt or state plainly upon it what
goods were delivered, he will be liable to anyone who
purchased the receipt in good faith and for value.

d. A warehouseman is not liable to the holder of a receipt if


the goods do not correspond with the description in it.
B. Safekeeping of the Goods
1. One of these statements is not correct:
a. A warehouseman is liable for any loss or injury to the
goods caused by his failure to exercise such care as a
reasonably careful owner would exercise.
b. In the absence of a stipulation to the contrary, the
warehouseman is not liable for any loss or injury to the
goods which could not have been avoided by exercise of
such care.
c. A warehouseman is not liable for loss due to a fortuitous
event.
d. The person claiming the goods has the burden of
proving the loss was due to the fault of the
warehouseman.
II. Warehousemans Lien
A. Claims Included and Properties Covered
1. One of these statements is not correct:
a. A warehouseman has a lien on the goods deposited or
their proceeds in his hands for all lawful charges for
storage and preservation of the goods, for all lawful
claims in relation to the goods, for all reasonable
charges and expenses for notice and advertisement for
sale, and for sale of the goods.
b. If the receipt is negotiable, the warehouseman will have
no lien on the goods except charges for storage, unless
the receipt expressly enumerates other charges for
which a lien is claimed.
c. A warehouseman has a lien against all goods belonging
to the person liable for the claims with respect to which
a lien is asserted.
d. A warehouseman cannot have a lien against the goods if
the depositor was merely entrusted with its possession,
even if the warehouseman acted in good faith and for
value.
B. Enforcement of Warehousemans Lien
1. One of these statements is not correct:
a. A warehousemans lien may be satisfied by selling the
goods.

b. The warehouseman must give the person for whose


account he is holding the goods or any other person he
knows to claim an interest in the goods notice to pay
within ten days.
c. If the warehouseman is not paid, an advertisement of
the sale must be published once a week for three
consecutive weeks in a newspaper published in the
place of the sale.
d. The sale cannot be made less than 15 days before the
date of the first publication.
2.

One of these statements is not correct:


a. If there is no newspaper published in the place of the
sale, the advertisement must be posted at least 10 days
before the sale in six conspicuous places.
b. A sale held without complying with the publication and
before the prescribed time is void.
c. In case of deficiency in the proceeds of the sale, the
warehouseman cannot sue for the deficiency.
d. If the proceeds of the sale exceed the amount due the
warehouseman, the excess shall be delivered to the
person entitled to the delivery of the goods.

III. Negotiation and Transfer of Warehouse Receipts


A. Negotiation
1.

One of these statements is not correct:


a. A negotiable receipt may be negotiated by delivery if by its
terms the goods are deliverable to the bearer or by its
terms the goods are deliverable to the order of a specified
person and he or a subsequent indorsee indorsed the
receipt in blank or to bearer.
b. If the goods are deliverable to bearer or the negotiable
receipt was indorsed in blank or to bearer, even if the
holder indorsed it to himself or a specified person, the
receipt can be negotiated further by delivery.
c. The warrant of a negotiable receipt by the person to whose
order the goods are deliverable may be in blank, to bearer,
or to a specified person.
d. Subsequent negotiations may be made in the same
manner.

2. One of these statements is not correct:


a. A negotiable receipt may be negotiated by the owner.
b. If by the terms of a negotiable receipt, the goods are
deliverable to the order of the person to whose possession

the owner of the receipt entrusted it, such person cannot


negotiate the receipt.
c. A person to whom a negotiable receipt was negotiated
acquires such title to the goods as the person negotiating
had ability to convey to a buyer in good faith and for value.
d. A person to whom a negotiable receipt was negotiated
acquires the direct obligation of the warehouseman to hold
the goods for him.
3.

One of these statements is not correct:


a. The negotiation of a negotiable receipt is not impaired by
the fact that it was a breach of duty of the person
negotiating it or that the owner of the receipt was induced
by fraud, mistake or duress to entrust the receipt to such
person if the person to whom it was negotiated took it in
good faith and for value.
b. If a person who sold goods covered by a negotiable receipt
remained in possession of it, the negotiation of the receipt
to a person who took it in good faith and for value has the
same effect as if the first buyer had authorized the
negotiation.
c. A sellers lien or right of stoppage in transitu will defeat the
rights of a buyer in good faith and for value to whom the
receipt was negotiated.
d. If a warehouseman who sold sugar covered by a negotiable
receipt was not paid by the buyer, the negotiation of the
receipt by the buyer is valid.

B. Transfer of Rights
1. One of these statements is not correct:
a. A non-negotiable receipt may not be transferred by
delivery.
b. The negotiation of a non-negotiable receipt does not give
the transferee any additional right.
c. A person to whom a non-negotiable receipt was transferred
acquires as against the transferor title to the goods subject
to their agreement.
d. A person to whom a non-negotiable receipt was transferred
acquires the right to notify the warehouseman of the
transfer to him and to acquire the direct obligation of the
warehouseman to hold the goods for him.
2. One of these statements is not correct:
a. Before the notification to the warehouseman, the title of
the transferee to the goods maybe defeated by a levy
upon them by a creditor of the goods.

b. Before the notification to the warehouseman, the title of


the transferee to the goods may be defeated by a
notification to the warehouseman of a subsequent sale
of the goods.
c. If a negotiable receipt is transferred for value by
delivery and indorsement is necessary for its
negotiation, the transferee can compel the transferor to
indorse it.
d. The effect of the negotiation will retroact to the date of
the transfer of the receipt.
TITLE 1V: THE WAREHOUSE RECEIPTS LAW
INTRODUCTION

Scope of the law : All warehouses, whether public or private, bonded or not.
Civil Code applicable where the receipts are not issued by a warehouse man
Purposes of the law:
1) Regulate the status, rights, and liabilities of the parties in a warehousing contract
2) Protect those who, in good faith and for value, acquire negotiable warehouse
receipts by negotiation
3) Render the title to, and the right of possession of, property stored in warehouses
4) Facilitate the use of warehouse receipts as documents of title
5) Place a much greater responsibility on the warehouseman

CHAPTER 1: THE ISSUE OF WAREHOUSE RECEIPTS


Section 1

Warehouseman person lawfully engaged in the business of storing goods for profit
Only one authorized to issue warehouse receipts
A duly authorized officer/agent of a warehouseman may validly issue a warehouse
receipt.
Warehouse the building or place where goods are deposited and stored for profit

Section 2

Warehouse receipt 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
Simple written contract between the owner of the goods and the warehouseman to
pay the compensation for that service
A bilateral contract (symbolical representation of the property itself)
Not a negotiable instrument
Not require or specify any particular form
Essential terms of the receipt:
1) Location of warehouse for the benefit of the holders of warehouse receipts
2) Date of issue of receipt not essential; indicates prima facie the date when the
contract of deposit is perfected and when the storage charges shall begin to run
against the depositor

3) Consecutive number of receipt to identify each receipt with the goods for which it
was issued
- No express requirement as to when the consecutive numbering shall begin
4) Person to whom goods are deliverable prima facie entitled lawfully to the
possession of the goods deposited
- Does not determine the negotiability of the receipt
5) Rate of storage charges the consideration for the contract from the view of the
warehouseman
- Presumption that depositor shall pay the customary/reasonable
compensation for the services of the warehouseman (in the absence of
express agreement)
6) Description of goods or packages for identification so that the identical property
delivered to the warehouseman may be delivered back by him upon the return of
the warehouse receipt
- Mere fact that the goods deposited are incorrectly described does not make
ineffective the receipt when the identity of the goods is fully established by
evidence
7) Signature of the warehouseman best evidence of the fact that the warehouseman
has received the goods described in the receipt and has bound himself to assume
all obligations in connection with it
8) Warehousemans ownership of or interest in goods the document should carry the
notice of the fact on its face
- Omission to state ownership of the goods in the receipt issued render the
warehouseman criminally liable
9) Statement of advances made and liabilities incurred to preserve the lien of the
warehouseman over the goods stored or the proceeds of it
Effect of omission of any of essential terms:
1) Validity of the receipt not affected
2) Warehouseman liable for damages to those injured
3) Negotiability of receipt not affected
4) Contract converted to ordinary deposit
Form provided by the law is merely permissive and directory

Section 3

Warehouseman given the power to insert additional terms or conditions in receipts


Limitations:
a) Contrary to provisions of Act No. 2137
b) In any wise impair his obligation to exercise that degree of care
c) Not contrary to law, morals, good customs, public order, or public policy
Terms that cannot be included in a warehouse receipt:
1) Exemption from liability from misdelivery contrary to Section 10 or Sections 33/34
2) Exemption from liability for negligence

Sections 4-5

Negotiable the law regards the property which they describe as following them and
gives to their regular transfer by indorsement the effect of manual delivery of the things
specified in them
A warehouse receipt is no sense a negotiable instrument!

Sections 6-7

Section 6 refer to negotiable receipts


Section 7 refer to non-negotiable receipts
Effect of failure to mark negotiable or non-negotiable:
1) Negotiable not render the receipt non-negotiable
- Usually written or printed on the face of a negotiable warehouse receipt
2) Non-negotiable render it negotiable
- Provided : Holder of such unmarked receipt purchased it for value
supposing it to be negotiable
- Law imposes upon the warehouseman the duty to mark the receipts nonnegotiable or not negotiable
Liberal construction of the law in favor of the bona fide holders of such receipts
No application to actions against any party to the transactions other than a
warehouseman

CHAPTER 2: OBLIGATIONS AND RIGHTS OF THE WAREHOUSEMEN UPON THEIR


RECEIPTS
Section 8

Warehouseman is essentially a depositary with respect to the goods received and


stored by him in the warehouse.
Principal obligations of warehouseman:
1) Take care of the goods entrusted to his safekeeping
2) Deliver the goods to the holder of the receipt or the depositor
Demand should be made on the warehouseman in order that the duty to deliver the
goods will arise
If demand is useless, demand is dispensed with.
Offer to satisfy the warehousemans lien is required before the warehouseman is bound
to deliver or return the goods
If offer is vain/useless, formal tender is not required.
Warehouseman criminally liable if he delivers goods without obtaining possession of
such receipts
Right to require production of the receipt as a condition precedent to delivery is subject
to waiver
Negotiable receipt = demand for the delivery of the goods must be accompanied by
an offer to surrender the receipt properly indorsed
Not negotiable receipt = any person lawfully entitled to the possession of the goods
may be entitled to delivery without the surrender of the receipt
Existence of a lawful excuse for such refusal to deliver is an affirmative defense which
the warehouseman must prove

Section 9

Person to whom goods must be delivered:


1) Person lawfully entitled to possession of goods or his agent
- Competent court has ordered the delivery of the goods

Attaching creditor
Purchaser in case of sale of the goods by the warehouseman to enforce his
lien
- Goods are perishable or hazardous
2) Person entitled to delivery under a non-negotiable receipt or with written authority
3) Person in possession of a negotiable receipt
- If delivered to one who acquired custody of the goods through the use of
falsified delivery permit, warehouseman cannot sue for the value of the
goods unless he has been sued by the depositor or consignee.
Section 10

Warehousemans liability for misdelivery:


1) Liability similar to a bank paying for a forged check duty rests upon the
warehouseman of devising appropriate means by which deception can be avoided
2) Liability for conversion
- Liable if prior to delivery, he has been requested not to make such delivery
or he had received notice of the adverse claim or title of a third person
Conversion 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 rights

Sections 11-12

Not applicable to non-negotiable receipts


Warehouseman may make delivery without requiring their surrender and
cancellation

SECTION 11
Receipt must be cancelled
Except as provided in Section 36
Warehouseman delivers goods for which
he had issued a negotiable receipt and
fails to take up and cancel the receipt

Liable to anyone who purchases for value


in good faith such receipt for failure to
deliver the goods to him

SECTION 12
Receipt must be either cancelled or
marked
Except as provided in Section 36
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
Liable to anyone who purchases for value
in good faith such receipt for failure to
deliver ALL the goods specified in the
receipt

Warehouseman not liable to purchaser for value in good faith of such receipt from a
thief

Section 13

Effects of alteration on liability of warehouseman:


1) Alteration immaterial liable on the altered receipt according to its original tenor

- Tenor of the receipt not changed


- Whether fraudulent or not
- Whether authorized or not
2) Alteration material liable according to the terms of the receipt as altered
- Tenor of the receipt is changed
- Authorized
3) Material alteration innocently made liable on the altered receipt according to its
original tenor
- Unauthorized
4) Material alteration fraudulently made liable according to the original tenor of the
receipt to a purchaser for value without notice
- Liability is limited only to delivery as he is excused from any liability
Even a fraudulent alteration cannot divest the title of the owner of stored goods
Warehouseman liable to return them to the owner
A bona fide holder acquires no right to the goods under a negotiable instrument:
1) lost
2) stolen
3) indorsement of depositor has been forged

Section 14

Court shall pass upon the question and make sure that the receipt is really lost or
destroyed before the goods are delivered or a new receipt is issued
Competent court may order the delivery of goods only:
1) Upon proof of loss or destruction of the receipt
2) Upon the giving of a bond with sufficient sureties to be approved by the court
Warehouseman is still liable to a holder of the receipt for value without notice

Section 15

When more than one negotiable receipt is issued for the same goods, the word
duplicate must be plainly placed by the warehouseman upon the face of every receipt,
except the first one issued.
Duplicate is an accurate copy of the original receipt
Original receipt is uncancelled at the date of the issue of the duplicate
Duplicate imposes no other liability upon the warehouseman
Except for breach of warranty
Warehouseman may not be compelled to deliver the goods by virtue of the duplicate
only

Section 16

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:
a) Directly or indirectly from a transfer made by the depositor at the time of the
deposit for storage or subsequent thereto
b) From the warehousemans lien
Based on the doctrine of estoppel

Sections 17-18

If there are several claimants to the goods:


1) Determine within reasonable time the validity of the conflicting claims
2) Deliver to entitled person the possession of the goods
3) Not excused from liability in case he makes a mistake
Warehouseman must bring a complaint in interpleader and require the different
claimants to litigate among themselves
Relieved from liability in delivering the goods to the person whom the court finds to
have a better right
Warehouseman liable for refusal to deliver to the rightful claimant
Where he does not compel interpleader in a case requiring it
Warehouseman held guilty of conversion as of the date of original demand for the
goods
Warehouseman neither interpleads nor investigates
After a lapse of reasonable time
Reasonable time determined in accordance with the circumstances of the particular
case
Section 18 not apply to cases where the warehouseman himself makes claim to the
goods

Section 19

Warehouseman cannot set up title in himself as an excuse for his failure or refusal to
deliver the goods
Adverse title of third person not a defense for refusal to deliver
Exceptions:
1) Section 9 person to whom goods must be delivered
2) Section 17 interpleader of adverse claimants
3) Section 18 warehouseman has reasonable time to determine validity of claims
4) Section 36 effect of sale

Section 20

GENERAL RULE: Warehouseman is under obligation to deliver the identical property


stored with him and if he fails to do so, he is liable directly to the owner.
Warehouseman is estopped to deny that he has received the goods described in it.
As against a bona fide purchaser of a warehouseman receipt
Whether the receipt is negotiable or not
Warehouseman is not liable even if the goods are not of the kind as indicated in the
marks or labels

Section 21

Required to exercise ordinary or reasonable care in the custody of the goods


Diligence of a good father of a family (Article 1163 of CC)
Warehouseman not liable for any loss or injury to the goods which could not have been
avoided by the exercise of such care

In the absence of any agreement to the contrary


What constitutes ordinary or reasonable care depends upon the circumstances
Warehouseman cannot stipulate with the depositor that he would not be responsible for
any loss
Even if caused by his negligence
Stipulation is VOID

Sections 22-24

GENERAL RULE: Warehouseman may not mingle goods belonging to depositors


EXCEPTION: Warehouseman may mingle fungible goods with the goods of the same
kind and grade
Provided, he is authorized by agreement or custom
Different owner become co-owners of the whole mass
Intended for the benefit of the holders of the receipt

Section 25

Direct obligation to hold possession of the goods:


1) For the original owner
2) For the person to whom the negotiable receipt of title has been duly negotiated
Goods cannot be attached or levied upon under an execution unless:
1) Document be first surrendered
2) Negotiation is enjoined
3) Document is impounded by the court
Warehouseman cannot be compelled to deliver up the possession of the goods until the
receipt is surrendered to him or impounded by the court
Section 25 do not apply:
1) Depositor is not the owner of the goods (thief)
2) Depositor has no right to convey title to the goods binding upon the owner
3) Actions for recovery or manual delivery of goods by the real owner
4) Attachment is made before the issuance of the negotiable receipt of title
Rights acquired by attaching creditors cannot be defeated by the issuance of a
negotiable receipt of title thereafter

Section 26

What is attached by the creditor is the negotiable receipt in the debtors possession
Expressly gives the court full power to aid by injunction and otherwise a creditor
seeking to get a negotiable receipt covering such goods

Section 27

Warehousemans lien over the goods deposited with him is his security for the payment
of the charges, money advanced, and other expenses.
Lien exists for the benefit of the warehouseman
Section 30 prescribes the extent of lien when the receipt is negotiable

Section 28

Goods subject to lien:


1) Goods belonging to depositor or his principal
2) Goods stored in fraud of true owners rights
Warehouseman may enforce his lien:
1) Against the goods of the depositor who is liable to the warehouseman as debtor
whenever such goods are deposited
2) Against goods of other persons stored by the depositor who is liable to the
warehouseman as debtor with authority to make a valid pledge
- To give the warehouseman a lien for charges against the goods of persons
who are primarily liable for the charges incurred
- Create the relation of debtor and creditor

Section 29

Loss and waiver of lien upon goods:


1) By surrendering possession of goods
- By voluntarily surrendering the possession of it without requiring payment of
lien
- Presumption that lien has been waived or abandoned where
warehouseman permits a depositor to remove the goods
- Involuntary parting with possession of goods ordinarily does not result in
loss of his lien by a warehouseman.
- 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
bailments
2) By wrongfully refusing to deliver goods
- Where the holder of the receipt offers to comply with the requirements
- In case the warehouse receipt has been pledged as security = depositorpledgor as owner continues to be liable
- The fact that the receipt was delivered and endorsed in blank to the pledgee
does not alter the situation.
Warehousemans lien concomitantly lost as to what the law deems a valid demand
Valid demand by the lawful holder of a warehouse receipt for the delivery of goods
Absence of a lawful excuse provided by the law
Valid reasons for refusing to deliver goods:
1) Holder of the receipt does not satisfy the conditions prescribed in Section 8
2) Warehouseman has legal title in himself on the goods
3) Warehouseman has legally set up the title or right of third person as lawful defense
for nondelivery of the goods
3.1) Requested by or on behalf of the person lawfully entitled to a right of property
of or possession in the goods not to make such delivery
= require all known claimants to interplead
3.2) Had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods
= excused from liability
3.3) Goods have already been lawfully sold to third person to satisfy the
warehousemans lien, or have been lawfully sold or disposed of because of their
perishable or hazardous nature
4) Warehouseman having a lien valid against the person demanding the goods
refuses to deliver the goods to him unless the lien is satisfied
5) Failure was not due to any fault on the part of the warehouseman
- Good were stolen or destroyed by fire, flood, etc. without any negligence on
his part
- Goods taken by the mistake of a third person without the knowledge or
implied assent of the warehouseman
- Other justifiable ground for non-delivery

Section 30

Lien exists only for the other charges expressly enumerated in the receipt
Written within the terms of Section 26
Although amount not stated

Exception: Charges for storage and preservation of goods


Warehouseman shares pro rata with the other creditors of the depositor the balance of
the proceeds of the sale for the satisfaction of said claims
Claims not specified in the receipt
After deducting the charges for storage

Sections 31-36

1.
1.

1.
1.
1.
1.
1.

Remedies for enforcement of warehousemans lien:


1) Refusing to deliver the goods until the lien is satisfied
2) Causing the extrajudicial sale of the property and applying the proceeds to the
value of the lien
3) Filing a civil action for collection of the unpaid charges
- Or by way of counterclaim in an action to recover the property from him
- Or other remedies allowed by law for the enforcement of a lien against
personal property
- Or to a creditor against his debtor
Warehouseman entitled to all the remedies allowed by the law to a creditor against his
debtor for the collection from the depositor of all the charges which the depositor has
bound himself to pay.
Effect of sale:
1) Warehouseman not liable for nondelivery
- Even if receipt given for the goods when they were deposited be negotiated
2) Sale without publication required and before time specified by the law = VOID
- Purchases of the goods acquires no title
Acts for which warehouseman is liable:
1) Failure to stamp duplicate on copies of a negotiable receipt
2) Failure to place non-negotiable or not negotiable on a non-negotiable receipt
3) Misdelivery of goods
4) Failure to effect cancellation of a negotiable receipt upon delivery of the goods
5) Issuing receipt for non-existing goods or misdescribed goods
6) Failure to take care of the goods
7) Failure to give notice
- for sale of goods to satisfy his lien
- for perishable or hazardous goods
WAREHOUSE RECEIPTS LAW

1.
Warehouse a building or place where goods are deposited and stored for
profit.
2.
Warehouseman person lawfully engaged in the business of storing goods for
profit.
Only a warehouseman may issue warehouse receipts.
3.
Warehouse Receipt 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.
4.
Non-negotiable Receipt receipt deliverable to a specified person.
5.
Negotiable Receipt receipt deliverable to order or to bearer.
6.
Essential Terms which MUST be embodied in a Warehouse Receipt:
a.
location of the warehouse

2.
3.
4.
5.
6.
7.
8.
1.
1.
2.
3.
4.
1.

1.
1.
2.
1.
1.
2.
1.
1.
2.
3.
4.

b.
date of the issue of the receipt
c.
consecutive number of the receipt
d.
statement whether the goods received will be delivered to bearer, or a
specified person, or his order
e.
rate of storage charges
f.
description of the goods or packages containing them for identification
purposes
g.
signature of the warehouseman
h.
statement of the amount of advances made and of liabilities incurred for which
the warehouseman claims as lien
7.
Effect of omission of any of the essential terms:
a.
The validity of the warehouse receipt is not affected.
b.
The warehouseman shall be held liable for damages to those injured by his
omission.
c.
The negotiability of the warehouse receipt is not affected.
d.
The issuance of a warehouse receipt in the form provided by the law is merely
permissive and directory and not mandatory in the sense that if the requirements are
not observed, then the goods delivered for storage become ordinary deposits.
8.
Terms which may be inserted in a Warehouse Receipt: Any other terms except
(a) those contrary to the provisions of this Act; (b) those that would impair a
warehousemans obligation to exercise that degree of care in the safekeeping of the
goods entrusted to him
9.
Marks to be made on a warehouse receipt:
a.
A non-negotiable receipt must be clearly marked non-negotiable or not
negotiable, otherwise, the holder of the receipt who purchased it for value and who
supposed it to be negotiable, may treat it as negotiable.
b.
Duplicate receipts must be so marked, otherwise, the warehouseman is held
liable for all damages suffered by a holder believing the same to be the original.
10. Warranties of a warehouseman as to duplicate receipts:
a.
The duplicate is an accurate copy of the original receipt.
b.
Such original receipt is uncancelled at the date of the issue of the duplicate.
11. Effects of alteration on the liability of the warehouseman:
a.
If the alteration is IMMATERIAL (the tenor of the receipt is not changed),
whether fraudulent or not, authorized or not, the warehouseman is liable on the
altered receipt according to its original tenor.
b.
If the alteration is MATERIAL but AUTHORIZED, the warehouseman is liable
according to the terms of the altered receipt.
c.
If the alteration is MATERIAL, UNAUTHORIZED but INNOCENTLY MADE, the
warehouseman is liable on the altered receipt according to its original tenor.
d.
If the alteration is MATERIAL and FRAUDULENTLY MADE, the warehouseman is
liable:
(1) to the purchaser of the receipt for value and without notice of the alteration
according to the tenor of the altered receipt
(2)

to the alterer, according to the terms of the original receipt

(3) to subsequent purchasers with notice of the alteration, according to the terms of
the original receipt
1.

12. Effects of misdescription of goods:

1.
2.
3.
1.
1.

1.

a.
A 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.
b.
As against a bona fide purchaser of a warehouse receipt, the warehouseman is
estopped from denying that he has received the goods described in the receipt.
c.
If the description consists merely of marks or label upon the goods or upon the
packages containing them, the warehouseman is not liable even if the goods are not of
the kind as indicated in the marks or labels.
13. Principal Obligations of a Warehouseman:
a.
To take care of the goods entrusted to his safekeeping
General Rule: A warehouseman is required to exercise such degree of care which a
reasonable careful owner would exercise over similar goods of his own. He shall be
liable for any loss or injury to the goods caused by his failure to exercise such care.
Exception: He shall not be liable for any loss or injury which could not have been
avoided by the exercise of such care.
Exception to the Exception: He may limit his liability to an agreed value of the
property received in case of loss. He cannot stipulate that he will not be responsible
for any loss caused by his negligence.
b.
To deliver the goods to the holder of the receipt or the depositor upon demand,
provided demand is accompanied with:
(1) an offer to satisfy the warehousemans lien;
(2) an offer to surrender the negotiable receipt properly endorsed. If the receipt is
non-negotiable, any person lawfully entitled to the possession of the goods may be
entitled to delivery without surrender of the receipt.
(3) a readiness and willingness to sign an acknowledgment that the goods have been
delivered if such is requested by the warehouseman.

1.
1.

14. Persons to whom goods must be delivered:


A.
Persons lawfully entitled to the possession of the goods or his agent:
a. persons to whom a competent court has ordered the delivery of the goods
(1) where a negotiable instrument has been lost or destroyed, the court may order
delivery to a person upon satisfactory proof of such loss or destruction and upon
proper posting of a bond to protect the warehouseman from any liability or expense
which he may incur by reason of the original receipt remaining outstanding.
(2) where more than one person claims title or possession of the goods the
warehouseman may require all claimants to interplead. The court will then order
delivery to the person having a better right.

1.

b.
an attaching creditor Goods, while in the possession of the warehouseman and
covered by a negotiable receipt, cannot be attached or levied upon under an
execution unless:
(I)
the negotiable receipt is first surrendered to the warehouseman, or
(ii)

its negotiation is enjoined, or

(iii) the receipt is impounded by the court

c. to the purchaser in case of sale of the goods by the warehouseman to enforce his
lien
1.
1.
1.
2.
1.
1.
2.
3.
4.
1.

1.
2.

d.
to the purchaser where perishable or hazardous goods are sold at private or
public sale
B.
If goods are covered by a non-negotiable receipt:
a.
a person entitled to the delivery by the terms of the receipt, or
b.
one who has written authority from letter a
C.
If goods are covered by a negotiable receipt, a person in possession of the
receipt, the terms of which the goods are deliverable:
a.
to him or order
b.
to bearer
c.
indorsed to him
d.
indorsed in blank by the person whom delivery was promised
15. When is there Misdelivery?
When the warehouseman delivers the goods to a person who is not in fact lawfully
entitled to the possession of the goods because:
a.
the person does not fall under letter B or C above; or
b.
the person falls under letter B or C but prior to delivery, the warehouseman had
either:
(1) been requested by the person lawfully entitled to the delivery not to make such
delivery, or
(2) had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods

1.

16. Effects of Misdelivery:


The warehouseman shall be liable for conversion to all having a right to property or
possession of the goods.

1.

17. What happens if there is proper delivery or partial delivery but the
warehouseman fails to cancel the receipt or record on the receipt of such partial
delivery?
a.
If goods covered by a negotiable warehouse receipt are delivered by a
warehouseman but he fails to take the receipt and cancel it, then he is still liable to
one who purchases for value and in good faith such receipt.
b.
If he makes partial delivery of the goods but fails to record the partial delivery
on the receipt then he may still be held liable for the entire receipt to one who
purchases for value and in good faith such receipt.
18. Lawful excuses for refusal to deliver goods:
a.
The warehouseman can refuse to deliver the goods if he has acquired title or
right to the possession of the goods:
(1) directly or indirectly from a transfer made by the depositor at the time of the
deposit for storage or subsequent thereto; or

1.
2.
1.
1.

(2)
1.

b.

from the warehousemans lien


If someone other than the depositor or person claiming under the depositor has

1.
1.
1.
1.
1.

1.
1.
2.
1.

a claim to the title or possession of the 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 until he has had a
reasonable time to ascertain the validity of the adverse claim or to bring legal
proceedings to compel all claimants to interplead.
c.
The warehouseman will not be required to deliver the goods if such had been
lost. But this is without prejudice to liabilities which may be incurred by him due to
such loss.
d.
The warehouseman having a valid lien against the person demanding the goods
may refuse to deliver the goods to him until the lien is satisfied.
e.
If goods have been lawfully sold or disposed of because of their perishable or
hazardous nature, the warehouseman shall not be liable for failure to deliver the
goods.
19. A warehouseman cannot refuse to deliver goods to the depositor or to a person
claiming under him on the ground that adverse title to the goods belongs to a third
person.
20. Rules as regards Co-mingling of Deposited Goods:
General Rule: A warehouseman may not co-mingle goods belonging to different
depositors or belonging to the same depositor for which separate receipts had been
issued.
Exception: A warehouseman may co-mingle fungible goods of the same kind and grade
provided he is authorized by agreement or by custom.
21. Effect of Co-mingling of Goods:
a.
The different owners become co-owners of the whole mass.
b.
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.
22. Remedies of a Creditor: (the debtor being the owner of the negotiable receipt)
Creditors of the depositors, before negotiation, may protect themselves by obtaining a
writ of preliminary injunction and serve the same on the depositor before he has a
chance to negotiate the receipt. Once enjoined, there will be no longer a danger that
a 3rd person will be prejudiced so the goods may now be attached, levied upon, or
that the vendors lien or the right of stoppage in transit be exercised.

1.

23. Warehousemans Lien


Extent of Warehousemans Lien:
A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his
hands for:

1.
2.

a.
all lawful charges for storage and preservation of the goods
b.
all lawful claims for money advances, interest, insurance, transportation, labor,
weighing, cooperating and other charges and expenses in relation to such goods
c.
all reasonable charges and expenses for notice and advertisements of sale and
for sale of the goods where default has been made in satisfying the warehouse lien
Goods Subject to lien:
a.
goods belonging to the depositor who is liable to the warehouseman as debtor
whenever such goods are deposited and
b.
goods belonging to other persons stored by the depositor who is liable to the
warehouseman as debtor with authority to make a valid pledge
How is a lien enforced?

3.

1.
2.

1.
2.
3.

1.
2.
1.

1.
2.

a.
by refusing to deliver the goods until the lien is satisfied
b.
by causing the extrajudicial sale of the property and applying the proceeds to
the value of the lien
c.
by filing a civil action for unpaid charges or by way of counterclaim in an action
to recover the property from him
How is a lien lost?
a.
when the warehouseman voluntarily surrenders possession of the goods without
requiring payment of his lien; or
b.
when the warehouseman wrongfully refuses to deliver the goods when a
demand is made with which he is bound to comply
24. Negotiation and Transfer of Receipts
How do we negotiate a receipt deliverable to order?
a.
by indorsing it in blank thereby making it deliverable to bearer or
b.
by special indorsement which would require further indorsements for further
negotiations.
In both cases, the indorsements must be coupled with delivery.

How do we negotiate a receipt deliverable to bearer?


There is no need to indorse for negotiation. Physical delivery of the instrument will
suffice. But if the instrument is indorsed specially, the bearer character of the receipt
is destroyed and for further negotiation, there will be a need for indorsement.

1.
2.

1.

Who may negotiate warehouse receipts?


a.
the owner of the receipt, or
b.
the person to whom possession of the receipt was entrusted to by the owner
Rights acquired by a person to whom the receipt has been negotiated:
a.
the title of the person negotiating the receipt over the goods covered by the
receipt
b.
the title of the person (depositor or owner) to whose order by the terms of the
receipt the goods were to be delivered
c.
the direct obligation of the warehouseman to hold possession of the goods for
him, as if the warehouseman directly contracted with him
May non negotiable receipts be negotiated?
No, even if the receipt is indorsed, the transferee acquires no additional right. That is
why they are called non negotiable receipts. But they may be transferred or assigned
by delivery.

2.
3.

1.
2.
3.

Rights of a person to whom a non negotiable receipt has been transferred:


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
Distinction between a non negotiable receipt from a negotiable receipt with regard to
attachment or execution upon goods:

Non-negotiable Receipt

Negotiable Receipt

Prior to notification of the warehouseman by the


transferor or transferee, the warehouseman is not
bound to the transferee whose right may be defeated
by a levy of an attachment or execution upon the goods
by the creditor of the transferor or by a notification to
such warehouseman of the subsequent sale of the
goods.

The goods cannot be attached or levied


under an execution unless the receipt be
first surrendered to the warehouseman
or its negotiation enjoined.

1.
2.

Rights of a person to whom a negotiable receipt has been transferred, not indorsed:
a.
the right to the goods as against the transferor
b.
the right to compel the transferor to indorse the receipt. But if the intention of
the parties is that the receipt should merely be transferred, the transferee has no
right to require the transferor to indorse the receipt.
Note: Negotiation takes effect as of the time when the indorsement is actually made.

1.
2.
3.
4.

Warranties of a person negotiating or transferring a receipt:


a.
the receipt is genuine
b.
he has a legal right to negotiate or transfer it
c.
he has knowledge that would impair the validity or worth of the receipt and
d.
he has a right to transfer the title to the goods and that the goods are
merchantable
A holder for security of a receipt (mortgagee or pledgee) who in good faith accepts
payment of the debt from a person does not warrant the genuineness of the receipt
not the quality or quantity of the goods therein described.
It is the duty of the purchaser, mortgagee or pledgee of goods for which a negotiable
receipt has been issued to require the negotiation of the receipt to him, otherwise his
failure will have the same effect as an express authorization on his part to the seller,
mortgagor, or pledgor in possession of such receipt to make any subsequent
negotiation. The subsequent purchaser must have taken the receipt in good faith and
for value.
A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods
where he purchases from the owners agent within the actual or apparent scope of his
authority. In sum, negotiation is valid despite having been made in breach of trust.
Distinctions between a negotiable instrument and a negotiable warehouse receipt:

Negotiable Instrument

Negotiable Warehouse Receipt

When a negotiable instrument is altered


deliberately, it becomes null and void.

When a warehouse receipt is altered, it is still valid


but it may be enforced only in accordance with its
original tenor.

If a negotiable instrument is originally payable to


bearer, it will always remain so payable regardless of
the way it is indorsed, whether specially or in blank.

If a warehouse receipt, payable to bearer, is indorsed


specially, it will be converted into a receipt
deliverable to order and can only be negotiated
further by indorsement and delivery.

A holder in due course may be able to obtain a title

An indorsee even if a holder in due course obtains

better than that which the party who negotiated the


instrument to him had.

only such title as the person negotiating has over the


goods.

The indorsement of a negotiable instrument has a


double effect. It is at the same time a conveyance
of the instrument and a contract the indorser has
with the indorsee that on certain conditions, the
indorser will pay the instrument if the party
primarily liable fails to do so.

The indorsement of a warehouse receipt amounts


merely to a conveyance by the indorser. Accordingly,
an indorser of a receipt shall not be liable to the
holder if, for example, the warehouseman fails to
deliver the goods because they were lost due to his
fault or negligence.

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. LAUREANO


ATENDIDO, defendant-appellant.
Nature: An appeal from a decision of CFI Nueva Ecija ordering Atendido to
pay PNB the sum of P3,000, with interest thereon at the rate of 6% per annum
from June 26, 1940, and the costs of action.
Facts: June 26, 1940 - Atendido obtained from PNB a loan of P3,000 payable
in 120 days with interest at 6% per annum from the date of maturity. To
guarantee the payment of the obligation, Atendido pledged to PNB 2,000
cavanes of palay deposited in a warehouse in Bulacan. Atendido endorsed the
corresponding warehouse receipt in favor of PNB.
Before the maturity of the loan, the 2,000 cavanes of palay disappeared for
unknown reasons in the warehouse. When the loan matured Atendido failed to
pay. The present action was instituted.
Atendido claims that the warehouse receipt covering the palay which was
given as security having been endorsed in blank in favor of PNB, and the palay
having been lost or disappeared, he thereby became relieved of liability. He
also claims that he is entitled to an indemnity which represents the difference
between the value of the palay lost and the amount of his obligation. CFI ruled
in favor of PNB. Atendido appealed
Issue: Whether the surrender of the warehouse receipt covering the 2,000
cavanes of palay given as a security, endorsed in blank, to PNB, has the effect
of transferring their title or ownership to PNB.
SC Held: CFI decision affirmed.
The surrendering of the warehouse receipt was not that of a final transfer but
merely as a guarantee to the fulfillment of the original obligation of P3,000.00.
The 2,000 cavanes of palay covered by the warehouse receipt were given to
PNB only as a guarantee to secure the fulfillment by Atendido of his obligation.
This appears in the contract between them wherein it is expressly stated that
said 2,000 cavanes of palay were given as a collateral security.

The delivery of said palay being merely by way of security, it follows that by
the very nature of the transaction its ownership remains with Atendido (the
pledgor) subject only to foreclosure in case of non-fulfillment of the obligation.
If the obligation is not paid upon maturity the most that PNB (the pledgee) can
do is to sell the property and apply the proceeds to the payment of the
obligation and to return the balance, if any, to the pledgor (Article 1872, Old
Civil Code).
According to the SC, this is the essence of this contract, for, according to law, a
pledgee cannot become the owner of, nor appropriate to himself, the thing
given in pledge (Article 1859, Old Civil Code).
If by the contract of pledge the pledgor continues to be the owner of the thing
pledged during the pendency of the obligation, in case of loss of the property,
the loss should be borne by the pledgor (owner).
The fact that the warehouse receipt covering the palay was delivered,
endorsed in blank, to PNB does not alter the situation, the purpose of such
endorsement being merely to transfer the juridical possession of the property
to the pledgee and to forestall any possible disposition thereof on the part of
the pledgor.
RCBC vs ALFA
Facts:
Alfa on separate instances was granted by RCBC 4 letters of credit
to facilitate the purchase of raw materials for their garments business. Alfa
executed 4 trust receipts and made comprehensive surety agreements wherein
the signatory officers of Alfa agreed in joint/several capacity to pay RCBC in
case the company defaulted. RCBC filed a case versus Alfa for a sum of money.
The CA awarded only P3M (minimum amount) to RCBC instead of P18M as
stipulated in their contract.
Issue:
W/N the CA can deviate from the provisions of the contract
between the parties?
Ruling:
No. Contracting parties may establish agreements terms, deemed
advisable provided they are not contrary to law/public policy. A contract is a law
between the parties. In this case its valid because it was not excessive under
the Usury Law.
*Atty. Aguinaldo assigned this case because he just wanted to show us how to
compute for the interest in long term deals. He even made a diagram on the
board. Di ko na ilalagay un sa digest because I assume that my industrious &
responsible classmates took down notes... = p
RODZSSEN SUPPLY V. FAR EAST
Facts: On January 15, 1979, defendant Rodzssen Supply, Inc. opened with

plaintiff Far East Bank and Trust Co. a 30-day domestic letter of credit, in the
amount of P190,000.00 in favor of Ekman and Company, Inc. (Ekman) for the
purchase from the latter of five units of hydraulic loaders, to expire on February
15, 1979. The three loaders were delivered to defendant for which plaintiff paid
Ekman and which defendant paid plaintiff before expiry date of LC. The
remaining two loaders were delivered to defendant but the latter refused to
pay. Ekman pressed payment to plaintiff. Plaintiff paid Ekman for the two
loaders and later demanded from defendant such amount as it paid Ekman.
Defendant refused payment contending that there was a breach of contract by
plaintiff who in bad faith paid Ekman, knowing that the two units of hydraulic
loaders had been delivered to defendant after the expiry date of subject LC.
Issue: WON petitioner is liable to respondent.
Ruling: The SC agrees with the CA that petitioner should pay respondent bank
the amount the latter expended for the equipment belatedly delivered by
Ekman and voluntarily received and kept by petitioner. Equitable considerations
behoove us to allow recovery by respondent. True, it erred in paying Ekman, but
petitioner itself was not without fault in the transaction. It must be noted that
the latter had voluntarily received and kept the loaders since October 1979.
When both parties to a transaction are mutually negligent in the performance
of their obligations, the fault of one cancels the negligence of the other and, as
in this case, their rights and obligations may be determined equitably under the
law proscribing unjust enrichment.
PNB vs. Se, et al.
G.R. No. 119231 | 18 April 1996
ISSUE:
WON the warehouseman can enforce his warehouseman's lien before delivering
the sugar stocks as ordered by the Court of Appeals or need he file a separate
action first to enforce payment of storage fees
HELD
YES. It is not disputed, therefore, that, under the subject Warehouse Receipts provision,
storage fees are chargeable. Petitioner anchors its claim against private respondents on
the five (5) Warehouse Receipts issued by the latter to third-party defendants Rosa Ng
Sy of RNS Merchandising and Teresita Ng of St. Therese Merchandising, which found
their way to petitioner after they were negotiated to them by Luis T. Ramos and
Cresencia K. Zoleta for a loan of P39.1 Million. Accordingly, petitioner PNB is legally
bound to stand by the express terms and conditions on the face of the Warehouse
Receipts as to the payment of storage fees. Even in the absence of such a provision,
law and equity dictate the payment of the warehouseman's lien pursuant to Sections 27
and 31 of the Warehouse Receipts Law (R.A. 2137).
After being declared not the owner, but the warehouseman, the decision having been
affirmed by us on December 1, 1993, private respondents cannot legally be deprived of
their right to enforce their claim for warehouseman's lien, for reasonable storage fees
and preservation expenses. Pursuant to Section 31, the goods under storage may not
be delivered until said lien is satisfied. Considering that petitioner does not deny the
existence, validity and genuineness of the Warehouse Receipts on which it anchors its

claim for payment against private respondents, it cannot disclaim liability for the payment
of the storage fees stipulated therein.
Petitioner is in estoppel in disclaiming liability for the payment of storage fees due
the private respondents as warehouseman while claiming to be entitled to the
sugar stocks covered by the subject Warehouse Receipts on the basis of which it
anchors its claim for payment or delivery of the sugar stocks. The unconditional
presentment of the receipts by the petitioner for payment against private respondents on
the strength of the provisions of the Warehouse Receipts Law (R.A. 2137) carried with it
the admission of the existence and validity of the terms, conditions and stipulations
written on the face of the Warehouse Receipts, including the unqualified recognition of
the payment of warehouseman's lien for storage fees and preservation expenses.
Petitioner may not now retrieve the sugar stocks without paying the lien due private
respondents as warehouseman.
While the PNB is entitled to the stocks of sugar as the endorsee of the quedans,
delivery to it shall be effected only upon payment of the storage fees. Imperative is
the right of the warehouseman to demand payment of his lien at this juncture, because,
in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman
loses his lien upon goods by surrendering possession thereof. In other words, the lien
may be lost where the warehouseman surrenders the possession of the goods without
requiring payment of his lien, because a warehouseman's lien is possessory in nature.