WAREHOUSE RECEIPTS ACT

ACT NO. 2137

SCOPE OF THE LAW

The WRL is a full and complete treatise on the subject. It covers all warehouses whether public
or private, bonded or not.

NATURE AND FUNCTIONS OF WAREHOUSE RECEIPT

A warehouse receipt, being a document of title to goods, is a proof of the (1) possession or
control of the goods, or (2) authorizing or purporting to authorize the possessor of the documents
to transfer or receive, either by indorsement or by delivery, good represented by such document.1

Warehouse receipts constituted as Equitable Mortgage2:

GENERAL RULE: The proper negotiation or assignment of a warehouse receipts carries

with it the transfer of title over the commodities covered by the receipt.

EXCEPTION: Where a negotiable warehouse receipt is indorsed and delivered to a creditor

as a collateral for loan, which would then be a species of security, referred to as equitable
mortgage.

[Read: BPI vs. Herridge, 47 PHIL 57 and Martinez vs. PNB 93 PHIL 765]

PURPOSE: The Warehouse Receipt Act [WRA] seeks:

(1) to encourage transactions on negotiable warehouse receipts, which may only be
issued by a warehouseman who is engaged in the business of receiving commodities on
deposit for storage.
(2) to regulate the status, rights, and liabilities of the parties in a warehousing contract;
(3) to protect those who in good faith and for value, acquire negotiable warehouse
receipts by negotiation;
(4) to render title to, and right of possession of, property stored in warehouses more
easily convertible;
(5) to place greater responsibility on the warehouseman.3

SECTION 1. Warehouse receipts may be issued by any warehouseman.

WAREHOUSEMAN: a person lawfully engaged in the business of storing goods for profit. 4 For one
to be considered engaged in the warehousing business, therefore, it is sufficient that he receives
goods owned by another for storage and collects fees in connection with the same. 5 However, the
1
Article 1636(1), New Civil Code
2
An equitable mortgage is one which, although it lacks the proper formalities of a mortgage, shows the intention of
the parties to make the property a security for a debt. Cachola vs CA, 208 SCRA 496
3
93 CJS 400
4
Section 58, WRA
5
CIR vs. Hawaiian-Philippine Co., 11 SCRA 256 [1964]
fact that the deposits were made for free does not detract the applicability of the Law, especially
when it appears that the warehouseman induced the depositor to deposit in order to promote his
business and to attract other depositors.6

SECTION 2. Warehouse receipts need not be in any particular form but every receipt must
embody within its written or printed terms:

(a) The location of the warehouse where the goods are stored;
(b) The date of issue of receipt;
(c) The consecutive number of receipt;
(d) A statement whether the goods received will be delivered to the bearer, a specified
person, or to specified person or his order;
(e) The rate of storage charges;
(f) A description of the goods or of the packages containing them;
(g) The signature of the warehouseman which may be made by his agent;
(h) If the receipt is issued for goods of which the warehouseman is the owner, either
solely or jointly or in common with others, the fact of ownership; and
(i) A statement of the amount of advances made and of liabilities incurred for which
the warehouseman claims a lien. If the precise amount of such advances made or
of such liabilities is, at the same time of the issue of the receipt, unknown to the
warehouseman or his agent who issues it, a statement of the fact that advances
have been made or liabilities incurred and the purpose thereof is sufficient.

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

WAREHOUSE RECEIPT: a written acknowledgment by a warehouseman that he has received and

holds certain goods therein described in stored for the person to whom it is issued.

A warehouse receipt is a bilateral contract. It imports that goods are in the hands of the
warehouseman and is a symbolical representation of the property itself. It is non-negotiable
within the meaning of the Negotiable Instruments Law7, even though the WRA declares it
negotiable.

Effect of Omission of Any Essential Terms

(1) Any omission of any of the requirements under Section 2 herein will not affect the
validity of the warehouse receipt. It will only render the warehouseman liable for
damages to those injured by his omission.
(2) Section 2 does not deal with the negotiability of warehouse receipt.

6
Gonzales vs. Go Tiong and Luzon Surety, 104 PHIL 492 [1958]
7
“An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed
by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must
be payable on demands or at a fixed or determinable future time; (d) Must be payable to order or bearer; and (e)
Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
certainty.” Section 1, NIL
 (3) The issuance of a warehouse receipt in the form provided by law is merely permissive
and not mandatory, in the sense that if the requirements are not observed, then the goods
delivered for storage become ordinary deposit.

SECTION 3. A warehouseman may insert in a receipt issued by him, any other terms and
conditions, provided that such terms and conditions shall not:

(a) Be contrary to the provisions of this Act;

(b) In any ways impair his obligation to exercise that degree of care in the safekeeping of
the goods entrusted to him which a reasonably careful man would exercise in regard to
similar goods of his own.

Additionally, the stipulations of the receipt must not be contrary to law, moral, good customs,
public order or public policy.8

SECTION 4. A receipt, in which it is stated that the goods received will be delivered to the
depositor or to any other specified person, is a non negotiable receipt.

Although Article 1511 of the NCC provides that a non-negotiable document of title can be
transferred “by delivery to the purchaser”, nevertheless to bind third parties, Article 1625
requires that it must be done through the execution of a public instrument.

Nevertheless: Both under Section 42 of the WRA and Article 1514 of the NCC, it is to notice the
warehouseman that the legally transfers ownership over the commodities to the assignee-buyer.

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

No provision shall be inserted in a negotiable instrument that it is non-negotiable.

Such provision, if inserted, shall be void.

SECTION 6. When more than one negotiable receipt is issued for the same goods, the word
“duplicate” shall be plainly placed upon the face of every such receipt, except the one first
issued. A warehouseman shall be liable for all damages caused by his failure to do so to any
one who purchased the subsequent receipt for value supposing it to be the original, even
though the purchase be after delivery of the goods by the warehouseman to the holder of the
original receipt.

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

8
Article 1306, NCC
 This section does not apply, however, to letters, memoranda, or written
acknowledgments of an informal character.

As instruments of credit, warehouse receipts play an important role in modern commerce and the
present day tendency is towards liberal construction of the law in favor of the bona fide holders
of such receipt. 9

This rule, however, has no application to actions against any party to the transaction other than
the warehouseman. The purchaser of a non-negotiable receipt not marked accordingly from one
who has stolen or found it cannot interpose the defense against the owner of the goods that the
receipt is negotiable and has given him the title to the goods, the warehouseman not being party
to the transaction.

SECTION 8. A warehouseman, in the absence of some lawful excuse provided by this Act, is
bound to deliver the goods upon demand made either by the holder of the receipt for the goods
or the depositor, if such demand is accompanied with:

(a) An offer to satisfy the warehouseman’s lien;

(b) An offer to surrender the receipt, if negotiable, with such indorsements as would be
necessary for the negotiation of the receipt; and
(c) A readiness and willingness to sign, when the goods are delivered, an
acknowledgment that they have been delivered, is such signature is requested by
the warehouseman.

In case the warehouseman refuses or fails to deliver the goods in compliance with a
demand by the holder or depositor so accompanied, the burden shall be upon the warehouse
to establish the existence of a lawful excuse for such refusal.

Principal Obligations of the Warehouseman

(1) To take care of the goods entrusted to his safekeeping;
(2) To deliver them to the holder of the receipt to the depositor, provided that the conditions
under Section 8 are fulfilled.

Offer to Satisfy Warehouseman’s Lien

A warehouseman having a lien valid against the person demanding the goods may refuse
to deliver the goods to him until his lien is satisfied. 10 Furthermore, the warehouseman will be
criminally liable of her delivers the goods without obtaining possession of such receipt.11

Lawful Excuses for Refusal to Deliver Goods

Even if the demand is accompanied by the three conditions under Section, the warehouseman
may still validly refuse delivery of goods covered by the warehouse receipt on some lawful
excuses provided in this act, to wit:
(1) Aa
9
Bank of PI vs. Herridge, 47 PHIL 57 [1924]
10
Section 31, WRA
11
The warehouseman may be punished for each offense by imprisonment of not exceeding one year or by a fine of
not exceeding two thousand pesos, or by both. Section 54, WRA
SECTION 9. A warehouseman is justified in delivering the goods subject to the provisions of
the three following sections, to one who is:

(a) The person lawfully entitled to the possession of the goods or his agent;
(b) A person who is either himself entitled to delivery by the terms of a non-negotiable
receipt issued for the goods, or who has a written authority from the person
entitled, either indorsed upon the receipt or written upon another paper.
(c) A person in possession of a negotiable receipt by the terms of which the goods are
deliverable to him or order, or bearer, or which had been indorsed to him or in
blank by the person to whom delivery was promised by the terms of the receipt or by
his mediate or immediate indorser.

Any delivery made to any person enumerated in Section 9 is justified. Hence, the warehouseman
shall not be liable for misdelivery.

Under subsection (b), an oral authority is sufficient as the section does not provide that the
warehouseman is justified in making delivery only on the written authority of the party entitled
to possession; and to give it that meaning would open the door for fraud by enable an
unscrupulous owner to repudiate his express verbal authorization and thereby reap the fruits of
his wrong.

Under subsection (c), in case where the warehouseman delivered the goods to one who acquired
the custody of the same through falsified delivery permit, it was held that the warehouseman
cannot sue for value the goods unless he has been sued by the depositor or consignee who are the
real parties in interest, not the warehouseman.12

SECTION 10. Where a warehouseman delivers the goods to one who is not in fact lawfully
entitled to the possession of them, the warehouseman shall be liable as for conversion to all
having a right of property or possession in the goods if he delivered the goods than as
authorized by subdivisions (b) and (c) of the preceding section, and though he delivered the
goods as authorized by said subdivisions, he shall so be liable, if prior to such delivery he had
either:

(a) Been requested, by or on behalf of the person lawfully entitled to a right of property
or possession in the goods, not to make such delivery; or
(b) Had information that the delivery about to be made was to one not lawfully entitled
to the possession of the goods.

Conversion: the unauthorized assumption and exercise of the right of ownership over goods
belonging to another to the alteration of their condition or the exclusion of the owner’s rights.

SECTION 11. Except as provided in section thirty-six13, where a warehouseman delivers

goods for which he had issued a negotiable receipt, the negotiation of which would transfer
12
Consolidated Terminals, Inc. vs. Artex Dev. Co., 63 SCRA 1975 [1975]
the right of possession of the goods, and fails to take up and cancel the receipt, he shall be
liable to anyone who purchases for value in good faith, whether such purchaser acquired
titled to the receipt before or after the delivery of the goods to the warehouseman.

SECTION 12. Except as provided under section thirty-six, where a warehouseman delivers
part of the goods for which he had issued a negotiable receipt and fails either to take up and
cancel such receipt or to take plainly upon it a statement of what goods or packages have been
delivered, he shall be liable to anyone who purchases for value and in good faith such receipt,
for failure to deliver all the goods specified in the receipt whether such purchaser acquired
title to the receipt before or after the delivery of any portion of the goods to the
warehouseman.

Sections 11 and 12 are not applicable to non-negotiable warehouse receipts because the
warehouseman may make delivery without requiring their surrender and cancellation.

Note that under Section 11, the negotiable receipt must be one “the negotiation of which would
have transferred the right to possession of the goods.” So, the warehouseman who delivers goods
to the real owner without taking up and cancelling is not liable to the purchaser fro value and in
good faith of such receipt from a thief for failure to deliver goods to him as the thief has no title
to the goods.

SECTION 13. The alteration of a receipt shall not excuse the warehouseman who issued it
from any liability if such alteration was:

(a) Immaterial
(b) Authorized;
(c) Made without fraudulent intent.

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

Material and fraudulent alternation of a receipt shall not excuse the warehouseman
who issued it from liability to deliver according to the terms of the receipt as originally issued,
the goods for which it was issued, but shall excuse him from any other liability to the person
who made the alteration and to any person who took notice of the alteration. Any purchasers
of the receipt for value shall acquire the same rights as the warehouseman which such
purchaser would have acquired if the receipt had not been altered at the time of the purchase.

13
“After goods have been lawfully sold to satisfy a warehouseman’s lien, or have been lawfully disposed of because
of their perishable or hazardous nature, the warehouseman shall not thereafter be liable for failure to deliver the
goods to the depositor or owner of the goods, or to a holder of the receipt given for the goods, when they were
deposited, even if such receipt be negotiable.” Section 36, WRA