WAREHOUSE RECEIPTS LAW

1. 1. Warehouse a building or place where goods are

deposited and stored for profit.
1. 2. Warehouseman person lawfully engaged in the
business of storing goods for profit.
Only a warehouseman may issue warehouse receipts.
1. 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.
1. 4. Non-negotiable Receipt receipt deliverable to a
specified person.
1. 5. Negotiable Receipt receipt deliverable to order
or to bearer.
1. 6. Essential Terms which MUST be embodied in a
Warehouse Receipt:
1. a. location of the warehouse
2. b. date of the issue of the receipt
3. c. consecutive number of the receipt
4. d. statement whether the goods received will
be delivered to bearer, or a specified person, or
his order
5. e. rate of storage charges
6. f. description of the goods or packages
containing them for identification purposes
7. g. signature of the warehouseman
8. h. statement of the amount of advances
made and of liabilities incurred for which the
warehouseman claims as lien
1. 7. Effect of omission of any of the essential terms:
1. a. The validity of the warehouse receipt is
not affected.
2. b. The warehouseman shall be held liable for
damages to those injured by his omission.
3. c. The negotiability of the warehouse receipt
is not affected.
4. 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.
1. 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
1. 9. Marks to be made on a warehouse receipt:
1. 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.
2. 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.
1. 10. Warranties of a warehouseman as to duplicate
receipts:
1. a. The duplicate is an accurate copy of the
original receipt.
2. b. Such original receipt is uncancelled at the
date of the issue of the duplicate.
1. 11. Effects of alteration on the liability of the
warehouseman:
1. 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.
2. b. If the alteration is MATERIAL but
AUTHORIZED, the warehouseman is liable
according to the terms of the altered receipt.
3. c. If the alteration is MATERIAL,
UNAUTHORIZED but INNOCENTLY MADE, the
warehouseman is liable on the altered receipt
according to its original tenor.
4. 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. 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.
2. 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.
3. 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.
1. 13. Principal Obligations of a Warehouseman:
1. 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.
1. 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. 14. Persons to whom goods must be delivered:
1. 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. d. to the purchaser where perishable or hazardous
goods are sold at private or public sale
1. B. If goods are covered by a non-negotiable receipt:
1. a. a person entitled to the delivery by the
terms of the receipt, or
2. b. one who has written authority from letter
a
1. C. If goods are covered by a negotiable receipt, a
person in possession of the receipt, the terms of which
the goods are deliverable:
1. a. to him or order
2. b. to bearer
3. c. indorsed to him
4. d. indorsed in blank by the person whom
delivery was promised
1. 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:
1. a. the person does not fall under letter B or C above;
or
2. 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?
1. 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.
2. 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.
1. 18. Lawful excuses for refusal to deliver goods:
1. 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
(2) from the warehousemans lien
1. b. If someone other than the depositor or person
claiming under the depositor has 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.
1. 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.
1. 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.
1. 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.
1. 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.
1. 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.
1. 21. Effect of Co-mingling of Goods:
1. a. The different owners become co-owners of
the whole mass.
2. 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.
1. 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 3
rd
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. a. all lawful charges for storage and preservation of
the goods
2. b. all lawful claims for money advances, interest,
insurance, transportation, labor, weighing, cooperating
and other charges and expenses in relation to such goods
3. 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:
1. a. goods belonging to the depositor who is liable to
the warehouseman as debtor whenever such goods are
deposited and
2. 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?
1. a. by refusing to deliver the goods until the lien is
satisfied
2. b. by causing the extrajudicial sale of the property
and applying the proceeds to the value of the lien
3. 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?
1. a. when the warehouseman voluntarily surrenders
possession of the goods without requiring payment of his
lien; or
2. b. when the warehouseman wrongfully refuses to
deliver the goods when a demand is made with which he
is bound to comply
1. 24. Negotiation and Transfer of Receipts
How do we negotiate a receipt deliverable to order?
1. a. by indorsing it in blank thereby making it
deliverable to bearer or
2. 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.
Who may negotiate warehouse receipts?
1. a. the owner of the receipt, or
2. 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:
1. a. the title of the person negotiating the receipt over
the goods covered by the receipt
2. b. the title of the person (depositor or owner) to
whose order by the terms of the receipt the goods were
to be delivered
3. 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.
Rights of a person to whom a non negotiable receipt has
been transferred:
1. a. the title to the goods as against the transferor
2. b. the right to notify the warehouseman of the
transfer thereof and
3. 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.
Rights of a person to whom a negotiable receipt has been
transferred, not indorsed:
1. a. the right to the goods as against the transferor
2. 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.
Warranties of a person negotiating or transferring a
receipt:
1. a. the receipt is genuine
2. b. he has a legal right to negotiate or transfer it
3. c. he has knowledge that would impair the validity or
worth of the receipt and
4. 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 better than that
which the party who
negotiated the instrument
to him had.
An indorsee even if a holder in
due course obtains 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.
GENERAL BONDED WAREHOUSE LAW
Any warehouseman receiving commodities for
(a) storage; (b) milling; (c) co-mingling must:
1. a. obtain prior license from the Bureau of Commerce
2. b. file a bond in an amount equivalent to 33 1/3 % of
the capacity of the warehouse against which bond
depositors may sue directly
3. c. open to the public, no discrimination allowed
4. d. liable for double market value should he accept
goods in excess of the capacity of warehouse if goods are
damaged or destroyed
Note: for palay and corn license, a bond with the
National Grains Authority is required; also an insurance
cover is required.