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 warehouseman’s 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 warehouseman’s 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 warehouseman’s 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
3rd person will be prejudiced so the goods may now be attached, levied upon, or that the
vendor’s lien or the right of stoppage in transit be exercised.
 1. 23. Warehouseman’s Lien

 Extent of Warehouseman’s 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 The goods cannot be attached or levied
transferor or by a notification to such under an execution unless the receipt be
warehouseman of the subsequent sale of first surrendered to the warehouseman
the goods. 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 owner’s 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 warehouse receipt is altered, it is

When a negotiable instrument is altered still valid but it may be enforced only in
deliberately, it becomes null and void. accordance with its original tenor.

If a warehouse receipt, payable to

If a negotiable instrument is originally bearer, is indorsed specially, it will be
payable to bearer, it will always remain converted into a receipt deliverable to
so payable regardless of the way it is order and can only be negotiated further
indorsed, whether specially or in blank. by indorsement and delivery.

A holder in due course may be able to

obtain a title better than that which the An indorsee even if a holder in due
party who negotiated the instrument to course obtains only such title as the
him had. 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.