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 The goods cannot be attached or levied under
creditor of the transferor or by a notification to an execution unless the receipt be first
such warehouseman of the subsequent sale of surrendered to the warehouseman or its
the goods. 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 still

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

If a warehouse receipt, payable to bearer, is

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

A holder in due course may be able to obtain a An indorsee even if a holder in due course
title better than that which the party who obtains only such title as the person negotiating
negotiated the instrument to him had. has over the goods.

The indorsement of a negotiable instrument The indorsement of a warehouse receipt

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.
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.