LOPEZ, JUNE KARLA P.

1993
WAREHOUSE RECEIPTS LAW

PROBLEM:

A purchased from S 150 cavans of palay on credit. A deposited the palay in W’s warehouse. W
issued to A a negotiable warehouse receipt in the name of A. Thereafter, A negotiated the receipt
to B who purchased the said receipt for value in good faith.

1) Who has a better right to the deposit, S, the unpaid vendor or B, the purchaser of the
receipt for value and in good faith? Why?
2) When can the warehouseman be obliged to deliver the palay to A?

SUGGESTED ANSWER:

1) B has a better right than S. According to Section 49 of the Warehouse Receipts Law,
where a negotiable receipt has been issued for goods, no seller’s lien or right of stoppage
in transitu shall defeat the rights of any purchaser for value in good faith to whom such
receipt has been negotiated, whether such negotiation be prior or subsequent to the
notification to the warehouseman who issued such receipt of the seller’s claim to a lien or
right of stoppage in transitu. Thus, the right to the goods of the unpaid seller, S, was
defeated by the right of the purchaser of the receipt for value and in good faith, B.

2) The warehouseman can be obliged to deliver the palay to A if B negotiated back the receipt
to A. In that case, A becomes a holder again of the receipt, and A can comply with Section
of the Warehouse Receipts Law.