Comments and Cases of Credit transactions

Atty. Hector De Leon

The Warehouse Receipts Law

Act no. 2137 as amended
Secs. 1-61
Scope:
It covers warehouses whether public or
private, bonded or not. Thus it has been
held to be applicable to a warehouseman
licensed under ACT no. 8393 ( as amended
by R.A. No. 247, known as the General
Bonded Warehouse Act , of special
application to those engaged in the business
of receiving commodities for storage
When Civil Code Applicable:
The act applies to warehouse receipts issued
by a warehouseman as defined in section
58(a) of the act, while the civil code refers to
the other cases where the receipts are not
issued by a warehouseman as defined in this
section.
Purposes of the Law:
To regulate the status, rights, and liabilities
of the parties in the warehousing contract;
To protect those who, in good faith and for
value acquire negotiable warehouse receipts
by negotiation;
To facilitate the use of warehouse receipts as
documents of title;
To render the title to, and right of
possession of, property stored
warehouses more easily convertible; and
In order to accomplish these, to place a
much greater responsibility on the
warehouseman (93 C.J.S. 400)
I. The issue of Warehouse Receipts
Section 1. Person who may issue receipts –
warehouse receipts may be issued by any
WAREHOUSEMAN.
WAREHOUSEMAN – a person lawfully
engaged in the business of storing goods for
profit. (Section 58 a)
Note: if a warehouse receipts was issued by
someone else other than a warehouseman, it
would not be considered as the former
receipt except if that person was authorized
to act as the agent of the warehouseman.
Warehouse – the law does not define what
a warehouse is. As used, however, in the act,
warehouse means the building or place
where the goods are deposited and stored
for profit.
Section 2. Form of receipts; essential
terms. – Warehouse receipts need not
be in any particular form but every
such 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 the
receipt
c. The consecutive number of
the receipt
d. A statement whether the
goods received will be
delivered to the bearer, to a
specified person or to a
specified person or his
in order;
e. The rate of storage charges
f. A description of the goods
or package containing them
g. The signature of the
warehouseman which may
be made by his authorized
agent
h. If the receipts is issued for
goods of which the
warehouseman is owner,
either solely or jointly or in
common with others, the
fact of such ownership and;

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 1
 Comments and Cases of Credit transactions
Atty. Hector De Leon

i. A statement of the amount A warehouse receipt is not negotiable

of advances made of instrument within the meaning of
liabilities incurred for negotiable instrument law in the technical
which the warehouseman sense that a bill of exchange or promissory
claim as lien. If the precise note is negotiable , even though the
amount of such advances warehouse receipts act declares it
made or of such liabilities negotiable. Negotiability is provided for by
incurred is, at the same time the act.
of the issue of the receipt,
unknown to the
warehouseman or to his FORM AND CONTENTS:
agent who issues it, a
statement of the fact that (SEE ENUMERATED ITEMS IN SEC. 2)
advances have been made or
liabilities incurred and the EFFECT OF OMMISSION OF ANY
purpose thereof is ESSENTIAL TERMS.
sufficient.
NOTE: the terms prescribed in the Section
A warehouseman shall be liable to 2 are required for the protection of the
any person injured thereby for all depositor and those succeeding to his right.
damages caused by the omission from
a negotiable receipt of any of the Validity of receipt not affected – the
terms herein required. omission of any of the requirements will not
affect the validity of the warehouse receipt.
DEFINITION AND NATURE OF Warehouseman liable for damages – it will
WAREHOUSE RECEIPT only render the warehouseman liable for
damages to those injured by his omission.
The act does not define the warehouse (Wordson vs. Davenport Mill and Elevator
receipt. Co. , 13 P. (2d) 478)
It has been defined as written Negotiability of receipt not affected –
acknowledgment by a warehouseman that neither is the negotiability affected. Section
he has received and holds certain goods 2 does not deal with negotiability of
therein describe in store for the person to warehouse receipts.
whom it is issued. (Vanett vs. Reilly- Hertz Contract converted to ordinary deposit –
automobile co., 173 N.W. 466) the issuance of a warehouse receipt in the
It is a simple written contract between the form provided by law is merely permissive
owner of the goods and the warehouseman and directory and not mandatory in the
to pay the compensation for that service. sense that if the requirements are not
( Hale vs. Milwaukee Dock Co. , 29 Wis. observed, then the goods are delivered for
482, 67 C.J. 463.) the storage become ordinary deposits.
A warehouse receipt is a bilateral contract. – (Gonzales vs. Go Ting and Luzon Surety Co.,
it imports that goods are in the hands of the 104 PHIL. 492{1958})
warehouseman and is symbolical Section 3. Form of Receipts. – What terms
representation of the property itself. may be inserted. – A warehouseman may
insert in a receipt, issued by him, any other

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 2
 Comments and Cases of Credit transactions
Atty. Hector De Leon

terms and conditions provided that such
terms and conditions shall not:
Be contrary to the provision of this act.
In any wise impair his obligation to exercise
that degree of care in the safekeeping of the
goods entrusted to him which reasonably
careful man would exercise in regard to
similar goods of his own.
Note: the stipulations must not be contrary
to law, morals, good customs, public order
or public policy (ART. 1306, Civil Code)
TERMS THAT CAN NOT BE INCLUDED IN
A WAREHOUSE RECEIPT:
1. Exemption from liability for
misdelivery – under subsection
(a), a warehouseman is not
authorized to insert any term
exempting him from liability for
misdelivery of goods because such
would be against in section 10 of the
act or for not giving statutory notice
in case of sale of goods because such
would be against in section 10 of the
act or for not giving statutory notice
in case of sale of goods because such
would be contrary to section 33 and
34.
2. Exemption from liability for
negligence – under subsection (b),
the warehouseman can not insert
any term which would relieve him
from liability of his own negligence
such as “for account and the risk of
the depositor.”
Note: the law requires the warehouseman to
exercise the degree of care in safekeeping of
the goods entrusted to him which a
reasonable careful man would exercise in
regard to similar goods of his own.
Section 4 and 5 refers to the difference
between negotiable and non negotiable
receipt
Section 4. Non Negotiable receipt – a
receipt 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.
Section 5. Negotiable Receipt – A
receipt which it is stated that the
goods received will be delivered to the
bearer or to the order of any person
named in such receipt is a negotiable
receipt.
No provision shall be inserted in a
negotiable receipt that it is non
negotiable. Such provision , If
inserted shall be void.
Note: The word negotiable is used only
indicating that in the passage of warehouse
receipts through the channels of commerce,
the law regards the property which the
describe as following them and gives to their
regular transfer by indorsement the effect of
manual delivery of the things specified in
them. (Vanett vs. Reilly- Hertz automobile
co., 173 N.W. 466)
Reason why it is not a negotiable
instrument: because it does not comply with
section 1b of act no. 2031 (negotiable
instrument law) which requires
unconditional promise or order to pay sum
or certain in money.
Sec. 6. Duplicate receipts must be so
marked. — 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 first

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 3
 Comments and Cases of Credit transactions
Atty. Hector De Leon

one issued. A warehouseman shall be In case of non negotiable receipts, the law
liable for all damages caused by his imposes upon the warehouseman the duty
failure so to do to any one who to mark them ”non negotiable” provided the
purchased the subsequent receipt for holder of such unmarked receipt purchased
value supposing it to be an original, it for value supposing it to be negotiable.
even though the purchase be after the
delivery of the goods by the II — OBLIGATIONS AND RIGHTS OF
warehouseman to the holder of the WAREHOUSEMEN UPON THEIR
original receipt. RECEIPTS

Sec. 7. Failure to mark "non- Sec. 8. Obligation of warehousemen

negotiable." — A non-negotiable
receipt shall have plainly placed upon
its 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.
This section shall not apply, however, to
letters, memoranda, or written
acknowledgment of an informal character.
Application of section 6 and 7. The former
refers only to negotiable instrument law
while the latter refers to non negotiable
instrument receipts. ( see section 52, for
criminal liability of warehouseman)
EFFECT OF FAILURE TO
“NEGOTIABLE OR
NEGOTIABLE”
The word “negotiable” usually is written or
printed on the face of a negotiable
warehouse receipt and the failure to do so
mark it does not render it non negotiable if
it contains words of negotiability. (section 5)
to deliver. — A warehouseman, in the
absence of some lawful excuse
provided by this Act, is bound to
deliver the goods upon a demand
made either by the holder of a receipt
for the goods or by the depositor; if
such demand is accompanied with:
(a) An offer to satisfy the
warehouseman's lien1;
(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, if 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
MARK holder or depositor so accompanied,
NON the burden shall be upon the
warehouseman to establish the
existence of a lawful excuse for such
refusal.
Principal Obligation of the
Warehouseman:

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 4
 Comments and Cases of Credit transactions
Atty. Hector De Leon

1. To take care of the goods entrusted indorser.

to his safekeeping (SECTION 21)
2. To deliver them to the holder of the Person to whom the Goods must
receipt or the depositor provided the delievered:
conditions under section 8 are 1. The person lawfully entitled to the
fulfilled. possession of the goods, or his agent
2. Person entitled to deliver under a
Lawful Exercise for Refusal to Deliver negotiable receipt or with written
Goods: authority
3. Person in possession of a negotiable
A warehouseman may still refuse delivery of receipt.
goods covered by warehouse receipt on
some lawful excuses provided in this act Sec. 10. Warehouseman's liability for
(See section 10, 16, 18,21,31 and 36). But the misdelivery. — Where a
existence of a lawful excuse for such refusal warehouseman delivers the goods to
is an affirmative defense which the one who is not in fact lawfully entitled
warehouseman must prove. (See section 8, to the possession of them, the
paragraph 2) warehouseman shall be liable as for
conversion to all having a right of
Sec. 9. Justification of warehouseman property or possession in the goods if
in delivering. — A warehouseman is he delivered the goods otherwise than
justified in delivering the goods, as authorized by subdivisions (b) and
subject to the provisions of the three (c) of the preceding section, and
following sections, to one who is: though he delivered the goods as
authorized by said subdivisions, he
(a) The person lawfully entitled to the shall be so liable, if prior to such
possession of the goods, or his agent; delivery he had either:
(a) Been requested, by or on behalf of
(b) A person who is either himself the person lawfully entitled to a right
entitled to delivery by the terms of a of property or possession in the
non-negotiable receipt issued for the goods, not to make such deliver; or
goods, or who has written authority
from the person so entitled either (b) Had information that the delivery
indorsed upon the receipt or written about to be made was to one not
upon another paper; or lawfully entitled to the possession of
the goods.
(c) A person in possession of a
negotiable receipt by the terms of Liability of Warehouseman for
which the goods are deliverable to Misdelivery:
him or order, or to bearer, or which • Liability similar to a bank
has been indorsed to him or in blank paying forged check.
by the person to whom delivery was • Liability as for conversion2.
promised by the terms of the receipt
or by his mediate or immediate
Sec. 11. Negotiable receipt must be
4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 5
 Comments and Cases of Credit transactions
Atty. Hector De Leon

cancelled when goods delivered. — (a) Immaterial,

Except as in section thirty-six, where
a warehouseman delivers goods for (b) Authorized, or
which he had issued a negotiable
receipt, the negotiation of which (c) Made without fraudulent intent.
would transfer the right to the
possession of the goods, and fails to If the alteration was authorized, the
take up and cancel the receipt, he warehouseman shall be liable
shall be liable to any one who according to the terms of the receipt
purchases for value in good faith such as altered. If the alteration was
receipt, for failure to deliver the unauthorized but made without
goods to him, whether such fraudulent intent, the warehouseman
purchaser acquired title to the receipt shall be liable according to the terms
before or after the delivery of the of the receipt as they were before
goods by the warehouseman. alteration.

Sec. 12. Negotiable receipts must be Material and fraudulent alteration of

cancelled or marked when part of a receipt shall not excuse the
goods delivered. — Except as provided warehouseman who issued it from
in section thirty-six, where a liability to deliver according to the
warehouseman delivers part of the terms of the receipt as originally
goods for which he had issued a issued, the goods for which it was
negotiable receipt and fails either to issued but shall excuse him from any
take up and cancel such receipt or to other liability to the person who made
place plainly upon it a statement of the alteration and to any person who
what goods or packages have been took with notice of the alteration.
delivered, he shall be liable to any one Any purchaser of the receipt for value
who purchases for value in good faith without notice of the alteration shall
such receipt, for failure to deliver all acquire the same rights against the
the goods specified in the receipt, warehouseman which such purchaser
whether such purchaser acquired title would have acquired if the receipt had
to the receipt before or after the not been altered at the time of
delivery of any portion of the goods by purchase.
the warehouseman.

Note: The above provision is not

applicable to non negotiable receipt s
because the warehouseman may Effects of Alteration on Liability of a
make delivery without requiring their Warehouseman:
surrender and cancellation.
1. Alteration immaterial – If the
Sec. 13. Altered receipts. — The alteration immaterial (the tenor of
alteration of a receipt shall not excuse the receipt is not changed like the
the warehouseman who issued it from substitution of the real name of the
any liability if such alteration was: party), whether fraudulent or not,

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 6
 Comments and Cases of Credit transactions
Atty. Hector De Leon

the warehouseman is liable on the payment of the warehouseman's

altered receipt according to its
original tenor.
2. Alteration material – if the alteration
is material (the tenor of the receipt is
changed like the erasure of the name
of the party and the insertion of
another), but authorized the
warehouseman is liable according to
the terms of the receipt as altered
3. Material alteration innocently made
– If the alteration is material but
innocently made through
unauthorized, the warehouseman is
liable on the altered receipt
according to its original tenor.
4. Material alteration through
fraudulently. – If the alteration is
material and fraudulently made, the
warehouseman is liable according to
the original tenor of the receipt to a
purchaser of the receipt for value
without notice and even the alterer
and subsequent purchasers with
notice except as regard to the last
two, the warehouseman’s liability is
limited only to delivery as he is
excused from any liability.
Sec. 14. Lost or destroyed receipts. —
Where a negotiable receipt has been
lost or destroyed, a court of
competent jurisdiction may order the
delivery of the goods upon
satisfactory proof of such loss or
destruction and upon the giving of a
bond with sufficient sureties to be
approved by the court to protect the
warehouseman from any liability or
expense, which he or any person
injured by such delivery may incur by
reason of the original receipt
remaining outstanding. The court
may also in its discretion order the
reasonable costs and counsel fees.
The delivery of the goods under an
order of the court as provided in this
section, shall not relieve the
warehouseman from liability to a
person to whom the negotiable
receipt has been or shall be
negotiated for value without notice of
the proceedings or of the delivery of
the goods.
Liability of a warehouseman in case
of Lost or Destroyed Receipt:
Under section 8 and 11, the warehouseman
is not liable for nondelivery without the
surrender of the receipt. Indeed even if the
receipt is claimed to have been lost or
destroyed, it is essential that the court shall
pass upon the question and make sure the
receipt is really lost or destroyed.
Under section 14, a competent court may
order the delivery of the goods only:
1. Upon proof of the loss or destruction
of the receipt
2. Upon giving of a bond with sufficient
sureties to be approved by the court.
Note: by virtue of the second paragraph, the
warehouseman is still liable to a holder of
the receipt for value without notice since the
warehouseman can secure himself on the
bond given.
Sec. 15. Effect of duplicate receipts. —
A receipt upon the face of which the
word "duplicate" is plainly placed is a
representation and warranty by the
warehouseman that such receipt is an
accurate copy of an original receipt
properly issued and uncanceled at the

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 7
 Comments and Cases of Credit transactions
Atty. Hector De Leon

date of the issue of the duplicate, but 2. warehouseman lien

shall impose upon him no other
liability. Sec. 17. Interpleader of adverse
claimants. — If more than one person
Liability of a warehouseman as to duplicate: claims the title or possession of the
goods, the warehouseman may, either
General Rule: When more than one receipt as a defense to an action brought
is issued for the same goods, the word against him for non-delivery of the
duplicate must be plainly placed by the goods or as an original suit,
warehouseman upon the face of every such whichever is appropriate, require all
receipt except the one first issued. known claimants to interplead.

The warehouseman warrants that: Sec. 18. Warehouseman has

reasonable time to determine validity
1. duplicate copy is an accurate copy of of claims. — If someone other than
the original receipt; and the depositor or person claiming
2. Such original receipt is uncancelled under him has a claim to the title or
at the date of the issue of the possession of goods, and the
duplicate. warehouseman has information of
such claim, the warehouseman shall
be excused from liability for refusing
Sec. 16. Warehouseman cannot set up to deliver the goods, either to the
title in himself . — No title or right to depositor or person claiming under
the possession of the goods, on the him or to the adverse claimant until
part of the warehouseman, unless the warehouseman has had a
such title or right is derived directly reasonable time to ascertain the
or indirectly from a transfer made by validity of the adverse claim or to
the depositor at the time of or bring legal proceedings to compel
subsequent to the deposit for storage, claimants to interplead.
or from the warehouseman's lien,
shall excuse the warehouseman from Duty of the warehouseman where there are
liability for refusing to deliver the several claimants:
goods according to the terms of the
receipt. The warehouseman must determine within
the reasonable time the validity of the
The warehouseman cannot refuse to deliver conflicting claims (sec 18) and to deliver to
the goods on the ground that he has the person whom he finds is entitled to the
acquired title or right to the possession of possession of goods.
the same unless such title or right is
derived: However, he is not excused from liability of
mistake.
1. derived directly or indirectly from a
transfer made by the depositor at the For the protection of the warehouseman, he
time of deposit or subsequent must bring the complaint in interpleader
thereto

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 8
 Comments and Cases of Credit transactions
Atty. Hector De Leon

and require the different claimants to to deliver the goods (section 16). Neither
litigate among themselves. (sec. 17) can the warehouseman, as depositary for
hire, set up an adverse title in another as an
Note: in short the warehouseman will be excuse for his failure to deliver property to
relived from liability in delivering the goods his bailor on demand.
to the person whom the court finds to have a
better right. Sec. 20. Liability for non-existence or
misdescription of goods. — A
Liability of a warehouseman to rightful warehouseman shall be liable to the
claimant: holder of a receipt for damages
caused by the non-existence of the
Where a warehouseman does not compel goods or by the failure of the goods to
interpleader in case requiring it, he is liable correspond with the description
for refusal to deliver to the rightful thereof in the receipt at the time of its
claimant, and where he neither interpleads issue. If, however, the goods are
nor investigates, he will, after a lapse of a described in a receipt merely by a
reasonable time, be held guilty of statement of marks or labels upon
conversion as of the date of original them or upon packages containing
demands for the goods. them or by a statement that the goods
are said to be goods of a certain kind
What constitutes a reasonable time? Is one or that the packages containing the
of fact for determination in accordance with goods are said to contain goods of a
the circumstances of the particular case. certain kind or by words of like
purport, such statements, if true,
Section 18 does not apply to cases where the shall not make liable the
warehouseman himself make a claim to the warehouseman issuing the receipt,
goods although the goods are not of the kind
which the marks or labels upon them
Sec. 19. Adverse title is no defense indicate or of the kind they were said
except as above provided. — Except as to be by the depositor.
provided in the two preceding
sections and in sections nine and Liability of a warehouseman for non
thirty-six, no right or title of a third existence or misdescription of goods:
person shall be a defense to an action
brought by the depositor or person General Rule: The warehouseman is under
claiming under him against the the obligation to deliver the identical
warehouseman for failure to deliver property stored with him and if he fails to
the goods according to the terms of do so, he is liable directly to the owner. (93
the receipt. C.J.S. 472)

Adverse Title of Third Person is not a As against a bonafide purchaser of a

defense for Refusal to deliver warehouseman receipt, the warehouseman
is stopped, whether the receipt is negotiable
The warehouseman cannot set up title for or not, to deny that he has received the
himself as an excuse for his failure or refusal goods described in it.

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 9
 Comments and Cases of Credit transactions
Atty. Hector De Leon

But if the description consists merely of

marks or labels upon the goods or upon the Sec. 22. Goods must be kept separate.
packages containing them, etc. The — Except as provided in the following
warehouseman is not liable even if the section, a warehouseman shall keep
goods are not of the kind as indicated in the the goods so far separate from goods
marks or label. of other depositors and from other
goods of the same depositor for which
Sec. 21. Liability for care of goods. — a separate receipt has been issued, as
A warehouseman shall be liable for to permit at all times the
any loss or injury to the goods caused identification and redelivery of the
by his failure to exercise such care in goods deposited.
regard to them as reasonably careful
owner of similar goods would Sec. 23. Fungible goods may be
exercise, but he shall not be liable, in commingled if warehouseman
the absence of an agreement to the authorized. — If authorized by
contrary, for any loss or injury to the agreement or by custom, a
goods which could not have been warehouseman may mingle fungible
avoided by the exercise of such care. goods with other goods of the same
kind and grade. In such case, the
Liability of warehouseman for loss due to various depositors of the mingled
lack of care. goods shall own the entire mass in
common and each depositor shall be
The warehouseman is required to exercise entitled to such portion thereof as the
ordinary or reasonable care in the custody amount deposited by him bears to the
of the goods, that is, the care a reasonably whole.
careful owner would exercise over similar
goods of his own. Sec. 24. Liability of warehouseman to
It is also known as the diligence of a of depositors of commingled goods. —
father of the family. The warehouseman shall be severally
liable to each depositor for the care
In the absence of any agreement to the and redelivery of his share of such
contrary, the warehouseman is not liable for mass to the same extent and under
any loss or injury of the goods which could the same circumstances as if the
not have been avoided by the exercise of goods had been kept separate.
such care. Commingling of deposited goods:
Commingling of the deposited goods:
Of course, what constitutes ordinary and
reasonable care depends upon the General Rule: A warehouseman may not
circumstances such as the character and mingle goods belonging to depositor (sec
value of the property and the character and 22). In the case of fungible goods (see
location of the warehouse. (93, C.J.S. 452) section 58) like rice sugar, etc., the
warehouseman may mingle them with the
Note: Stipulation of limiting its liability is goods of the same kind and grade provided
VOID (Sec 3) that he is authorized by agreement or

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 10
 Comments and Cases of Credit transactions
Atty. Hector De Leon

custom. (sec 23). In that case, the different The warehouseman has the direct obligation
owners became co-owners of the whole to hold possession of the goods for the
mass. original owner or for the person to whom
the negotiable receipt of title has been duly
Intention of sec 22 and 23: negotiated. (See section 41). While in
possession of such warehouseman, the
It is for the benefit of the holders of the goods cannot be attached or levied upon
receipts and not for the benefit of the under an execution unless:
warehouseman. 1. document is first surrendered
2. its negotiation is enjoined
Remember: Authorization from the owners 3. the document is impounded by the
is a must! court

Article 1976 of the NCC, “unless there is Delivery of the goods covered by
stipulation to the contrary, the depositary outstanding negotiable receipt.
may commingle grain or other articles of the
same kind and quality.” The warehouseman can not be compelled to
deliver up the possession of the goods until
the receipt is surrendered to him or
Sec. 25. Attachment or levy upon impounded by the court.
goods for which a negotiable receipt
has been issued. — If goods are This prohibition is for the protection of the
delivered to a warehouseman by the warehouseman since he could be made
owner or by a person whose act in liable to a subsequent purchaser for value in
conveying the title to them to a good faith. (similar to Art. 1519 of Civil
purchaser in good faith for value Code)
would bind the owner, and a
negotiable receipt is issued for them, Note: applicable only to owner
they can not thereafter, while in the
possession of the warehouseman, be Sec. 26. Creditor's remedies to reach
attached by garnishment or negotiable receipts. — A creditor
otherwise, or be levied upon under an whose debtor is the owner of a
execution unless the receipt be first negotiable receipt shall be entitled to
surrendered to the warehouseman or such aid from courts of appropriate
its negotiation enjoined. The jurisdiction, by injunction and
warehouseman shall in no case be otherwise, in attaching such receipt
compelled to deliver up the actual or in satisfying the claim by means
possession of the goods until the thereof as is allowed at law or in
receipt is surrendered to him or equity in these islands in regard to
impounded by the court. property which can not readily be
attached or levied upon by ordinary
legal process.
Attachment or Levy of Negotiable Receipt:
Remedies of creditor or owner of negotiable
receipt.

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 11
 Comments and Cases of Credit transactions
Atty. Hector De Leon

any time by the person who is liable

This article expressly gives the court full
power to aid by injunction and otherwise a
creditor seeking to get negotiable receipts
covering such goods.
Sec. 27. What claims are included in the
warehouseman's lien. — Subject to the
provisions of section thirty,
warehouseman shall have a lien on goods
deposited or on the proceeds thereof in his
hands, for all lawful charges for storage and
preservation of the goods; also for all lawful
claims for money advanced, interest,
insurance, transportation, labor, weighing,
coopering and other charges and expenses
in relation to such goods, also for all
reasonable charges and expenses for notice,
and advertisements of sale, and for sale of
the goods where default had been made in
satisfying the warehouseman's lien.
Extent of warehouseman’s Lien:
The warehouseman lien over the goods
deposited with him is his security, just like
pledge or motgage, for the payment of the
charges, money advanced and other
expenses enumerated in section 27.
Sec. 28. Against what property the
lien may be enforced. — Subject to the
provisions of section thirty, a
warehouseman's lien may be
enforced:
(a) Against all goods, whenever
deposited, belonging to the person
who is liable as debtor for the claims
in regard to which the lien is asserted,
and
as debtor for the claims in regard to
which the lien is asserted if such
person had been so entrusted with the
possession of goods that a pledge of
the same by him at the time of the
deposit to one who took the goods in
good faith for value would have been
a valid.
Goods subject to Lien:
1. Goods belonging to depositor or his
principal
Under section 28, the
warehouseman may enforce his lien
a. Against the goods of the
depositor who is liable to the
warehouseman as debtor
whenever such goods are
deposited
b. Against the goods of other
persons stored by the depositor
who is liable to the
warehouseman as debtor with
authority to make a valid pledge.
2. Goods stored in fraud of true owners
rights
There is nothing in this act giving a
warehouseman a lien on goods
belonging to another and stored by
stranger in fraud of the true owners
rights.
Sec. 29. How the lien may be lost. — A
warehouseman loses his lien upon
goods:
(a) By surrendering possession
thereof, or

(b) Against all goods belonging to (b) By refusing to deliver the goods
others which have been deposited at when a demand is made with which

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 12
 Comments and Cases of Credit transactions
Atty. Hector De Leon

he is bound to comply under the not preclude other remedies. —

provisions of this Act. Whether a warehouseman has or has
not a lien upon the goods, he is
Sec. 30. Negotiable receipt must state entitled to all remedies allowed by
charges for which the lien is claimed. law to a creditor against a debtor for
— If a negotiable receipt is issued for the collection from the depositor of
goods, the warehouseman shall have all charges and advances which the
no lien thereon except for charges for depositor has expressly or impliedly
storage of goods subsequent to the contracted with the warehouseman to
date of the receipt unless the receipt pay.
expressly enumerated other charges
for which a lien is claimed. In such Sec. 33. Satisfaction of lien by sale. —
case, there shall be a lien for the A warehouseman's lien for a claim
charges enumerated so far as they are which has become due may be
within the terms of section twenty- satisfied as follows:
seven although the amount of the (a) An itemized statement of the
charges so enumerated is not stated warehouseman's claim, showing the
in the receipt. sum due at the time of the notice and
the date or dates when it becomes
due,
Lien where receipt negotiable:
(b) A brief description of the goods
With the exception of the charges for against which the lien exists,
storage and preservation of goods for which
a negotiable receipt has been issued, the lien (c) A demand that the amount of the
exist only for the other charges expressly claim as stated in the notice of such
enumerated in the receipt so far as they are further claim as shall accrue, shall be
written within the terms of section 27 paid on or before a day mentioned,
although the amount of the said charges is not less than ten days from the
not stated. delivery of the notice if it is personally
delivered, or from the time when the
As to claims not specified in the receipt, the notice shall reach its destination,
warehouseman shares pro rata with the according to the due course of post, if
other creditors of the depositor of the the notice is sent by mail,
balance of the proceeds of the sale for the
satisfaction of the said claims. (d) A statement that unless the claim
is paid within the time specified, the
Sec. 31. Warehouseman need not goods will be advertised for sale and
deliver until lien is satisfied. — A sold by auction at a specified time and
warehouseman having a lien valid place.
against the person demanding the
goods may refuse to deliver the goods In accordance with the terms of a
to him until the lien is satisfied. notice so given, a sale of the goods by
auction may be had to satisfy any
Sec. 32. Warehouseman's lien does valid claim of the warehouseman for

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 13
 Comments and Cases of Credit transactions
Atty. Hector De Leon

which he has a lien on the goods. The if he is a person entitled, under the
sale shall be had in the place where provision of this Act, to the
the lien was acquired, or, if such place possession of the goods on payment
is manifestly unsuitable for the of charges thereon. Otherwise, the
purpose of the claim specified in the warehouseman shall retain the
notice to the depositor has elapsed, possession of the goods according to
and advertisement of the sale, the terms of the original contract of
describing the goods to be sold, and deposit.
stating the name of the owner or
person on whose account the goods Sec. 34. Perishable and hazardous
are held, and the time and place of the goods. — If goods are of a perishable
sale, shall be published once a week nature, or by keeping will deteriorate
for two consecutive weeks in a greatly in value, or, by their order,
newspaper published in the place leakage, inflammability, or explosive
where such sale is to be held. The sale nature, will be liable to injure other
shall not be held less than fifteen days property , the warehouseman may
from the time of the first publication. give such notice to the owner or to the
If there is no newspaper published in person in whose names the goods are
such place, the advertisement shall be stored, as is reasonable and possible
posted at least ten days before such under the circumstances, to satisfy
sale in not less than six conspicuous the lien upon such goods and to
places therein. remove them from the warehouse and
in the event of the failure of such
From the proceeds of such sale, the person to satisfy the lien and to
warehouseman shall satisfy his lien receive the goods within the time so
including the reasonable charges of specified, the warehouseman may sell
notice, advertisement and sale. The the goods at public or private sale
balance, if any, of such proceeds shall without advertising. If the
be held by the warehouseman and warehouseman, after a reasonable
delivered on demand to the person to effort, is unable to sell such goods, he
whom he would have been bound to may dispose of them in any lawful
deliver or justified in delivering manner and shall incur no liability by
goods. reason thereof.

At any time before the goods are so The proceeds of any sale made under
sold, any person claiming a right of the terms of this section shall be
property or possession therein may disposed of in the same way as the
pay the warehouseman the amount proceeds of sales made under the
necessary to satisfy his lien and to pay terms of the preceding section.
the reasonable expenses and
liabilities incurred in serving notices Sec. 35. Other methods of enforcing
and advertising and preparing for the lien. — The remedy for enforcing a
sale up to the time of such payment. lien herein provided does not
The warehouseman shall deliver the preclude any other remedies allowed
goods to the person making payment by law for the enforcement of a lien

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 14
 Comments and Cases of Credit transactions
Atty. Hector De Leon

against personal property nor bar the
right to recover so much of the
warehouseman's claim as shall not be
paid by the proceeds of the sale of the
property.
Sec. 36. Effect of sale. — After goods
have been lawfully sold to satisfy a
warehouseman's lien, or have been
lawfully sold or 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.
Enforcement of Warehouseman Lien:
The remedies available to a warehouseman
for enforcing his lien are as follows :
a. By refusing to deliver the goods
until the lien is satisfied (sec. 31)
b. By causing extrajudicial sale of
the property and applying the
proceeds to the value of the lien (
section 33, 34); and
c. By filing Civil Action for
collection of unpaid charges or
by way of counterclaim in an
action to recover the property for
him or such other remedies
allowed by law for
enforcement of a lien against
property (section 35) or to
creditor against his debtor of all
the charges which the depositor
has bound himself to pay.
( section 32)
d. A warehouseman is entitled to all
the remedies allowed by law to a
creditor against his debtor for
the collection from the depositor
of all charges which the
depositor is obliged to pay
(section 32)3
EFFECT OF SALE OF GOODS:
a. In case of sale of goods, the
warehouseman is not liable for
non delivery even if the receipt
given for the goods when they
were deposited be negotiated.
(sec. 36). This rule necessarily
qualifies the right of a purchaser
of a negotiable receipt.
b. Where the sale was made
without the publication require
and before the time specified by
law ( sec 33, paragraph 2), such
sale is void and the purchaser of
the goods acquires no title in
them.
ACTS FOR WHICH WAREHOUSEMAN IS
LAIBLE:
1. Failure to stamp “duplicate” on
copies of negotiable receipt (sec
6)
2. Failure to place non negotiable
receipt or not negotiable on a
non negotiable receipt (sec 7)
3. Misdelivery of goods (sec. 10)
4. Failure to effect cancellation of
negotiable receipt upon delivery
of the goods (sec. 11)
the 5. Issuing receipt for non existing
goods or misdescribed goods
(Sec. 20)
6. Failure to take care of goods
(section 21)
7. Failure to give notice in case of
sale of goods to satisfy his lien
(sec. 33) or because the goods
are perishable or hazardous
(sec.34)

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 15
 Comments and Cases of Credit transactions
Atty. Hector De Leon

Indorsement is in blank when

the holder merely signs his name
III — NEGOTIATION AND TRANSFER at the back of the receipt without
OF RECEIPTS specifying to whom the goods are
to be delivered
Sec. 37. Negotiation of negotiable
receipt of delivery. — A negotiable 2. If the receipt is specially
receipt may be negotiated by delivery: indorsed, it become an order
(a) Where, by terms of the receipt, the receipt and negotiation can only
warehouseman undertakes to deliver be effected by the indorsement of
the goods to the bearer, or the indorsee.

(b) Where, by the terms of the receipt, A special indorsement specifies

the warehouseman undertakes to the person to whom or to whose
deliver the goods to the order of a order the goods are to be
specified person, and such person or delivered. (see art. 1508 which is
a subsequent indorsee of the receipt same as sec. 37)
has indorsed it in blank or to bearer.

Where, by the terms of a negotiable Sec. 38. Negotiation of negotiable

receipt, the goods are deliverable to receipt by indorsement. — A
bearer or where a negotiable receipt negotiable receipt may be negotiated
has been indorsed in blank or to by the indorsement of the person to
bearer, any holder may indorse the whose order the goods are, by the
same to himself or to any other terms of the receipt, deliverable.
specified person, and, in such case, Such indorsement may be in blank, to
the receipt shall thereafter be bearer or to a specified person. If
negotiated only by the indorsement of indorsed to a specified person, it may
such indorsee. be again negotiated by the
indorsement of such person in blank,
Negotiation of a negotiable receipt: to bearer or to another specified
person. Subsequent negotiation may
It is the same manner of negotiation of be made in like manner.
promissory notes and bills of exchange
under the negotiable instrument Law. (ACT Negotiation of Negotiable Receipt by
No. 2031) indorsement
1. If indorsed in blank or to nearer,
1. A negotiable warehouse receipt the document becomes
is negotiable by delivery if the negotiable to delivery. (see
goods are deliverable to the section 37)
bearer or when it is indorsed in 2. If indorsed to a specified person,
blank or to the bearer by the it may be again negotiated by
person to whose order the goods indorsement of such person in
are deliverable or by subsequent blank, to bearer or to another
indorsee. specified person.

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 16
 Comments and Cases of Credit transactions
Atty. Hector De Leon

undertakes to deliver the goods

to the order of the person to
whom the possession or
Sec. 39. Transfer of receipt. — A custody of the receipt has been
receipt which is not in such form that entrusted, or if, at the time of
it can be negotiated by delivery may such entrusting, the receipt is
be transferred by the holder by in such form that it may be
delivery to a purchaser or donee. negotiated by delivery.

A non-negotiable receipt can not be THE RIGHTS ACQUIRED BY BY

negotiated, and the indorsement of PERSON WHOM THE RECEIPT
such a receipt gives the transferee no HAS BEEN NEGOTIATED
additional right.
1. The title of the person negotiating
ADVANTAGES OF A NEGOTIABL the receipt over the goods covered
WAREHOUSE RECEIPT: by the receipt
2. The title of the person (depositor or
1. It protects a purchaser per value owner) to whose order by the terms
and in good faith ( sec. 41) of the receipt the goods were to be
delivered over such goods; and
2. the goods covered by the receipt 3. The direct obligation of the
cannot be garnished or levied warehouseman to hold possession
upon under execution unless it is of the goods for him, as if the
surrendered, or impounded or its warehouseman directly contracted
negotiation enjoined. (sec. 25) with him.
3. in case of negotiation, the holder
acquires the direct obligation of
the warehouseman to hold Sec. 41. Rights of person to whom a
possession of the goods for him receipt has been negotiated. — A
without notice to such person to whom a negotiable receipt
warehouseman (sec. 41); has been duly negotiated acquires
4. the goods it covers are not thereby:
subject to sellers lien or stoppage (a) Such title to the goods as the
in transitu4.(sec. 49) person negotiating the receipt to him
had or had ability to convey to a
Sec. 40. Who may negotiate a receipt. purchaser in good faith for value, and
— A negotiable receipt may be also such title to the goods as the
negotiated: depositor or person to whose order
(a) By the owner thereof, or the goods were to be delivered by the
terms of the receipt had or had ability
(b) By any person to whom the to convey to a purchaser in good faith
possession or custody of the for value, and
receipt has been entrusted by
the owner, if, by the terms of (b) The direct obligation of the
the receipt, the warehouseman warehouseman to hold possession of

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 17
 Comments and Cases of Credit transactions
Atty. Hector De Leon

the goods for him according to the of a non negotiable document 9par 2 and 3).
terms of the receipt as fully as if the The rights of such person are:
warehouseman and contracted
directly with him. 1. The title of the goods as against to
the transferor.
Sec. 42. Rights of person to whom 2. The right to notify the
receipt has been transferred. — A warehouseman of the transfer
person to whom a receipt has been thereof
transferred but not negotiated 3. The right thereafter, to acquire the
acquires thereby, as against the obligation of the warehouseman to
transferor, the title of the goods hold the goods for him.
subject to the terms of any agreement Note: the right of transferee is not absolute
with the transferor. as it is subject to the terms of any agreement
with the transferor.
If the receipt is non-negotiable, such
person also acquires the right to ATTACHMENT OF GOODS COVERED BY
notify the warehouseman of the RECEIPT:
transfer to him of such receipt and
thereby to acquire the direct 1. Receipt non negotiable - the transfer
obligation of the warehouseman to of non negotiable document of title
hold possession of the goods for him does not affect the delivery of the
according to the terms of the receipt. goods covered by it.
2. Receipt negotiable – the goods can
Prior to the notification of the not be attached or be levied in
warehouseman by the transferor or execution unless the receiptbe first
transferee of a non-negotiable surrendered to the warehouseman or
receipt, the title of the transferee to its negotiation enjoined.
the goods and the right to acquire the
obligation of the warehouseman may Sec. 43. Transfer of negotiable receipt
be defeated by the levy of an without indorsement. — Where a
attachment or execution upon the negotiable receipt is transferred for
goods by a creditor of the transferor value by delivery and the indorsement
or by a notification to the of the transferor is essential for
warehouseman by the transferor or a negotiation, the transferee acquires a
subsequent purchaser from the right against the transferor to compel
transferor of a subsequent sale of the him to indorse the receipt unless a
goods by the transferor. contrary intention appears. The
negotiation shall take effect as of the
RIGHTS OF PERSON TO WHOM time when the indorsement is actually
RECEIPT HAS BEEN TRANSFERED made.

This section refers to the right of a person to

whom the negotiable warehouse receipt( not
duly negotiated) has been
transferred(paragraph 1) or the transferee

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 18
 Comments and Cases of Credit transactions
Atty. Hector De Leon

RIGHT S OF TRANSFEREE OF A proceeds of sale, this for a simple

NEGOTIABLE RECEIPT: reason that the transaction involved
This section specvifies the rights of a person is not a sale but only a mortgage or
to whom an order receipt, which may not pledge.
properly be negotiated by mere delivery has 3. Innocent third persons – where,
been delivered, w/o indorsement. They are: however, the rights of innocent third
persons are involve, the indorsee-
1. The rights of the goods as against to pledgee of a warehouse receipt is
transferor (sec 42) considered the owner of goods
2. The right to compel the transferor to covered by it whenever necessary for
indorse the receipt. the protection.
Note: if the intention of the parties is that
the receipt should be merely transferred, the Sec. 44. Warranties of a sale of
transferee has no right to require the receipt. — A person who, for value,
transferor to indorse the receipt. negotiates or transfers a receipt by
indorsement or delivery, including
RULE WHERE RECEIPT SUBSEQUENTLY one who assigns for value a claim
INDORSED: secured by a receipt, unless a
For the purpose of determining whether the contrary intention appears, warrants:
transferee is purchaser for value in good (a) That the receipt is genuine,
faith without notice (sec. 41) , the
negotiation shall take effect as of the time (b) That he has a legal right to
when the indorsement is actually made, not negotiate or transfer it,
at the time the receipt has been delivered
(c) That he has knowledge of no fact
OWNERSHIP OF THE GOODS COVERED which would impair the validity or
BY RECEIPT NEGOTIATED OR worth of the receipt, and
TRANSFERRED:
1. Indorsee or transferee – For (d) That he has a right to transfer the
purposes of facilitating commercial title to the goods and that the goods
transactions, the indorsee or are merchantable or fit for a
transferee of the warehouse receipt particular purpose whenever such
should be regarded as the owner of warranties would have been implied,
the goods covered by it. if the contract of the parties had been
2. Indorser or Transferor –where a to transfer without a receipt of the
warehouse receipt is indorsed or goods represented thereby.
transferred to a creditor only to
secure the payment of a loan or debt, Sec. 45. Indorser not a guarantor. —
the indorsee or transferre does not The indorsement of a receipt shall not
automatically become the owner of make the indorser liable for any
the goods covered by the warehouse failure on the part of the
receipt but he merely retains the warehouseman or previous indorsers
right to keep and with the consent of of the receipt to fulfill their respective
the owner to sell them so as to obligations.
satisfy the obligation from the

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 19
 Comments and Cases of Credit transactions
Atty. Hector De Leon

Sec. 46. No warranty implied from previous sale, mortgage or pledge,

accepting payment of a debt. — A shall have the same effect as if the
mortgagee, pledgee, or holder for first purchaser of the goods or receipt
security of a receipt who, in good had expressly authorized the
faith, demands or receives payment of subsequent negotiation.
the debt for which such receipt is
security, whether from a party to a Sec. 49. Negotiation defeats vendor's
draft drawn for such debt or from any lien. — Where a negotiable receipt has
other person, shall not, by so doing, been issued for goods, no seller's lien
be deemed to represent or to warrant or right of stoppage in transitu shall
the genuineness of such receipt or the defeat the rights of any purchaser for
quantity or quality of the goods value in good faith to whom such
therein described. receipt has been negotiated, whether
such negotiation be prior or
Sec. 47. When negotiation not subsequent to the notification to the
impaired by fraud, mistake or duress. warehouseman who issued such
— The validity of the negotiation of a receipt of the seller's claim to a lien or
receipt is not impaired by the fact that right of stoppage in transitu. Nor
such negotiation was a breach of duty shall the warehouseman be obliged to
on the part of the person making the deliver or justified in delivering the
negotiation or by the fact that the goods to an unpaid seller unless the
owner of the receipt was induced by receipt is first surrendered for
fraud, mistake or duress or to entrust cancellation.
the possession or custody of the IV — CRIMINAL OFFENSES
receipt to such person, if the person
to whom the receipt was negotiated or Sec. 50. Issue of receipt for goods not
a person to whom the receipt was received. — A warehouseman, or an
subsequently negotiated paid value officer, agent, or servant of a
therefor, without notice of the breach warehouseman who issues or aids in
of duty, or fraud, mistake or duress. issuing a receipt knowing that the
goods for which such receipt is issued
Sec. 48. Subsequent negotiation. — have not been actually received by
Where a person having sold, such warehouseman, or are not under
mortgaged, or pledged goods which his actual control at the time of
are in warehouse and for which a issuing such receipt, shall be guilty of
negotiable receipt has been issued, or a crime, and, upon conviction, shall
having sold, mortgaged, or pledged be punished for each offense by
the negotiable receipt representing imprisonment not exceeding five
such goods, continues in possession years, or by a fine not exceeding ten
of the negotiable receipt, the thousand pesos, or both.
subsequent negotiation thereof by the
person under any sale or other Note: it is made an offense to issue receipt
disposition thereof to any person unless the property is actually in storage.
receiving the same in good faith, for
value and without notice of the

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 20
 Comments and Cases of Credit transactions
Atty. Hector De Leon

Sec. 51. Issue of receipt containing ownership, shall be guilty of a crime,

false statement. — A warehouseman, and, upon conviction, shall be
or any officer, agent or servant of a punished for each offense by
warehouseman who fraudulently imprisonment not exceeding one
issues or aids in fraudulently issuing year, or by a fine not exceeding two
a receipt for goods knowing that it thousand pesos, or by both.
contains any false statement, shall be
guilty of a crime, and upon Sec. 54. Delivery of goods without
conviction, shall be punished for each obtaining negotiable receipt. — A
offense by imprisonment not warehouseman, or any officer, agent,
exceeding one year, or by a fine not or servant of a warehouseman, who
exceeding two thousand pesos, or by delivers goods out of the possession
both. of such warehouseman, knowing that
a negotiable receipt the negotiation of
Sec. 52. Issue of duplicate receipt not which would transfer the right to the
so marked. — A warehouse, or any possession of such goods is
officer, agent, or servant of a outstanding and uncanceled, without
warehouseman who issues or aids in obtaining the possession of such
issuing a duplicate or additional receipt at or before the time of such
negotiable receipt for goods knowing delivery, shall, except in the cases
that a former negotiable receipt for provided for in sections fourteen and
the same goods or any part of them is thirty-six, be found guilty of a crime,
outstanding and uncanceled, without and, upon conviction, shall be
plainly placing upon the face thereof punished for each offense by
the word "duplicate" except in the imprisonment not exceeding one
case of a lost or destroyed receipt year, or by a fine not exceeding two
after proceedings are provided for in thousand pesos, or by both.
section fourteen, shall be guilty of a
crime, and, upon conviction, shall be Sec. 55. Negotiation of receipt for
punished for each offense by mortgaged goods. — Any person who
imprisonment not exceeding five deposits goods to which he has no
years, or by a fine not exceeding ten title, or upon which there is a lien or
thousand pesos, or by both. mortgage, and who takes for such
goods a negotiable receipt which he
Sec. 53. Issue for warehouseman's afterwards negotiates for value with
goods or receipts which do not state intent to deceive and without
that fact. — Where they are deposited disclosing his want of title or the
with or held by a warehouseman existence of the lien or mortgage,
goods of which he is owner, either shall be guilty of a crime, and, upon
solely or jointly or in common with conviction, shall be punished for each
others, such warehouseman, or any of offense by imprisonment not
his officers, agents, or servants who, exceeding one year, or by a fine not
knowing this ownership, issues or exceeding two thousand pesos, or by
aids in issuing a negotiable receipt for both.
such goods which does not state such

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 21
 Comments and Cases of Credit transactions
Atty. Hector De Leon

Note: Section 50 to 55 is offenses

punishable by the Act. "Delivery" means voluntary transfer
of possession from one person to
INGREDIENTS OF OFFENSE PUNISHED another.
BY SECTION 54
"Fungible goods" means goods of
1. THERE IS DELIVERY OF GOODS which any unit is, from its nature by
OUT OF THE POSSESSION OF THE mercantile custom, treated as the
WWAREHOUSEMAN HIMSELF OR equivalent of any other unit.
BY ANY OFFICER, AGENT OR
SERVANT OF THE "Goods" means chattels or
WAREHOUSEMAN. merchandise in storage or which has
2. THE PERSON WHO CAUSES THE been or is about to be stored.
DELIVERY HAS KNOWLEDGE
THA T A NEGOTIABLE RECEIPT "Holder" of a receipt means a person
FOR THE GOODS, WHICH WOULD who has both actual possession of
TRANSFER THE RIGHT TO THE such receipt and a right of property
POSSESSION THEREOF IS therein.
OUTSTANDING AND
UNACANCELLED. "Order" means an order by
3. THE PERSON CAUSING THE indorsement on the receipt.
DELIVERY DOES SO WITHOUT
OBTAINING POSSESSION OF THE "Owner" does not include mortgagee.
RECEIPT AT OR BEFORE THE
TIME OF THE DELIVERY. "Person" includes a corporation or
partnership or two or more persons
V — INTERPRETATION having a joint or common interest.

Sec. 56. Case not provided for in Act. To "purchase" includes to take as
— Any case not provided for in this mortgagee or as pledgee.
Act shall be governed by the
provisions of existing legislation, or "Receipt" means a warehouse receipt.
in default thereof, by the rule of the
law merchant. "Value" is any consideration
sufficient to support a simple
Sec. 57. Name of Act. — This Act may contract. An antecedent or pre-
be cited as the Warehouse Receipts existing obligation, whether for
Act. money or not, constitutes value where
a receipt is taken either in satisfaction
Sec. 58. Definitions. — (a) In this Act, thereof or as security therefor.
unless the content or subject matter
otherwise requires: "Warehouseman" means a person
"Action" includes counterclaim, set- lawfully engaged in the business of
off, and suits in equity as provided by storing goods for profit.
law in these islands.

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 22
 Comments and Cases of Credit transactions
Atty. Hector De Leon

(b) A thing is done "in good faith"

within the meaning of this Act when it
is in fact done honestly, whether it be
done negligently or not.

Sec. 59. Application of Act. — The

provisions of this Act do not apply to
receipts made and delivered prior to
the taking effect hereof.

Sec. 60. Repeals. — All acts and laws

and parts thereof inconsistent with
this Act are hereby repealed.

Sec. 61. Time when Act takes effect. —

This Act shall take effect ninety days
after its publication in the Official
Gazette of the Philippines shall have
been completed.

4
This is the name of that act of a vendor of goods, upon a credit, who, on learning that the buyer has failed, resumes the possession
of the goods, while they are in the hands of a carrier or middle-man, in their transit to the buyer, and before they get, into his actual
possession. The subject will be considered with reference to, 1. The person who has a right to stop goods in transitu. 2. The property
whicli may be stopped. 3. The time when to be stopped. 4. The, manner of stopping. 5. The failure of the buyer. 6. The effect of
stopping. The right of stopping property in transitu is confined to cases in which the consignor is substantially the seller; and does
not extend to a mere surety for the price, nor to any person who does not rest his claim on a proprietor's right.The property stopped
must be personal property actually sold or bartered, on a credit. Page 23