ACT NO.

2137 (WAREHOUSE RECEIPTS ACT)

SCOPE: Covers all warehouses, whether public or private (Citizen’s State Bank of Vici
v. Galtig), bonded or not, and of special application to those engaged in the business of
receiving commodities (e.g. palay and rice) for storage (People v. Goco; Phil. Tobacco
Flue Curing and Redrying Corp. v. Pablo)

APPLICABILITY

✓ Prospective application: Does not apply to receipts made and delivered prior
to effectivity (SEC. 59);
✓ Cases not provided for (SEC. 56):
1. Existing legislation;
2. In default thereof, rule of the law merchant (lex mercatoria or merchant
law or custom of merchants)

What is lex mercatoria or merchant law?

A system of law that does not rest exclusively on the institutions and local
customs of any particular country, but consists of certain principles of equity
and usages of trade which general convenience and a common sense of justice
have established to regulate the dealings of merchants and mariners in all the
commercial countries of the civilized world (Bank of Conway v. Stary, 200 N.W.
505 [N.D. 1924])
✓ Consisted of usages of trade in different departments of commerce
proved in court and ratified by legal decisions, upon the assumption
that persons entering upon transactions in different departments of
trade dealt with each other on the footing of any custom or usage
generally prevailing in those departments, so that the usage, is
“engrafted upon or incorporated with” the law and accordingly binding
on the courts
✓ Originated in the unwritten customs of merchants in different
commercial countries
✓ From it developed the rules of bills and notes, sales of goods,
partnerships, guaranty, insurance, and agency
✓ From the 13th century, maritime and commercial cases were
determined in accordance with the customs of merchants and by
merchant courts
✓ It was not until the 18th century that merchants were encouraged, if
not compelled, to try their causes in the common law courts
✓ The usage adopted by the courts is the origin of the so-called “law
merchant” as to negotiable instruments
PURPOSES OF WAREHOUSE RECEIPTS LAW

1. To Regulate the status, rights, and liabilities of the parties in a warehousing

contract;
2. To Render the title to, and right of possession of, property stored in warehouses
more easily convertible;
3. To Protect those who, in good faith and for value, acquire negotiable warehouse
receipts by negotiation;
4. To Facilitate the use of warehouse receipts as documents of title;
5. In order to accomplish these, to Place a much greater responsibility on the
warehouseman.

DEFINITION OF TERMS IN SECTION 58(a)

• Action – includes counterclaim, set-off, and suits in equity as provided by law in

these islands
• Delivery – voluntary transfer of possession from one person to another
• Fungible goods – goods of which any unit is, from its nature or by mercantile
custom, treated as the equivalent of any other unit
• Goods – chattels or merchandise in storage, or which has been or is about to be
stored
• Holder of a receipt – person who has both actual possession of such receipts and
a right of property therein
• Order – an order by indorsement on the receipt
• Owner – does not include mortgagee
• Person – includes a corporation or partnership or two or more persons having a
joint or common interest
• (To) purchase – includes to take as mortgage or as pledge
• Purchaser – includes mortgagee and pledgee
• Value – any consideration sufficient to support simple contract. An antecedent or
pre-existing obligation whether for money or not, constitutes value where a receipt
is taken either in satisfaction thereof or as security thereof
• Warehouseman – a person lawfully engaged in the business of storing goods for
profit
• A thing is done in good faith – it is in fact done honestly, whether it be done
negligently or not (SEC. 58[b])
 THE ISSUE OF WAREHOUSE RECEIPTS

SECTION 1. PERSONS WHO MAY ISSUE RECEIPTS

Warehouse – a building or place where goods are deposited and stored for profit. (Sec.
2, General Bonded Warehouse Act)

Warehouseman/Bailee – a person (natural or juridical) lawfully engaged in the business

of storing goods for profit. (Sec. 58[a])

Warehouse Receipt (BAW)

a. It is a Bilateral contract. It imports that goods are in the hands of a

warehouseman and is a symbolical representation of the property itself.
b. It is a written Acknowledgement by a warehouseman that he has received and
holds certain goods therein described in store for the person to whom it is
issued. (Talengtan Bros. & Sons v. CA)
c. It is a simple Written contract between the owner of the goods and the
warehouseman to pay the compensation for that service. (Hale v. Milwaukee
Dock Co.)

Who May Issue Warehouse Receipts (WA)

a. Only a Warehouseman may issue warehouse receipts to put said
warehouse receipts within the purview of the Warehouse Receipt Law.
b. But a duly Authorized officer or agent of a warehouseman may validly issue
a warehouse receipt. (National Bank v. Producer’s Warehouse Association)

• Receipts not issued by a warehouseman are not warehouse receipts although in the
form of warehouse receipt. (National Bank of Commerce v. Kansas City)

SECTION 2. FORM OF RECEIPTS; ESSENTIAL TERMS

Need not be in any particular form, BUT the receipt must at least contain the following:
(ORALSND3)
a. If the receipt is issued for goods of which the warehouseman is owner, either
solely or jointly or in common with others, the fact of such Ownership.
b. The Rate of storage charges.
c. A statement of the Amount of advances made and of liabilities incurred for
which the warehouseman claims as lien. If the precise amount for such
advances made or of such liabilities incurred is, at the same time of the issue
of the receipt, unknown to the warehouseman or to his agent who issues it, a
statement of the fact that advances have been made or liabilities incurred and
the purpose thereof is sufficient.
d. The Location of the warehouse where the goods are stored.
 e. The Signature of the warehouseman which may be made by his authorized
agent.
f. Consecutive Number of the receipt.
g. The Date of issue of the receipt.
h. A statement whether the goods received will be Delivered to the bearer, to a
specified person or to a specified person or his order.
i. A Description of the goods or of the packages containing them.

Effect of Omission of the Essential Contents (VOND)

✓ Validity of receipt not affected

✓ Contract converted to Ordinary deposit
✓ Negotiability of receipt not affected
✓ Warehouseman liable for Damages

SECTION 3. Terms that Cannot Be Included in the Warehouse Receipt

A warehouseman could add or insert any other terms to his receipt provided that such
additional terms are NOT: (Law-Di)

a. Those contrary to any provision of the Law;

b. Terms reducing the degree of Diligence imposed by the law on the
warehouseman.

SECTIONS 4-5. MEANING OF NEGOTIABLE UNDER THE ACT

The word “negotiable” is not used in the sense in which it is applied to bills of exchange
or promissory notes but only as indicating that in the passage of warehouse receipts
through the channels of commerce, the law regards the property which they describe as
following them and gives to their regular transfer by indorsement the effect of manual
delivery of the things specified in them. (Vanett v. Reilly-Hertz Automobile Co.)

A warehouse receipt is in no sense a negotiable instrument because it does not comply

with Section 1(b) of Negotiable Instruments Law which requires an unconditional
promise or order to pay a sum certain in money.

Warehouse Receipt vs. Negotiable Instruments

A warehouse receipt, even if negotiable, is not a negotiable instrument within the

meaning of the Negotiable Instruments Law, for the following reasons: (VIS)

a. In negotiable instruments, the instrument itself is the object of Value; in

warehouse receipts, the goods are the objects of value;
 b. In negotiable instruments, Intermediate parties become secondarily liable; in
warehouse receipts, intermediate parties are not liable for the warehouseman's
failure to deliver the goods; and

c. In negotiable instruments, the Subject is money; in warehouse receipts, the

subject is merchandise.

Negotiable Warehouse Receipts

A negotiable warehouse receipt is one in which it is stated that the goods received will
be delivered either:
a. To the bearer; or
b. To the order of any person named in such receipt.

SECTIONS 6-7. CLASSES OF RECEIPTS

(1) Negotiable warehouse receipts
(2) Non-negotiable warehouse receipts

Duplicate Receipts Must Be Marked: When more than one is issued for the same goods,
the word "duplicate" shall be plainly placed upon the face of every such receipt, except
the first one issued.

A warehouseman shall be held liable for damages for failure to do so to anyone who
purchased the subsequent receipt for value supposing it to be original, even though
the purchaser be after the delivery of the goods by the warehouseman to the holder
of the original receipt.

Negotiable Warehouse Receipt

A negotiable warehouse receipt is a warehouse receipt wherein it is expressly stated

that the goods are deliverable to bearer or to the order of a person specified therein.

A warehouse receipt stating that the goods are deliverable to bearer is a negotiable
warehouse receipt. If the words "non-negotiable" are inserted in the receipt, the insertion
is void, and the receipt remains negotiable.

Non-negotiable warehouse receipt

A non-negotiable warehouse receipt is a warehouse receipt in which it is stated that the
goods received will be delivered to the depositor or to any specified person. The receipt
should be stamped on its face "non-negotiable." A holder of a non-negotiable receipt not
stamped "non-negotiable" believing it to be negotiable may treat the receipt at
negotiable.
A non-negotiable warehouse receipt, if not stamped with the words "non-negotiable,
“may make a warehouseman liable for damages suffered by a holder of such receipt
who purchases it for value supposing it to be negotiable.
The said holder may treat, as his option, such receipt as imposing upon the
warehouseman the same liabilities he would have incurred had the receipt been
negotiable.

Negotiable vs. Non-Negotiable Warehouse Receipt

NEGOTIABLE
WAREHOUSE RECEIPT
A negotiable warehouse
receipt is negotiated either
MANNER OF TRANSFER
by delivery or by
indorsement.
An indorsee of a
negotiable warehouse
receipt acquires the direct
EFFECT ON RIGHTS OF
obligation of the
INDORSEE/TRANSFEREE
warehouseman to hold
possession of the goods
for him.
NON-NEGOTIABLE
WAREHOUSE RECEIPT
A non-negotiable receipt
may be transferred by its
delivery to the transferee
accompanied by a deed of
assignment, donation, or
other form of transfer.
A transferee of a non-
negotiable warehouse
receipt only acquires the
right to inform the
warehouseman of such
transfer and thereafter
acquires also the
obligation of the
warehouseman.

OBLIGATIONS AND RIGHTS OF WAREHOUSMEN UPON THEIR RECEIPTS

Principal Obligations of the Warehouseman: (CD)

(1) To take Care of the goods entrusted to his safekeeping; and

(2) To Deliver to the holder of the receipt or the depositor provided the conditions in
Sec. 8 are fulfilled.

SEC. 8. Obligation of Warehouseman 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: (LRA)

1. An offer to satisfy the warehouseman’s Lien;

An offer to satisfy the warehouseman’s lien is required before the warehouseman
is bound to deliver or return the goods. Warehouseman having a lien valid against
the person demanding the goods may refuse to deliver the goods to him until the
 lien is satisfied. He loses his lien upon the goods by surrendering possession
thereof.

2. An offer to surrender the Receipt, if negotiable with such indorsements

as would be necessary for the negotiation of the receipts; and

An offer to surrender the receipt is required for the protection of the warehouseman
since the receipt represents the goods described therein. The warehouseman will
be criminally liable if he delivers the goods without obtaining possession of such
receipt.
• If the receipt is negotiable, the demand for delivery of the goods must be
accompanied by an offer to surrender the receipt properly indorsed.
• If receipt is non-negotiable, any person lawfully entitled to the possession of
the goods may be entitled to deliver without surrendering the receipt.

3. 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 holder or depositor so accompanied, the burden shall be upon
the warehouseman to establish the existence of a lawful excuse for such refusal.

GENERAL RULE: Demand should be made on the warehouseman in order that duty to
deliver the goods to arise.

EXCEPTION: Where demand is evidently useless.

A warehouseman may validly refuse delivery of the goods covered by a warehouse

receipt on some lawful excuses such as SECS. 10, 16, 18, 21, 31, 36

SECTION 9. JUSTIFICATION OF WAREHOUSEMAN IN DELIVERING. — A

warehouseman is justified in delivering the goods, subject to the provisions of the
three following sections, to one who is:

a) The person lawfully entitled to the possession of the goods, or his agent;
b) A person who is either himself entitled to delivery by the terms of a non-negotiable
receipt issued for the goods, or who has written authority from the person so entitled
either indorsed upon the receipt or written upon another paper; or
c) A person in possession of a negotiable receipt by the terms of which the goods are
deliverable to him or order, or to bearer, or which has been indorsed to him or in blank
by the person to whom delivery was promised by the terms of the receipt or by his
mediate or immediate indorser.
Persons to whom goods must be delivered: (PDN)

1. Person lawfully entitled to Possession of goods or his agent;

2. Person entitled to Deliver under a non-negotiable receipt or with written
authority – the delivery is justified only upon written authority of the party
entitled to the possession; and
3. Person in possession of a Negotiable receipt deliverable to him.
✓ Not mere possessor
✓ Must be deliverable to him to:
• Order
• Bearer
• Indorsed to him
• Indorsed to in blank

Warehouseman is merely a depository, such that he cannot sue for the value of
the goods unless he has been sued by the depositor or the consignee who are the
real parties in interest.

SECTION 10. WAREHOUSEMAN’S LIABILITY FOR MISDELIVERY. — Where a

warehouseman delivers the goods to one who is not in fact lawfully entitled to the
possession of them, the warehouseman shall be liable as for conversion to all
having a right of property or possession in the goods if he delivered the goods
otherwise than as authorized by subdivisions (b) and (c) of the preceding section,
and though he delivered the goods as authorized by said subdivisions, he shall
be so liable, if prior to such delivery he had either:

a. Been requested, by or on behalf of the person lawfully entitled to a right of

property or possession in the goods, not to make such delivery; or
b. Had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods.

Where the delivery is otherwise than as authorized by subsection b and c, the

warehouseman is liable for conversion
Conversion – an unauthorized assumption and exercise of the right of ownership
over goods belonging to another through the alteration of their condition or the
exclusion of the owner’s right.

SECTION 11. NEGOTIABLE RECEIPTS MUST BE CANCELLED WHEN GOODS

DELIVERED. — Except as provided in Section thirty-six, where a warehouseman
delivers goods for which he had issued a negotiable receipt, the negotiation of
which would transfer the right to the possession of the goods, and fails to take up
and cancel the receipt, he shall be liable to anyone who purchases for value in
good faith such receipt, for failure to deliver the goods to him, whether such
purchaser acquired title to the receipt before or after the delivery of the goods by
the warehouseman.

SECTION 12. NEGOTIABLE RECEIPTS MUST BE CANCELLED OR MARKED

WHEN PART OF GOODS DELIVERED. — Except as provided in Section thirty-six,
where a warehouseman delivers part of the goods for which he had issued a
negotiable receipt and fails either to take up and cancel such receipt, or to place
plainly upon it a statement of what goods or packages have been delivered, he
shall be liable to any one who purchases for value in good faith such receipt, for
failure to deliver all the goods specified in the receipt, whether such purchaser
acquired title to the receipt before or after the delivery of any portion of the goods
by the warehouseman.
✓ Not applicable to non-negotiable receipts
✓ So, the warehouseman who delivers the goods to the real owner without taking
up and cancelling the receipt is not liable to the purchaser for value in good faith
of such receipt from a thief for failure to deliver the goods to him as the thief has
no title to the goods.

SECTION 13. ALTERED RECEIPTS. — The alteration of a receipt shall not excuse
the warehouseman who issued it from any liability if such alteration was:
a. Immaterial;
b. Authorized; or
c. Made without fraudulent intent.
If the alteration was authorized, the warehouseman shall be liable according to the
terms of the receipt as altered.

If the alteration was unauthorized but made without fraudulent intent, the
warehouseman shall be liable according to the terms of the receipt as they were
before alteration.

Material and fraudulent alteration of a receipt shall not excuse the warehouseman
who issued it from liability to deliver, according to the terms of the receipt as
originally issued, the goods for which it was issued but shall excuse him from any
other liability to the person who made the alteration and to any person who took
with notice of the alteration. Any purchaser of the receipt for value without notice
of the alteration shall acquire the same rights against the warehouseman which
such purchaser would have acquired if the receipt had not been altered at the time
of the purchase.
Effects of Alteration
The liability of a warehouseman under a warehouse receipt which has been altered
depends on the nature of the alteration:

1. Alteration immaterial (whether fraudulent or not, or whether authorized or not):

Warehouseman is liable on the altered receipt according to its ORIGINAL tenor.
2. Alteration material but authorized: Warehouseman is liable according to the terms
of the receipt as ALTERED.
3. Material alteration innocently made: Warehouseman is liable on the altered receipt
according to its ORIGINAL tenor
4. Material alteration fraudulently made: Warehouseman is liable according to the
ORIGINAL tenor of the receipt to:
a. A purchaser of the receipt for value without notice
b. To the alterer and subsequent purchasers with notice: Warehouseman’s
liability is LIMITED only to delivery as he is excused from any liability.

SECTION 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 payment of the warehouseman’s
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.

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 that the receipt is really lost or destroyed, before
the goods are delivered or a new receipt is issued for the rights of possible innocent
purchasers of the original receipt may be involved.
Court may order the delivery of the goods only: (PB)

1. Upon Proof of the loss or destruction of the receipt; and

2. Upon giving of a Bond with sufficient sureties to be approved by the court.

SECTION 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 date of the issue of the duplicate, but shall
impose upon him no other liability.

For duplicate receipts warehouseman warrants: (CU)

1. That the duplicate is an accurate Copy of the original receipt; and

2. Such original receipt is Uncanceled at the date of the issue of the duplicate.

Except for breach of warranty, duplicate imposes no other liability upon the
warehouseman.

SECTION 16. WAREHOUSEMAN CANNOT SET UP TITLE IN HIMSELF. — No title

or right to the possession of the goods, on the part of the warehouseman, unless
such title or right is derived (1) directly or indirectly from a transfer made by the
depositor at the time of or subsequent to the deposit for storage, or (2) from the
warehouseman’s lien, shall excuse the warehouseman from liability for refusing
to deliver the goods according to the terms of the receipt.

*** Based on the doctrine of estoppel

SECTION 17. INTERPLEADER OF ADVERSE CLAIMANTS. — If more than one

person claims the title or possession of the goods, the warehouseman may, either
as a defense to an action brought against him for non-delivery of the goods, or as
an original suit, whichever is appropriate, require all known claimants to
interplead.
For the protection of the warehouseman, he must bring a complaint in interpleader (Sec.
1, Rule 62, Rules of Court.

In such case, the warehouseman will be relieved from liability in delivering the goods to
the person whom the court finds to have a better right. In Lua Kian v. Manila Railroad
Co. and Manila Port Service, 19 SCRA 5 (1967): “The legal relationship between an
arrastre operator and the consignee is akin to that of a depositor and warehouseman.”

SECTION 18. WAREHOUSEMAN HAS REASONABLE TIME TO DETERMINE

VALIDITY OF CLAIMS. — If someone other than the depositor or person claiming
under him 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 or to the adverse claimant, until the warehouseman
has had a reasonable time to ascertain the validity of the adverse claim or to bring
legal proceedings to compel all claimants to interplead.
If there are several claimants to the goods, the warehouseman must determine within a
reasonable time the validity of the conflicting claims, and deliver to the person whom he
finds is entitled to the possession of the goods.

The warehouseman is not excused from liability in case he makes a mistake.

✓ He is liable for refusal to deliver to the rightful claimant if he does not compel
interpleader in a case requiring it.
✓ Where he neither interpleads nor investigates, he will, after lapse of a
reasonable time, be held guilty of conversion as of the date of original demand
for the goods.
This section does not apply to cases where the warehouseman himself makes a claim
to the goods.

SECTION 19. ADVERSE TITLE IS NO DEFENSE EXCEPT AS ABOVE PROVIDED.

— Except as provided in the two preceding sections and in sections nine and
thirty-six, no right or title of a third person shall be a defense to an action brought
by the depositor or person claiming under him against the warehouseman for
failure to deliver the goods according to the terms of the receipt.

GENERAL RULE: Adverse title of third person not a defense for refusal to deliver.
EXCEPTIONS: SECS. 9, 17, 18, and 36

SECTION 20. LIABILITY OF WAREHOUSEMAN FOR NON-EXISTENCE OR

MISDESCRIPTION OF GOODS. — A warehouseman shall be liable to the holder of
a receipt for damages caused by the non-existence of the goods or by the failure
of the goods to correspond with the description thereof in the receipt at the time
of its issue. If, however, the goods are described in a receipt merely by a statement
of marks or labels upon them, or upon packages containing them or by a
statement that the goods are said to be goods of a certain kind, or that the
packages containing the goods are said to contain goods of a certain kind, or by
words of like import, such statements, if true, shall not make liable the
warehouseman issuing the receipt, although the goods are not of the kind which
the marks or labels upon them indicate, or of the kind they were said to be by the
depositor.

General Rule: The warehouseman is under obligation to deliver the identical property
stored with him and if he fails to do so, he is liable directly to the owner.
Exception: If the description consists merely of marks or labels upon the goods or upon
the packages containing them, etc., the warehouseman is NOT liable even if the goods
are not of the kind as indicated in the marks or labels.
SECTION 21. LIABILITY FOR CARE OF GOODS. — A warehouseman shall be liable
for any loss or injury to the goods caused by his failure to exercise such care in
regard to them as a reasonably careful owner of similar goods would exercise, but
he shall not be liable, in the absence of an agreement to the contrary, for any loss
or injury to the goods which could not have been avoided by the exercise of such
care.
The warehouseman is required to exercise ordinary or reasonable care in the custody
of the goods, that is, the care a reasonably careful owner would exercise over similar
goods of his own. Such care is also known as “the diligence of a good father of a family.”
(Art. 1163, Civil Code.)

Absence of any agreement to the contrary, the warehouseman is not liable for any loss
or injury to the goods which could not have been avoided by the exercise of such care.

The warehouseman may limit his liability to an agreed value of the property received in
case of loss, he cannot, HOWEVER, stipulate with the depositor that he would not be
responsible for any loss even if caused by his negligence.

SECTION 22. GOODS MUST BE KEPT SEPARATE. — Except as provided in the

following section, a warehouseman shall keep the goods so far separate from
goods of other depositors and from other goods of the same depositor for which
a separate receipt has been issued, as to permit at all times the identification and
redelivery of the goods deposited.

SECTION 23. FUNGIBLE GOODS MAY BE COMMINGLED IF WAREHOUSEMAN

AUTHORIZED. — If authorized by agreement or by custom, a warehouseman may
mingle fungible goods with other goods of the same kind and grade. In such case,
the various depositors of the mingled goods shall own the entire mass in common
and each depositor shall be entitled to such portion thereof as the amount
deposited by him bears to the whole.
SECTION 24. LIABILITY OF WAREHOUSEMAN TO DEPOSITORS OF
COMMINGLED GOODS. — 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.
General Rule: A warehouseman may not mingle goods belonging to depositors.
Exception: In the case of fungible goods (SEC. 58), like rice, sugar, etc., the
warehouseman may mingle them with the goods of the same kind and grade provided
that he is authorized by agreement or custom. (SEC. 23).
In this case, the different owners become co-owners of the whole mass. (SEC. 24).
Under the Civil Code, “unless there is stipulation to the contrary, the depositary may
commingle grain or other articles of the same kind and quality.” (Art. 1976).
SECTION 25. ATTACHMENT OR LEVY UPON GOODS FOR WHICH A NEGOTIABLE
RECEIPT HAS BEEN ISSUED. — If goods are delivered to a warehouseman by the
owner or by a person whose act in conveying the title to them to a purchaser in
good faith for value would bind the owner, and a negotiable receipt is issued for
them, they cannot thereafter, while in the possession of the warehouseman, be
attached by garnishment, or otherwise, or be levied upon under an execution,
unless the receipt be first surrendered to the warehouseman, or its negotiation
enjoined. The warehouseman shall in no case be compelled to deliver up the
actual possession of the goods until the receipt is surrendered to him or
impounded by the court.
While in possession of such warehouseman, the goods cannot be attached or levied
upon under an execution unless: (SEI)
1. The document be first Surrendered; or
2. Its negotiation is Enjoined; or
3. The document is Impounded by the court.

SECTION 25 does not apply to: (OR)

1. If the person depositing is not the Owner of the goods (like a thief) or one who has
no right to convey title to the goods binding upon the owner; AND
2. To actions for Recovery or manual delivery of goods by the real owner nor to
cases where the attachment is made before the issuance of the negotiable receipt
of title.

SECTION 26. CREDITOR’S REMEDIES TO REACH NEGOTIABLE RECEIPTS. — A

creditor whose debtor is the owner of a negotiable receipt shall be entitled to such
aid from courts of appropriate jurisdiction, by injunction and otherwise, in
attaching such receipt or in satisfying the claim by means thereof as is allowed at
law or in equity in these Islands in regard to property which cannot readily be
attached or levied upon by ordinary legal process.

What is attached by the creditor is the negotiable receipt in the debtor’s possession and
NOT the goods covered by such receipt.
This section expressly gives the court full power to aid by injunction and otherwise a
creditor seeking to get a negotiable receipt covering such goods.

SECTION 27. CLAIMS INCLUDED IN WAREHOUSEMAN’S LIEN

Warehouseman’s lien works as a security for payment of charges. It exists for the benefit
of the warehouseman.
Subject to provisions of Sec. 30, the warehouseman has lien on: (GP)
a) Goods deposited
b) Proceeds of goods deposited in his hands

Charges and claims included in the warehouseman’s lien: (WAG-TIIL-CO)

a) Weighing
b) Money Advanced
c) Storage and preservation of Goods
d) Transportation
e) Interest
f) Insurance
g) Labor
h) Cooperating
i) Other charges and expenses in relation to goods

In addition, SEC. 27 also enumerates the following charges and expenses as part of the
lien: (PG)
a) Notice and advertisements of Public sale
b) Sale of Goods

The aforementioned shall only apply when default is made in satisfying the
warehouseman lien, pursuant to SECS. 33-34.

SECTION 28. AGAINST WHAT PROPERTY MAY THE LIEN BE ENFORCED UPON
The warehouseman lien shall be enforced upon the following property, according to
SEC. 28: (PO)

1. Belonging to the Person liable as debtor for the claims regarding the lien;
2. Belonging to Others deposited by one liable as debtor regarding the lien if he had
been entrusted with the possession of the goods with authority to make a valid
pledge

In short, the lien shall be enforced upon the goods of the owner or belonging to another
but is deposited by one who is liable as debtor as to the lien, with the additional requisites
that he has an authority to make a valid pledge. However, as an EXCEPTION, goods
belonging to another but is stored by a stranger in fraud of the true owner’s rights is NOT
covered by the aforesaid section. It makes the warehouseman a legalized receiver of
stolen goods to the extent of the charges.

SECTION 29. HOW THE LIEN MAY BE LOST

General Rule: The warehouseman has a lien on the goods and may be validly demanded
by him before he surrenders the deposited goods.
Exceptions: The lien may be lost if the warehouseman does any one of these acts, under
SEC. 28: (SR)
 1. He Surrenders the possession of the goods, without demand of lien (in which
case, the lien shall be deemed waived or condoned by the warehouseman).

The warehouseman obviously loses his lien by virtue of waiving it. He cannot
subsequently charge the waived lien upon other goods deposited by the same
person, but covered by different receipts as he is estopped from doing so.
2. He Refuses to deliver when a valid demand was made by the owner or the
person who has a right to the goods.

The refusal to deliver is unjustified when the holder of the receipt complies or offers
to comply with the requisites of SEC. 8.

These, then are valid reasons to refuse the delivery of goods: (RIMFUL-T)

1. The holder does not satisfy the Requisites laid down in SEC. 8
2. Involuntary surrender of goods
3. The goods have been taken by Mistake by a third person without the knowledge
or implied assent of the warehouseman
4. Prior to demand, the goods were stolen and/or destroyed without Fault of the
warehouseman unless he contracted to be liable in such a case
5. The warehouseman refuses to deliver Until his lien is satisfied (SEC. 31)

6. The warehouseman has Legal title in himself vested directly or indirectly from a
transfer made by the depositor at the time of or subsequent to the deposit, or from
the warehouseman’s lien (SEC. 16)
7. The warehouseman has legally set up the title or right of Third persons as lawful
defense for non-delivery, and has required them to interplead, according to the ff:
SEC. 10: the warehouseman has been requested by or on behalf of the person
lawfully entitled to the goods not to make the delivery
SEC. 10: the warehouseman had information that delivery was about to be made
to one who is not lawfully entitled to the possession of the goods
SEC. 18 (in connection with SEC. 10): the warehouseman is given a reasonable
time to ascertain the validity of the adverse claims, or bring legal proceedings (such
as to compel all complainants to interplead) and he is excused from delivering
during such time

SECS. 33 and 36: the goods have already been lawfully sold to third persons to
satisfy the unpaid due lien
 SECS. 34 and 36: the goods have already been lawfully sold or disposed of if they
are hazardous or perishable in nature

SECTION 30. STATEMENT OF CHARGES ON NEGOTIABLE RECEIPT

General Rule: the warehouseman lien exists only for the other charges expressly
enumerated in the receipt as long as they adhere to SEC. 27 although the amount of
charges is not stated.
Exception: Charges for storage and preservation subsequent to date of receipt, although
not enumerated as lien, should be paid.
Requisites for the additional enumerated charges in the general rule: (WE)
1. The charges must be Within the terms of SEC. 27
2. The charges must be expressly Enumerated in the warehouse receipt, even if
the amount is not stated

As to unspecified claims and charges (those not expressly stated in the receipt), those
will be shared by the warehouseman and the creditors on a pro rata basis.

SECTION 31: NO DELIVERY UNTIL SATISFACTION OF LIEN

This provision states one of the valid grounds of refusal to deliver the goods to the owner
of the goods or the holder of the receipt or one who has title or right to the goods.
It simply states that the warehouseman has a right of retention over the goods deposited
to him until full satisfaction of a valid lien.

SECTION 32: OTHER REMEDIES

Whether a warehouseman has a lien or no lien over the goods, he is still entitled to ALL
remedies allowed by law (in a creditor-debtor relationship) to collect charges and
advances, which the debtor has contracted expressly or impliedly to pay, such as:
1. Civil action for collection / specific performance (Art. 1165);
2. Counterclaim in an action to recover property

SECTION 33: SATISFACTION OF LIEN BY SALE, PROCESS AND REQUISITES

GIVING OF WRITTEN NOTICE

The notice of claiming of lien must be given to ALL of these persons: (AI)
a. Person on whose Account the goods are held
b. Any other person known by the warehouseman to claim an Interest in the
goods
 The purpose of giving notice is to sufficiently inform them of his demand to claim
the lien before the goods are released, and this notice is indispensable as it is the
basis for the delay or default of the payment of lien. Delay subsequently gives rise
to the warehouseman’s right to sell the goods to satisfy the unpaid lien.
How must the notice be given: (DeRMa)
1. Delivery in person; or
2. Via Registered Mail to the last known place of business or abode of the persons
enumerated
CONTENTS OF WRITTEN NOTICE
The contents of the notice are as follows: (ID2S)
a. Itemized statement of claim (with the sum due at the time of the notice and the
dates when they became due);
b. A brief Description of the goods held by the warehouseman;
c. Demand that the amount shall be paid on or before a day certain which is not less
than 10 days from personal delivery of notice OR from the time mail has been
received; and
d. A Statement that unless the claim is duly paid during the time allowed, the goods
shall be advertised for sale and sold by auction.

PROCESS OF THE AUCTION SALE IN CASE OF FAILURE TO SATISFY LIEN

As with all events, the following are the details to know to attend an auction sale: time
and place.

The time of the auction sale shall be:

1. For newspaper publication of advertisement: not less than 15 days from first
publication
2. For publication in not less than 6 conspicuous places: at least 10 days before
sale

The place of the auction place shall be:

General Rule: the place where the lien was acquired

Exception: if the place is manifestly unsuitable for the purpose (auction sale),
then it shall be at the nearest suitable place.

An auction sale under SEC. 33 shall be void if the requisite of advertisement/publication

is not complied with, and if the time of sale specified by law is not followed (i.e. if the sale
is done before 15 days of first publication for newspapers, or if the sale is done in less
than 10 days in case of publication in conspicuous places).
The advertisement’s contents should be as follows: (DNTP)
(a) Description of goods
(b) Name of the owner or of the person on whose account the goods are held
(c) Time of the sale
(d) Place of the sale

The advertisement shall be published in:

General Rule: A newspaper publication in the place of sale, for once a week for two
consecutive weeks

Exception: in the absence of a newspaper in the place of sale, then in not less than
6 conspicuous places, which shall be published at least 10 days before the sale

APPLICATION OF THE PROCEEDS OF THE SALE

The proceeds of the sale shall thereafter be applied to satisfy the following charges:
(PAWN)
(a) Charges of Publication/advertisement
(b) Charges of the Auction sale
(c) Warehouseman’s lien
(d) Charges of giving Notice

Should there be leftover remaining balance, it shall be held by the warehouseman and
shall be delivered on demand to the person to whom he was supposed to deliver the
goods.

EFFECT OF PAYMENT OF LIEN BEFORE THE GOODS ARE SOLD IN THE

AUCTION

Before the goods are sold for the purpose of satisfying the lien, any person who is
claiming a right of property of possession of the goods may pay the:
a. Warehouseman’s lien
b. Reasonable expenses and liabilities in serving notices, advertisements, and the
preparations for the sale up to the time of actual payment

The effects of the payment of the aforementioned charges are: (DR)

a. The rise of the warehouseman’s obligation to Deliver the goods to the person
paying the charges if he is entitled to them upon the payment
b. But if the person who pays the charges is not entitled, then the warehouseman
shall Retain the possession of the goods
SECTION 34: PERISHABLE AND HAZARDOUS GOODS
There are several kinds of goods covered under this section, and they are: (PDI-OLIE)

1. Perishable goods
2. Goods which will greatly Deteriorate in value if kept
3. Goods which are liable to Injure other property due to their:
a. Odor
b. Leakage
c. Inflammability
d. Explosive nature
Because of the peculiar nature of the goods, the warehouseman has a slightly different
(due to urgency of the situation) right than that enumerated under SEC. 33. The
warehouseman may give notice to the owner or the person in whose name the goods
are stored to: (SR-SD)

1. Satisfy the warehouseman’s lien and other charges

2. Remove the goods from the warehouse

HOWEVER, if the owner or the person in whose name the goods are stored fails to
pay or remove the goods from the warehouse, the warehouseman may:
a. Sell the goods at a public or private sale EVEN WITHOUT advertising (due to
urgency, as it may damage or deteriorate under the warehouseman’s retention);
or
b. If, however, the warehouseman fails to sell the goods, or is unable to sell the
goods, he may Dispose of them in a lawful manner

SECTION 35: OTHER METHODS OF ENFORCING LIEN

This section is similar to SEC. 32, as it states that the warehouseman, in addition to the
remedies specified in the Warehouse Receipts Act, may avail of any other remedies for
the enforcement of lien against personal property AND he may recover the
warehouseman’s claim from the proceeds of sale of such property.

The remedy that comes into mind upon reading this section is the remedy of attachment.

SECTION 36: EFFECT OF SALE OF GOODS HELD BY WAREHOUSEMAN

If the warehouseman’s lien is not satisfied, and a valid sale of goods has thereafter been
done (pursuant to SECS. 33-34), then the goods are no longer held by the
warehouseman.

Therefore, the warehouseman shall no longer be liable for failure to deliver the goods to
the proper person (i.e. owner or a person who has a right over the goods deposited)
RECAP OF ENFORCEMENT OF LIEN: (RFC2O)

a. Refusing to deliver until lien is satisfied (SEC. 31)

b. Filing civil actions for collection or counterclaim to recover property
c. Causing the extrajudicial sale and applying the proceeds to lien (SECS. 33-34)
d. (As creditor-debtor) Collection of all charges which depositor bound himself to
pay (SEC. 32)
e. Other remedies allowed by law for enforcement of lien on personal property

RECAP OF WAREHOUSEMAN LIABILITIES: (MSG-C2N2D)

a. Misdelivery (SEC. 10)

b. Failure to give notice to satisfy lien in case of Sale (SEC. 33)
c. Failure to give notice to satisfy lien in case Goods are perishable or hazardous
(SEC. 34)
d. Failure to Cancel receipt upon delivery (SEC. 11)
e. Failure to take Care of goods (SEC. 21)
f. Failing to place “Non-Negotiable / not negotiable” (or words of similar import)
on a non-negotiable receipt (SEC. 7)
g. Issuing receipts for Non-Existent or misdescribed goods (SEC. 20)
h. Failing to stamp “Duplicate” on copies (SEC. 6)

NEGOTIATION AND TRANSFER OF RECEIPTS

SECTION 37. NEGOTIATION OF NEGOTIABLE RECEIPT BY DELIVERY. — A

negotiable receipt may be negotiated by delivery:

(a) Where, by the terms of the receipt, the warehouseman undertakes to deliver
the goods to the bearer; or
(b)Where, by the terms of the receipt, the warehouseman undertakes to deliver
the goods to the order of a specified person, and such person or a
subsequent indorsee of the receipt has indorsed it in blank or to bearer

Where, by the terms of a negotiable receipt, the goods are deliverable to bearer,
or any holder may indorse the same to himself or to any other specified person
and in such case the receipt shall thereafter be negotiated only by the indorsement
by such indorsee.
 NEGOTIABLE
Section 5. A receipt in 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 is non-negotiable.
Such provision, if inserted, shall be void.
It must be marked “DUPLICATE” if
necessary.
NON-NEGOTIABLE
Section 4. A receipt in 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.
It must be marked as non-negotiable.

1. By Delivery – Goods are deliverable to the bearer or indorsed in blank or to the

bearer by the person to whose order the goods are deliverable or by a subsequent
indorsee.
2. By Special Indorsement – Becomes an order receipt and negotiation can only be
effected by the indorsement of the indorsee. Specifies the person to whom or to
whose order the goods are to be delivered.

SECTION 38. NEGOTIATION OF NEGOTIABLE RECEIPT BY INDORSEMENT. — A

negotiable receipt may be negotiated by the indorsement of the person to whose
order the goods are, by the terms of the receipt, deliverable. Such indorsement
may be in blank, to bearer, or to a specified person. If indorsed to a specified
person, it may be again negotiated by the indorsement of such person in blank, to
bearer or to another specified person. Subsequent negotiation may be made in
like manner.

✓ Applicability: Negotiable Receipt

✓ Manner of indorsement
1. Indorsed in blank or to bearer, the document becomes negotiable by delivery
(SEC. 37)
2. Indorsed to a specified person, it may be again negotiated by blank, to bearer
or to another specified person. Delivery alone is not sufficient. (SEC. 38)

SECTION 39. TRANSFER OF RECEIPT. — A receipt which is not in such form that
it can be negotiated by delivery may be transferred by the holder by delivery to a
purchaser or donee.

A non-negotiable receipt cannot be negotiated, and the indorsement of such a

receipt gives the transferee no additional right.
NEGOTIABLE NON-NEGOTIABLE

May be negotiated by mere delivery or General Rule: Cannot be negotiated.

with indorsement. Exception: Can be transferred or assigned
by delivery.
SECTION 40. WHO MAY NEGOTIATE A RECEIPT. — A negotiable receipt may be
negotiated:
a. By the owner thereof, or
b. By any person to whom the possession or custody of the receipt has been
entrusted by the owner, if, by the terms of the receipt, the warehouseman
undertakes to deliver the goods to the order of the person to whom the
possession or custody of the receipt has been entrusted, or if at the time
of such entrusting the receipt is in such form that it may be negotiated by
delivery.
✓ Applicability: Negotiable Receipt
✓ Who May Negotiate: (OwEn)
1. The Owner himself
2. Any person to whom the possession or custody of the receipt was Entrusted

SECTION 41. RIGHTS OF PERSON TO WHOM RECEIPT HAS BEEN NEGOTIATED.

— A person to whom a negotiable receipt has been duly negotiated acquires
thereby:

a. Such title to the goods as the person negotiating the receipt to him had
or had ability to convey to a purchaser in good faith for value, and also
such title to the goods as the depositor or person to whose order the
goods were to be delivered by the terms of the receipt had or had ability
to convey to a purchaser in good faith for value, and
b. The direct obligation of the warehouseman to hold possession of the
goods for him according to the terms of the receipt as fully as if the
warehouseman had contracted directly with him.
✓ Applicability: When a negotiable receipt has been duly negotiated.
✓ Rights Acquired: (TiTiHo)
(1) The Title of the person who negotiated over the goods covered
(2) The Title of the depositor or owner to whose order the goods were delivered
(3) Direct obligation of the warehouseman to Hold possession of the goods for
him.

Siy Cong Bien v. HSBC

FACTS: A certain Otto Ranft bought bales of hemp from plaintiff evidenced by the sent
receipts together with the invoices. Ranft did not pay for the hemp but the plaintiff’s
understanding was that payment would be made against the same receipts like in his
previous transactions were it is paid after delivery.

Ranft died and the plaintiff, upon knowing the same, immediately demanded the return
of the receipts but was told that it had been sent to the bank, HSBC. Hence, plaintiff filed
a claim to recover the sum of P31,645 the value of the bales of hemp and he also
demanded for the return of the receipts, or the value thereof, which was refused by the
bank on the ground that the latter was the holder in due course.

ISSUE: WON the respondent bank acquired valid title over the receipts

RULING: Yes, HSBC acquired valid title. The receipts in question were negotiable in
form. They were pledge by Otto Ranft to the Defendant bank to secure the payment of
his preexisting debts to said bank. The receipts were issued in the name of the Plaintiff
were duly endorsed in blank by the Plaintiff and by Otto Ranft.

As provided in SEC. 41 of the Warehouse Receipts Act, the person to whom a receipt
has been negotiated has the right also to the title to the goods as the depositor of person
to whose order it was delivered. Thus, the entrustment of the receipts is more than
delivery of goods, it is a representation that the possession of the possession of the
receipt entrust the title to the goods. As provided in the same Act, said negotiation is not
impaired by breaches of trust or violations of agreement. Hence, the plaintiff is estopped
to deny the bank’s right to the valid title over the receipts. The rule on equitable estoppel
is applied where one of two innocent persons must suffer a loss, he who by conduct
made the loss possible must bear it.

SECTION 42. RIGHTS OF PERSON TO WHOM RECEIPT HAS BEEN

TRANSFERRED. — A person to whom a receipt has been transferred but not
negotiated, acquires thereby, as against the transferor, the title of the goods,
subject to the terms of any agreement with the transferor.

If the receipt is non-negotiable such person also acquires the right to notify the
warehouseman of the transfer to him of such receipt, and thereby to acquire the
direct obligation of the warehouseman to hold possession of the goods for him
according to the terms of the receipt.

Prior to the notification of the warehouseman by the transferor or transferee of a

non-negotiable receipt, the title of the transferee to the goods and the right to
acquire the obligation of the warehouseman may be defeated by the levy of an
attachment or execution upon the goods by a creditor of the transferor, or by a
notification to the warehouseman by the transferor or a subsequent purchaser
from the transferor of a subsequent sale of the goods by the transferor.

Transfer - The rights of a person to whom the receipt has been transferred by delivery
without indorsement.

Applicability:

(a) Negotiable Receipt not duly negotiated (par. 1)

(b) Transfer of a non-negotiable receipt (pars. 2 & 3)
Rights Acquired: (TAN)

(a) Title to the goods against the transferor

(b) The right to Acquire the obligation of the warehouseman to hold the goods for him
(c) The right to Notify the warehouseman of the transfer
However, these rights are not absolute and are subject to the terms of any agreement
with the transferor.
ATTACHMENT OF GOODS COVERED BY RECEIPT
NEGOTIABLE RECEIPT NON-NEGOTIABLE RECEIPT
Prior notification:
1. May be defeated by a levy or
Goods cannot be attached or levied. attachment
2. Warehouseman is not bound to the
transferee
Except when the receipt has been After notification – rights provided for in
surrendered to the warehouseman. Section 42 are acquired.

SECTION 43. TRANSFER OF NEGOTIABLE RECEIPT WITHOUT INDORSEMENT.

— Where a negotiable receipt is transferred for value by delivery, and the
indorsement of the transferor is essential for negotiation, the transferee acquires
a right against the transferor to compel him to indorse the receipt, unless a
contrary intention appears. The negotiation shall take effect as of the time when
the indorsement is actually made.

✓ Applicability: A negotiable receipt has been delivered without proper indorsement.

General Rule: The transferee may compel the transferor to indorse the receipt.
Exception: When the parties intended that the receipt is merely transferred.

✓ Negotiation: Shall take effect when the indorsement is actually made.

OWNERSHIP OF GOODS COVERED BY RECEIPT NEGOTIATED OR

TRANSFERRED
The indorsee or transferee should be
COMMERCIAL TRANSACTIONS regarded as the owner of the goods
covered by it.
The indorsee or transferee (creditor)
does not authomatically become the
SECURITY OF PAYMENT FOR LOANS
owner of the goods but has the right to
OR DEBTS
keep and with the consent of the owner
to sell as to satisfy the obligation.
 Martinez v. PNB

FACTS: As of February 1942, the estate of Pedro Rodriguez was indebted to the
defendant Philippine National Bank in the amount of P22,128.44 which represented
the balance of the crop loan obtained by the estate upon its 1941-1942 sugar cane
crop. Sometime in February 1942, Mrs. Amparo R. Martinez, late administratrix of the
estate upon request of the defendant bank through its Cebu branch endorsed and
delivered to the said bank two (2) quedans according to plaintiff-appellant issued by
the Bogo-Medellin Milling co. where the sugar was stored covering 2,198.11 piculs of
sugar belonging to the estate, although according to the defendant-appellee, only one
quedan covering 1,071.04 piculs of sugar was endorsed and delivered. During the
last Pacific war, sometime in 1943, the sugar covered by the quedan or quedans was
lost while in the warehouse of the Bogo-Medellin Milling Co. In the year 1948, the
indebtedness of the estate including interest was paid to the bank, according to the
appellant, upon the insistence of land pressure brought to bear by the bank.
Under the theory and claim the sometime in February 1942, when the invasion of the
Province of Cebu by the Japanese Armed Forces was imminent, the administratrix of
the estate asked the bank to release the sugar so that it could be sold at a god price
which was about P25 per picul in order to avoid its possible loss due to the invasion,
but that the bank refused that request and as a result the amount of P54,952.75
representing the value of said sugar was lost, the present action was brought against
the defendant bank to recover said amount.

ISSUE: Who has the rights over the sugar in question?

RULING: Estate of Pedro Rodriguez – It is obvious that where the transaction

involved in the transfer of a warehouse receipt is not a sale but pledge or security, the
transferee or endorsee does not become the owner of the goods but that he may only
have the property sold then satisfy the obligation from the proceeds of the sale. From
all this, it is clear that at the time the sugar in question was lost sometime during the
war, estate of Pedro Rodriguez was still the owner thereof.

SECTION 44. WARRANTIES OF A SALE OF RECEIPT. — A person who, for

value, negotiates or transfers a receipt by indorsement or delivery, including
one who assigns for value a claim secured by a receipt, unless a contrary
intention appears, warrants:

a) That the receipt is genuine,

b) That he has a legal right to negotiate or transfer it,
c) That he has knowledge of no fact which would impair the validity or
worth of the receipt, and
d) That he has a right to transfer the title to the goods and that the goods
are merchantable or fit for a particular purpose whenever such
warranties would have been implied, if the contract of the parties had
been to transfer without a receipt of the goods represented thereby.
This section treats of the warranties or liabilities of a person negotiating or transferring
a receipt. One who assigns for value a claim secured by a receipt of title is also liable
for the violation of any of the four warranties enumerated unless a contrary intention
appears.
Art. 1516, Civil Code is substantially the same as this section. It is the duty of every
indorsee to know that all previous endorsements are genuine; otherwise, he will not
acquire a valid title to the instrument.

SECTION 45. INDORSER NOT A GUARANTOR. — The indorsement of a receipt

shall not make the indorser liable for any failure on the part of the
warehouseman or previous indorsers of the receipt to fulfill their respective
obligations.
Liability of Person Negotiating or Transferring Receipt
Double effect of endorsing a negotiable instrument: (Con-Con)

a) Conveyance of the instrument

b) Contract of the indorser with the indorsee that on certain conditions the indorser
will pay the instrument if the party primarily liable fails to do so.

The endorsement of a warehouse receipt amounts merely to a conveyance by the

indorser, not a contract of guaranty.Endorser of a receipt shall not be liable to the
holder if the warehouseman fails to deliver the goods because they were lost due to
his fault or negligence.
Art. 1517 of the Civil Code which is substantially the same as SEC. 45.

SECTION 46. NO WARRANTY IMPLIED FROM ACCEPTING PAYMENT OF A

DEBT. — A mortgagee, pledgee, or holder for security of a receipt who, in good
faith, demands or receives payment of the debt for which such receipt is
security, whether from a party to a draft drawn for such debt or from any other
person, shall not, by so doing, be deemed to represent or to warrant the
genuineness of such receipt or the quantity or quality of the goods therein
described.

Liability of Mortgagee, Pledgee or Holder for Security

A holder for security of a receipt who in good faith accepts payment of the debt from
a person does not thereby warrant the genuineness of the receipt nor the quality or
quantity of the goods therein described.

SECTION 47. WHEN NEGOTIATION NOT IMPAIRED BY FRAUD, MISTAKE OR

DURESS. — The validity of the negotiation of a receipt is not impaired by the
fact that such negotiation was a breach of duty on the part of the person making
the negotiation or by the fact that the owner of the receipt was induced by fraud,
mistake or duress or to entrust the possession or custody of the receipt to such
person, if the person to whom the receipt was negotiated or a person to whom
the receipt was subsequently negotiated paid value therefor, without notice of
the breach of duty, or fraud, mistake or duress.

Validity of Negotiation as Against Real Owner

1. Receipt acquired from owner’s agent.

As against the real owner, 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; but not where the transfer
is made by one other than the owner without any ostensible authority to issue
or negotiate the receipt.
2. Lost or stolen receipt.

Where the receipt has been lost or stolen, a bona fide transferee thereof from
the thief or finder acquires no title as against the real owner of the receipt, unless
the latter, by indorsing the receipt in blank and leaving it with his agent, put it in
the power of such agent to steal and negotiate it.

Siy Cong Bieng & Co. v. Hongkong & Shanghai Bank, 56 Phil. 598 [1932]: “Buyer,
without having paid for goods purchased, pledged to a bank the negotiable quedans
given by seller who brought action against bank to recover the quedans or their value.”

SECTION 48. SUBSEQUENT NEGOTIATION. — Where a person having sold,

mortgaged, or pledged goods which are in warehouse and for which a
negotiable receipt has been issued, or having sold, mortgaged, or pledged the
negotiable receipt representing such goods, continues in possession of the
negotiable receipt, the subsequent negotiation thereof by the person under any
sale or other disposition thereof to any person receiving the same in good faith,
for value and without notice of the previous sale, mortgage or pledge, shall have
the same effect as if the first purchaser of the goods or receipt had expressly
authorized the subsequent negotiation.

Effect of Subsequent Negotiation by Seller, etc.

This section imposes a duty upon the purchaser, mortgagee, or pledgee of goods for
which a negotiable receipt has been issued, or of the negotiable receipt itself, 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, however, must have taken the receipt in good faith and
for value in order to acquire a better right.

SECTION 49. NEGOTIATION DEFEATS VENDOR'S LIEN. — 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. Nor shall the
warehouseman be obliged to deliver or justified in delivering the goods to an
unpaid seller unless the receipt is first surrendered for cancellation.

Indorsee’s Right Superior to Vendor’s Lien.

An innocent holder of a negotiable warehouse receipt has a better right to the goods
for which the receipt is given than the vendor who has a vendor’s lien upon such
goods.
Warehouseman is not obliged to deliver or justified in delivering the goods to an
unpaid seller unless the receipt is first surrendered for cancellation.
Roman v. Asia Banking Corporation, 46 Phil. 705 [1924]: “A vendor's lien upon
goods stored in a public warehouse cannot prevail against the rights of a purchaser,
mortgagee, or pledgee, for value and in good faith to whom the negotiable warehouse
receipts for such goods has been indorsed. “