WAREHOUSE

RECEIPTS LAW
CONTINUATION
 2 Kinds of Warehouse
Negotiable Receipt ReceiptsNon - Negotiable Receipt
Meaning of “negotiable” under the Act
-N ot a negotiable instrument under Act No. 2031 (Negotiable Instruments Law)

- Indicates passage of warehouse receipts through the channels of commerce

- Transfer of property through manual endorsement

DEFINITION

• Goods received will be delivered to the bearer • Goods received will be delivered to the
or to the order of any person named in such depositor or to any other specified person (Sec
receipt (Sec.5) 4.)

• If non-negotiable provision is inserted = provision is

void.
 2 Kinds of Warehouse
Negotiable Receipt
Receipts Non - Negotiable Receipt
APPLICATION
• Duplicate receipts must be marked “duplicate” • Must be marked “non-negotiable” or “not
plainly placed upon the face of every such negotiable” plainly placed upon its face (Sec 7)
receipt (Sec 6) • A holder of the receipt has the option to treat
• A warehouseman shall be liable for damages caused such receipt as negotiable.
by his failure to mark duplicate.

EFFECT OF FAILURE TO MARK ―NEGOTIABLE OR ―NON-NEGOTIABLE

• Considered negotiable provided the holder of
• Does not render it non-negotiable if it such unmarked receipt purchased it for value
contains words of negotiability. supposing it to be negotiable.

• Hence, negotiability of warehouse receipts

enlarged.
Construction of warehouse
receipts
- Liberal construction of the law in favor of the bona fide holders of
such receipts.

- No application to actions against any party to the transactions other than a warehouseman.
 OBLIGATIONS AND
RIGHTS OF
WAREHOUSEMEN UPON
THEIR RECEIPTS
Principal Obligations of
Warehouseman
1.To take care of the goods entrusted to his safekeeping (Sec. 21.); and

2.To deliver the goods upon a demand made either by the holder of a receipt for the goods or by the depositor provided that the conditions under Section 8 are fulfilled.
 Obligation to Deliver (Sec. 8)
Upon a demand made either by the holder of a receipt for the
goods or by the depositor, unless there is a legal excuse, if such demand is accompanied with:

(a) An offer to satisfy the warehouseman’s lien;

(b) An offer to surrender the receipt, if negotiable with such indorsements as would be necessary for the negotiation of the receipts; 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.
 Persons to whom goods must be
delivered (Sec 9)
A warehouseman is justified in delivering the goods to one who is:
1.Person lawfully entitled to possession of goods or his agent.
a. person to whom a competent court has ordered the delivery of the goods
b. to an attaching creditor
c. to the purchaser
d. goods are perishable or hazardous
2.Person entitled to delivery under either a non-negotiable receipt or with written authority.
3.Person in possession of a negotiable receipt
 Warehouseman’s liability for
misdelivery* (Sec. 10)
1.Liability similar to a bank paying a forged check.
2.Liability as for conversion.**

*Misdelivery - warehouseman delivers the **C onversion - unauthorized assumption and exercise of the right of ownership over goods belonging to another through the

goods to one who is not in fact lawfully alteration of their condition or the exclusion of the owner’s right. (Bouvier’s Law Dictionary)

entitled to the possession of them (those

specified in Sec. 9)
Instances When a Warehouseman is
Liable for Conversion
• Misdelivery
• Even if the warehouseman delivers the goods to the persons entitled
under Section 9, he may still be liable for conversion if prior to
delivery:
• He had been requested not to make such delivery; or,
• He had received notice of the adverse claim or title of a third person.
Cancellation of receipts on delivery of
goods
• Not applicable to non-negotiable receipts
• Negotiable receipts must be cancelled when goods delivered. (Sec. 11)

• Negotiable receipts must be cancelled or marked when part of goods delivered. (Sec. 12)
 Effects of alteration on liability of
warehouseman (Sec. Effect
Alteration 13)
Alteration immaterial Whether fraudulent or not, authorized or not, the warehouseman
is liable on the altered receipt according to its original tenor

Alteration material Liable according to the terms of the receipt as altered

Material alteration Liable on the altered receipt according to its original tenor
innocently made

Material alteration Liable according to the original tenor of the receipt to a

fraudulently made purchaser of the receipt for value without notice, and even to the
alterer and subsequent purchasers with notice.
Liability of warehouseman in case of
lost or destroyed receipts (Sec 14)
• Not liable for non-delivery
• A competent court may order the delivery of the goods

• Upon proof of the loss or destruction of the receipt; and

• Upon the giving of a bond with sufficient sureties to be approved by the court.

Liability of warehouseman as to
duplicate
• The duplicate imposes no other liability upon the(Sec 15)
warehousemanexcept for breach of this warranty:
• That the duplicate is an accurate copy of the original receipt; and
• Such original receipt is uncancelled at the date of the issue of the duplicate.
Duty of warehouseman where there
are several claimants
• The warehouseman must to determine within a
reasonable time the validity of the conflicting
claims. (Sec. 18)
• The warehouseman must bring a complaint in interpleader and require the different claimants to litigate among

themselves. (Sec. 17)

Liability of warehouseman to rightful

claimant
• If he does not compel interpleader in a case
requiring it and where he neither interpleads nor
investigates, after lapse of a reasonable time, be
held guilty of conversion as of the date of
original demand for the goods.
Adverse title of third person not a
defense for refusal to deliver (Sec 19)
• Cannot set up title in himself as an excuse for his
failure or refusal to deliver the goods. (Sec. 16.)
• Cannot set up an adverse title in another as an excuse for his failure to deliver property to his bailor on demand.

• XPN: Sec. 9, 17, 18, and 36.

Liability of warehouseman for non-

existence or misdescription of goods (Sec. 20)

GR: 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.
XPN: Description consists merely of marks or labels upon the goods or upon the packages containing them.
Liability of warehouseman for loss due
to lack of care
GR: Warehouseman is required to exercise care of the goods with “the
diligence of a good father of a family.” (Art. 1163, Civil Code.)

XPN: In the absence of an agreement to the contrary.

Commingling of deposited goods
• GR: Warehouseman may not mingle goods belonging
to depositors. (Sec. 22)

• XPN:

⚬ Fungible goods may be commingled if warehouseman authorized (Sec. 23) a different owners become co-ownersof the whole mass
 Attachment or levy of negotiable receipt
• Warehouseman has the direct obligation to hold possession of the goods. While in possession of such
warehouseman, the goods cannot be attached or levied upon under an execution unless:
• The receipt be first surrendered; or
• Its negotiation is enjoined; or
• The receipt is impounded by the court. (Sec. 25)

• Delivery of goods covered by an outstanding negotiable receipt does not apply:

⚬ When depositor is not owner or one who has no right to convey title to the goods binding upon
the owner.
⚬ 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
Remedies of creditor
or owner of
negotiable receipt
• What is attached by the creditor is the negotiable receipt in the debtor’s
possession NOT the goods

• Expressly gives the court full power to aid by injunction* and

otherwise a creditor seeking to get a negotiable receipt covering such
goods

*Injunction: a court order requiring a person to do or cease doing a specific action

 Extent of
Warehouseman's Lien
Lien*
• defined as a charge on property usually for the payment of some debt or obligation

• a qualified right or a proprietary interest, which may be exercised over the property of another

• It signifies a legal claim or charge on property as a collateral or security for the payment of some debt
or obligation

*G.R. No. 81541, Oct. 4, 1989

• Lien is his security for the payment of the charges, money advanced,
and other expenses

• Lien exists for the benefit of the warehouseman

Lien serves as payment
for:
Charges Money Sale of Goods
storage and Advanced
Interests, Insurance, notice and
preservation Transportation, Labor, advertisements of sale
Weighing, and
Cooperating
When the receipt is negotiable, Section 30 of this law prescribes the extent
of the lien
What is Negotiable
Receipt?
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
Lien when receipt is
negotiable
General Rule: Warehouseman does not have a lien on the goods

EXCEPTION: charges for storage subsequent to the date of the receipt

AND if the receipt expressly enumerates other charges
Goods subject to Lien

1. Goods belonging to depositor or his principal

2. Goods stored in fraud of true owner’s rights
Loss and waiver of lien
upon goods:
1. By surrendering possession thereof

2. By refusing to deliver the goods when a demand is made with which he is bound to comply under the provisions of the law
Valid reasons for refusing to
deliver goods
• Holder of the receipt does not satisfy the conditions prescribed in Section 8 of this Law
• Warehouseman has legal title in himself on the goods*
• Warehouseman has legally set up the title or right of third person as lawful defense for
nondelivery of the goods
• Warehouseman having a lien valid against the person demanding the goods refuses to deliver the
goods to him unless the lien is satisfied
• Failure was not due to any fault on the part of the warehouseman*
Enforcement of
Warehouseman's Lien
• Refusing to deliver the goods until the lien is satisfied
• Causing the extrajudicial sale of the property and applying the proceeds to the value of the lien
• Filing a civil action* for collection of the unpaid charges
Effect of sale of goods

• Warehouseman not liable for non-delivery

• Sale without publication required and before time specified by the law = VOID*
Acts for which warehouseman
is liable
• Failure to stamp “duplicate” on copies of a negotiable receipt
• Failure to place “non-negotiable” or “not negotiable” on a non-negotiable receipt
• Misdelivery of goods
• Failure to effect cancellation of a negotiable receipt upon delivery of the goods
• Issuing receipt for non-existing goods or misdescribed goods
• Failure to take care of the goods
• Failure to give notice*
Negotiation and
Transfer of
Receipts
Negotiation of negotiable
receipt
By Delivery By Indorsement
Who May Negotiate a
Receipt?
Owner of the Any person to whom
goods the possession or
custody of the receipt
has been entrusted by
the owner
Negotiation of negotiable
receipt by Delivery
If the goods are deliverable to the bearer AND
If the goods are delivered to a specified person
 Negotiation of negotiable receipt
by Indorsement
General Rule: A negotiable document of title by the terms of which the goods are deliverable
to a person specified therein may be negotiated only by the indorsement of such person.
 If indorsement is in blank, it becomes negotiable by delivery.

If indorsed to a specified person, delivery alone is not enough -> may be negotiated again to
another person, or in blank
Transfer of non-negotiable receipt

A non-negotiable receipt of title cannot be negotiated but can be transferred or assigned by

delivery. Only specific rights stated in Section 42 of this law is acquired.
Rights of Person to whom receipt has
been transferred
• The title to the goods as against the transferor
• The right to notify the warehouseman of the transfer thereof
• The right to acquire the obligation of the warehouseman to hold the goods for him
Advantages of a Negotiable
Warehouse Receipt
• It protects a purchaser for value and in good faith
• The goods covered by the receipt cannot be garnished or levied upon under execution
unless it is surrendered, or impounded, or its negotiation enjoined
• In case of negotiation, the holder acquires the direct obligation of the warehouseman to
hold possession of the goods for him without notice to such warehouseman
• The goods it covers are not subject to seller’s lien or stoppage in transitu
. Rights of person to whom receipt has
been negotiated
• The title of the person negotiating the receipt over the goods covered by the receipt
• The title of the person (depositor or owner) to whose order by the terms of the receipt
the goods were to be delivered, over such goods
• The direct obligation of the warehouseman to hold possession of the goods for him, as if
the warehouseman directly contracted with him
Attachment of Goods Covered By
Receipt
• The title of the person negotiating the receipt over the goods covered by the receipt
• The title of the person (depositor or owner) to whose order by the terms of the receipt
the goods were to be delivered, over such goods
• The direct obligation of the warehouseman to hold possession of the goods for him, as if
the warehouseman directly contracted with him
Attachment of Goods Covered
By Receipt
Receipt Non- Receipt
Negotiable Negotiable
Rights of Transferee of a Negotiable
Receipt
• The right to the goods as against the transferor
• The right to compel the transferor to indorse the receipt

￭ EXCEPTION: If the intention is that the receipt should be merely transferred,

the transferee has no right to require the transferor to indorse the receipt
Rule where Receipt Subsequently
Indorsed
Purpose of determining whether the transferee is a purchaser for value in good faith without
notice: The negotiation shall take effect as of the time when the indorsement is actually
made, not at the time the receipt is delivered
Ownership of Goods covered by Receipt
Negotiated or Transferred
• Indorsee or Transferee -> if for commercial transactions, owner of goods

• Indorser or Transferor -> if receipt is indorsed or transferred to a creditor, indorsee

does not automatically become owner of goods but has the right to keep
• Innocent Third Persons -> if third persons are involved, the indorsee-pledgee of a

warehouse receipt is considered the owner of the goods

Ownership of Goods covered by Receipt
Negotiated or Transferred
• Indorsee or Transferee -> if for commercial transactions, owner of goods

• Indorser or Transferor -> if receipt is indorsed or transferred to a creditor, indorsee

does not automatically become owner of goods but has the right to keep
• Innocent Third Persons -> if third persons are involved, the indorsee-pledgee of a

warehouse receipt is considered the owner of the goods

Warranties on Sale of Receipt

• Receipt must be genuine

• Seller should have legal right to sell it

• He should have knowledge that nothing would impair the validity of the receipt

• He should have the right to transfer the title to the goods and that the goods are

merchantable or fit for a particular purpose

Liability of Person Negotiating or
Transferring Receipt

Double Effect

Conveyance/Transportation of Instrument + Contract of Indorser

Validity of Negotiation as Against Real
Owner
• Receipt acquired from owner’s agent: a bona fide purchaser, acquires title to the goods

where he purchases from the owner’s agent*

• Lost or stolen receipt: a bona fide transferee thereof from the thief or finder acquires no

title as against the real owner of the receipt

Effect of Subsequent Negotiation by Seller

RULE:

purchaser/mortgagee/pledgee should require negotiation of the receipt to him

WHAT IF NOT FOLLOWED?

express authorization on his part to the seller, mortgagor or pledgor to make subsequent

negotiation
Indorsee’s Right Superior to Vendor’s Lien

innocent holder of the negotiable instrument has better right to the goods for which the
receipt is given than the vendor who has a vendor’s lien upon such goods
Possession of goods by warehouseman

"Issuing a receipt without the goods in storage is an offense"

Goods must be stored in his warehouse, under his care, and under his control at the time the
recieipt is issued
THANK YOU!