WAREHOUSE RECEIPTS LAW

1. 1. 1. 1. 1. 1. 1. Warehouse a building or place where goods are deposited and stored for profit. 2. Warehouseman person lawfully engaged in the business of storing goods for profit. Only a warehouseman may issue warehouse receipts. 3. Warehouse Receipt written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued. 4. Non-negotiable Receipt receipt deliverable to a specified person. 5. Negotiable Receipt receipt deliverable to order or to bearer. 6. Essential Terms which MUST be embodied in a Warehouse Receipt: 1. a. location of the warehouse 2. b. date of the issue of the receipt 3. c. consecutive number of the receipt 4. d. statement whether the goods received will be delivered to bearer, or a specified person, or his order 5. e. rate of storage charges 6. f. description of the goods or packages containing them for identification purposes 7. g. signature of the warehouseman 8. h. statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien 7. Effect of omission of any of the essential terms: 1. a. The validity of the warehouse receipt is not affected. 2. b. The warehouseman shall be held liable for damages to those injured by his omission. 3. c. The negotiability of the warehouse receipt is not affected. 4. d. The issuance of a warehouse receipt in the form provided by the law is merely permissive and directory and not mandatory in the sense that if the requirements are not observed, then the goods delivered for storage become ordinary deposits. 8. Terms which may be inserted in a Warehouse Receipt: Any other terms except (a) those contrary to the provisions of this Act; (b) those that would impair a warehousemans obligation to exercise that degree of care in the safekeeping of the goods entrusted to him 9. Marks to be made on a warehouse receipt: 1. a. A non-negotiable receipt must be clearly marked non-negotiable or not negotiable, otherwise, the holder of the receipt who purchased it for value and who supposed it to be negotiable, may treat it as negotiable. 2. b. Duplicate receipts must be so marked, otherwise, the warehouseman is held liable for all damages suffered by a holder believing the same to be the original. 10. Warranties of a warehouseman as to duplicate receipts: 1. a. The duplicate is an accurate copy of the original receipt. 2. b. Such original receipt is uncancelled at the date of the issue of the duplicate. 11. Effects of alteration on the liability of the warehouseman: 1. a. If the alteration is IMMATERIAL (the tenor of the receipt is not changed), whether fraudulent or not, authorized or not, the warehouseman is liable on the altered receipt according to its original tenor. 2. b. If the alteration is MATERIAL but AUTHORIZED, the warehouseman is liable according to the terms of the altered receipt. 3. c. If the alteration is MATERIAL, UNAUTHORIZED but INNOCENTLY MADE, the warehouseman is liable on the altered receipt according to its original tenor. 4. d. If the alteration is MATERIAL and FRAUDULENTLY MADE, the warehouseman is liable:

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(1) to the purchaser of the receipt for value and without notice of the alteration according to the tenor of the altered receipt

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to the alterer, according to the terms of the original receipt

(3) to subsequent purchasers with notice of the alteration, according to the terms of the original receipt
1. 12. Effects of misdescription of goods: 1. a. A warehouseman is under the obligation to deliver the identical property stored with him and if he fails to do so, he is liable directly to the owner. 2. b. As against a bona fide purchaser of a warehouse receipt, the warehouseman is estopped from denying that he has received the goods described in the receipt. 3. c. If the description consists merely of marks or label upon the goods or upon the packages containing them, the warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels. 1. 13. Principal Obligations of a Warehouseman: 1. a. To take care of the goods entrusted to his safekeeping General Rule: A warehouseman is required to exercise such degree of care which a reasonable careful owner would exercise over similar goods of his own. He shall be liable for any loss or injury to the goods caused by his failure to exercise such care. Exception: He shall not be liable for any loss or injury which could not have been avoided by the exercise of such care. Exception to the Exception: He may limit his liability to an agreed value of the property received in case of loss. He cannot stipulate that he will not be responsible for any loss caused by his negligence. 1. b. To deliver the goods to the holder of the receipt or the depositor upon demand, provided demand is accompanied with:

(1)

an offer to satisfy the warehousemans lien;

(2) an offer to surrender the negotiable receipt properly endorsed. If the receipt is non-negotiable, any person lawfully entitled to the possession of the goods may be entitled to delivery without surrender of the receipt. (3) a readiness and willingness to sign an acknowledgment that the goods have been delivered if such is requested by the warehouseman.
1. 14. Persons to whom goods must be delivered: 1. A. Persons lawfully entitled to the possession of the goods or his agent:

a. persons to whom a competent court has ordered the delivery of the goods (1) where a negotiable instrument has been lost or destroyed, the court may order delivery to a person upon satisfactory proof of such loss or destruction and upon proper posting of a bond to protect the warehouseman from any liability or expense which he may incur by reason of the original receipt remaining outstanding. (2) where more than one person claims title or possession of the goods the warehouseman may require all claimants to interplead. The court will then order delivery to the person having a better right.
1. b. an attaching creditor Goods, while in the possession of the warehouseman and covered by a negotiable receipt, cannot be attached or levied upon under an execution unless:

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the negotiable receipt is first surrendered to the warehouseman, or

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its negotiation is enjoined, or

(iii) the receipt is impounded by the court c. to the purchaser in case of sale of the goods by the warehouseman to enforce his lien
1. d. 1. B. to the purchaser where perishable or hazardous goods are sold at private or public sale If goods are covered by a non-negotiable receipt: 1. a. a person entitled to the delivery by the terms of the receipt, or 2. b. one who has written authority from letter a 1. C. If goods are covered by a negotiable receipt, a person in possession of the receipt, the terms of which the goods are deliverable: 1. a. to him or order 2. b. to bearer 3. c. indorsed to him 4. d. indorsed in blank by the person whom delivery was promised 1. 15. When is there Misdelivery?

When the warehouseman delivers the goods to a person who is not in fact lawfully entitled to the possession of the goods because:
1. a. 2. b. the person does not fall under letter B or C above; or the person falls under letter B or C but prior to delivery, the warehouseman had either:

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been requested by the person lawfully entitled to the delivery not to make such delivery, or

(2) had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods
1. 16. Effects of Misdelivery:

The warehouseman shall be liable for conversion to all having a right to property or possession of the goods.
1. 17. What happens if there is proper delivery or partial delivery but the warehouseman fails to cancel the receipt or record on the receipt of such partial delivery? 1. a. If goods covered by a negotiable warehouse receipt are delivered by a warehouseman but he fails to take the receipt and cancel it, then he is still liable to one who purchases for value and in good faith such receipt. 2. b. If he makes partial delivery of the goods but fails to record the partial delivery on the receipt then he may still be held liable for the entire receipt to one who purchases for value and in good faith such receipt. 1. 18. Lawful excuses for refusal to deliver goods: 1. a. The warehouseman can refuse to deliver the goods if he has acquired title or right to the possession of the goods:

(1) directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto; or (2) from the warehousemans lien

1. b. If someone other than the depositor or person claiming under the depositor has a claim to the title or possession of the goods and the warehouseman has information of such claim, the warehouseman shall be excused from liability for refusing to deliver the goods either to the depositor or person claiming under him until he has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead. 1. c. The warehouseman will not be required to deliver the goods if such had been lost. But this is without prejudice to liabilities which may be incurred by him due to such loss. 1. d. The warehouseman having a valid lien against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied. 1. e. If goods have been lawfully sold or disposed of because of their perishable or hazardous nature, the warehouseman shall not be liable for failure to deliver the goods. 1. 19. A warehouseman cannot refuse to deliver goods to the depositor or to a person claiming under him on the ground that adverse title to the goods belongs to a third person. 1. 20. Rules as regards Co-mingling of Deposited Goods: General Rule: A warehouseman may not co-mingle goods belonging to different depositors or belonging to the same depositor for which separate receipts had been issued. Exception: A warehouseman may co-mingle fungible goods of the same kind and grade provided he is authorized by agreement or by custom. 1. 21. Effect of Co-mingling of Goods: 1. a. The different owners become co-owners of the whole mass. 2. b. The warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances as if the goods had been kept separate. 1. 22. Remedies of a Creditor: (the debtor being the owner of the negotiable receipt)

Creditors of the depositors, before negotiation, may protect themselves by obtaining a writ of preliminary injunction and serve the same on the depositor before he has a chance to negotiate the receipt. Once enjoined, there will be no longer a danger that a 3rd person will be prejudiced so the goods may now be attached, levied upon, or that the vendors lien or the right of stoppage in transit be exercised.
1. 23. Warehousemans Lien Extent of Warehousemans Lien:

A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands for:
1. a. all lawful charges for storage and preservation of the goods 2. b. all lawful claims for money advances, interest, insurance, transportation, labor, weighing, cooperating and other charges and expenses in relation to such goods 3. c. all reasonable charges and expenses for notice and advertisements of sale and for sale of the goods where default has been made in satisfying the warehouse lien Goods Subject to lien: 1. a. goods belonging to the depositor who is liable to the warehouseman as debtor whenever such goods are deposited and 2. b. goods belonging to other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge How is a lien enforced? 1. a. by refusing to deliver the goods until the lien is satisfied 2. b. by causing the extrajudicial sale of the property and applying the proceeds to the value of the lien 3. c. by filing a civil action for unpaid charges or by way of counterclaim in an action to recover the property from him How is a lien lost?

1. a. when the warehouseman voluntarily surrenders possession of the goods without requiring payment of his lien; or 2. b. when the warehouseman wrongfully refuses to deliver the goods when a demand is made with which he is bound to comply 1. 24. Negotiation and Transfer of Receipts How do we negotiate a receipt deliverable to order? 1. a. by indorsing it in blank thereby making it deliverable to bearer or 2. b. by special indorsement which would require further indorsements for further negotiations.

In both cases, the indorsements must be coupled with delivery.

How do we negotiate a receipt deliverable to bearer?

There is no need to indorse for negotiation. Physical delivery of the instrument will suffice. But if the instrument is indorsed specially, the bearer character of the receipt is destroyed and for further negotiation, there will be a need for indorsement.
1. 2. 1. 2. Who may negotiate warehouse receipts? a. the owner of the receipt, or b. the person to whom possession of the receipt was entrusted to by the owner Rights acquired by a person to whom the receipt has been negotiated: a. the title of the person negotiating the receipt over the goods covered by the receipt b. the title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered 3. c. the direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him May non negotiable receipts be negotiated?

No, even if the receipt is indorsed, the transferee acquires no additional right. That is why they are called non negotiable receipts. But they may be transferred or assigned by delivery.
1. 2. 3. Rights of a person to whom a non negotiable receipt has been transferred: a. the title to the goods as against the transferor b. the right to notify the warehouseman of the transfer thereof and c. the right thereafter to acquire the obligation of the warehouseman to hold the goods for him Distinction between a non negotiable receipt from a negotiable receipt with regard to attachment or execution upon goods:

Non-negotiable Receipt
Prior to notification of the warehouseman by the transferor or transferee, the warehouseman is not bound to the transferee whose right may be defeated by a levy of an attachment or execution upon the goods by the creditor of the transferor or by a notification to such warehouseman of the subsequent sale of the goods.

Negotiable Receipt

The goods cannot be attached or levied under an execution unless the receipt be first surrendered to the warehouseman or its negotiation enjoined.

Rights of a person to whom a negotiable receipt has been transferred, not indorsed: 1. a. the right to the goods as against the transferor 2. b. the right to compel the transferor to indorse the receipt. But if the intention of the parties is that the receipt should merely be transferred, the transferee has no right to require the transferor to indorse the receipt.

Note: Negotiation takes effect as of the time when the indorsement is actually made.
1. 2. 3. 4. Warranties of a person negotiating or transferring a receipt: a. the receipt is genuine b. he has a legal right to negotiate or transfer it c. he has knowledge that would impair the validity or worth of the receipt and d. he has a right to transfer the title to the goods and that the goods are merchantable A holder for security of a receipt (mortgagee or pledgee) who in good faith accepts payment of the debt from a person does not warrant the genuineness of the receipt not the quality or quantity of the goods therein described. It is the duty of the purchaser, mortgagee or pledgee of goods for which a negotiable receipt has been issued to require the negotiation of the receipt to him, otherwise his failure will have the same effect as an express authorization on his part to the seller, mortgagor, or pledgor in possession of such receipt to make any subsequent negotiation. The subsequent purchaser must have taken the receipt in good faith and for value. A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he purchases from the owners agent within the actual or apparent scope of his authority. In sum, negotiation is valid despite having been made in breach of trust. Distinctions between a negotiable instrument and a negotiable warehouse receipt:

Negotiable Instrument
When a negotiable instrument is altered deliberately, it becomes null and void. If a negotiable instrument is originally payable to bearer, it will always remain so payable regardless of the way it is indorsed, whether specially or in blank. A holder in due course may be able to obtain a title better than that which the party who negotiated the instrument to him had. The indorsement of a negotiable instrument has a double effect. It is at the same time a conveyance of the instrument and a contract the indorser has with the indorsee that on certain conditions, the indorser will pay the instrument if the party primarily liable fails to do so.

Negotiable Warehouse Receipt

When a warehouse receipt is altered, it is still valid but it may be enforced only in accordance with its original tenor. If a warehouse receipt, payable to bearer, is indorsed specially, it will be converted into a receipt deliverable to order and can only be negotiated further by indorsement and delivery. An indorsee even if a holder in due course obtains only such title as the person negotiating has over the goods. The indorsement of a warehouse receipt amounts merely to a conveyance by the indorser. Accordingly, an indorser of a receipt shall not be liable to the holder if, for example, the warehouseman fails to deliver the goods because they were lost due to his fault or negligence.

GENERAL BONDED WAREHOUSE LAW

Any warehouseman receiving commodities for (a) storage; (b) milling; (c) co-mingling must: 1. a. obtain prior license from the Bureau of Commerce 2. b. file a bond in an amount equivalent to 33 1/3 % of the capacity of the warehouse against which bond depositors may sue directly 3. c. open to the public, no discrimination allowed 4. d. liable for double market value should he accept goods in excess of the capacity of warehouse if goods are damaged or destroyed Note: for palay and corn license, a bond with the National Grains Authority is required; also an insurance cover is required.

Uniform Currency Law

1. 1. Obligations Null and Void 1. a. obligations payable in gold/foreign currency

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2. b. obligations payable in Philippine currency but measured in gold/foreign currency 2. Exempt Transactions 1. a. government to government transactions or with international banking institutions 2. b. transactions affecting high priority economic projects 3. c. forward exchange transactions between banks 4. d. import and export and other international banking, financial, investment and industrial transactions 3. Merchants and Commercial Transactions Classes of Investments: a. Permitted one allowed without need of prior authority from the Philippine Government. If registered status, invest up to extent as not to affect its registered status. If enterprise not registered, investment not to exceed 40%. b. Permissible invest in excess of 40% in unregistered enterprise but with prior approval of BOI c. Pioneer Area (a) involves manufacturing, processing, production of product not produced at all/produced in non-commercial scale; (b) uses a design, scheme, formula that is new and untried in the Phils.; (c) agricultural activities/services essential to the attainment of food sufficiency; (d) produces non-conventional fuels/utilizes non-conventional sources of energy (all others are non-pioneer) 4. Absolutely Disqualified to become Merchants 1. a. serving penalty of civil interdiction 2. b. insolvent 3. c. absolutely disqualified by special laws 5. Relatively Disqualified 1. a. judicial and prosecuting officials in active service 2. b. administrative, economic, military chiefs 3. c. government collection agents and custodian of funds 4. d. stock and commercial brokers 5. e. by special laws cannot trade in specified territories 6. Books a Merchant must keep 1. a. book of inventories and balances, statement of assets, liabilities and capital 2. b. journal of day to day operations 3. c. ledger for classifying accounts 4. d. copying book for letters and telegrams; if juridical person, include book of minutes and stock and transfer book 7. Probative Value of Merchants Book 1. a. evidence against merchants themselves 2. b. in case of conflicts between 2 books that which s properly kept prevails 3. c. if one keeps books and the other does not and cannot explain why, the former prevails 4. d. if both books are properly kept and there is a conflict, other proofs can be resorted to 8. Commercial Contracts by Correspondence are perfected from the moment the offeree accepts the offer, even before knowledge of said acceptance by the offeror. This does not apply to deposit, guaranty, sales, loan, agency, partnership. 9. Joint Account Partnership business arrangement whereby 2 or more persons interest themselves in the business of another by making contributions thereto and participating in the results thereof 1. a. only one member is ostensible, others are silent 2. b. no common name 3. c. only ostensible partners can sue/be sued 4. d. no juridical personality