DEPOSIT A contract to deposit, or an agreement to constitute a

deposit, is a valid consensual contract.

I. THE CONCEPT OF DEPOSIT
Art. 1962 A deposit is constituted from the moment a
person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the same. If
the safekeeping of the thing delivered is not the principal
purpose of the contract, there is no deposit but some
other contract.
Art. 1964 A deposit may be constituted judicially or
extrajudicially.
Art. 1967 An extrajudicial deposit is either voluntary or
necessary.
A deposit is an obligation constituted from the moment of
delivery of the property belonging to another for the
purpose of safekeeping and eventual return.
It may be judicial, extrajudicial, voluntary and necessary.
The principal obligation in any kind of deposit is the
safekeeping of the thing and its eventual return.
II. VOLUNTARY DEPOSIT
A. GENERAL CONCEPTS
Art. 1963 An agreement to constitute a deposit is
binding, but the deposit itself is not perfected until the
delivery of the thing.
Art. 1968 A voluntary deposit is that wherein the delivery
is made by the will of the depositor. A deposit may also be
made by two or more persons each of whom believes
himself entitled to the thing deposited with a third person,
who shall deliver it in a proper case to the one to whom it
belongs.
BPI v. IAC (1988) Cortes, J.
Concept: Voluntary Deposit
Brief Facts: Zshornack entrusted $3,000 to COMTRUST
for safekeeping. When the amount was requested to be
returned, the bank refused, alleging that the amount was
already credited to Zshornacks account. Zshornack filed a
complaint against COMTRUST for the recovery of the
$3,000.
Doctrine: In a deposit, the safekeeping of the object is
the principal purpose. This is constituted from the moment
a person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the same.
The intention and the subsequent acts of the parties
determine the nature of the arrangement between the
parties.
Triple-V Food Services Inc. v. Filipino Merchants Insurance
Co. (2005) Nachura, J.
Concept: Deposit; Voluntary Deposit; General Concepts
Brief Facts: De Asis, an employee of Crispa Textile Inc.,
dined at Triple-Vs Kamayan Restaurant. She availed of the
valet parking service of the restaurant for the company
car assigned to her. However, after dining, the car was
discovered to be lost and could not be recovered. Covered
under a policy, Crispa Textile was indemnified by FMIC; in
turn, FMIC was subrogated into Crispas rights and filed
suit against Triple-V for the loss of the car.
Doctrine: In a contract of deposit, the depositary receives
an object belonging to the depositor, and has the
obligation of safely keeping the object and returning the
same to the latter. The contract of deposit may be
constituted without consideration. It is a real contract,
perfected upon the delivery of the object by the depositor
to the depositary.

Art. 1969 A contract of deposit may be entered into orally

or in writing.

Art. 1965 A deposit is a gratuitous contract, except when

there is an agreement to the contrary, or unless the
depositary is engaged in the business of storing goods.

Art. 1966 Only movable things may be the object of a

deposit.

Art. 1995 A deposit its extinguished:

(1) Upon the loss or destruction of the thing deposited;

(2) In case of a gratuitous deposit, upon the death of

either the depositor or the depositary.

An extrajudicial deposit that arises out of a contract. Thus,

meeting if the minds is required between the depositor
and the chosen depositary.-

A deposit is a real contract, requiring delivery for its

perfection

May be oral or written, may be gratuitous or onerous

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B. OBLIGATION TO SAFEKEEP
1. WAY OF THE DEPOSIT
Art. 1974 The depositary may change the way of the
deposit if under the circumstances he may reasonably
presume that the depositor would consent to the change if
he knew of the facts of the situation. However, before the
depositary may make such change, he shall notify the
depositor thereof and wait for his decision, unless delay
would cause danger.
Art. 1975 The depositary holding certificates, bonds,
securities or instruments which earn interest shall be
bound to collect the latter when it becomes due, and to
take such steps as may be necessary in order that the
securities may preserve their value and the rights
corresponding to them according to law.
The above provision shall not apply to contracts for the
rent of safety deposit boxes.
Art. 1976 Unless there is a stipulation to the contrary, the
depositary may commingle grain or other articles of the
same kind and quality, in which case the various
depositors shall own or have a proportionate interest in
the mass.
Art. 1977 The depositary cannot make use of the thing
deposited without the express permission of the depositor.
Otherwise, he shall be liable for damages.
However, when the preservation of the thing deposited
requires its use, it must be used but only for that purpose.
Art. 1978 When the depositary has permission to use the
thing deposited, the contract loses the concept of a
deposit and becomes a loan or commodatum, except
where safekeeping is still the principal purpose of the
contract.
The permission shall not be presumed, and its existence
must be proved.
Art. 1981 When the thing deposited is delivered closed
and sealed, the depositary must return it in the same
condition, and he shall be liable for damages should the
seal or lock be broken through his fault.
Fault on the part of the depositary is presumed, unless
there is proof to the contrary.
As regards the value of the thing deposited, the statement
of the depositor shall be accepted, when the forcible
opening is imputable to the depositary, should there be no
proof to the contrary. However, the courts may pass upon
the credibility of the depositor with respect to the value
claimed by him.
When the seal or lock is broken, with or without the
depositary's fault, he shall keep the secret of the deposit.
Art. 1982 When it becomes necessary to open a locked
box or receptacle, the depositary is presumed authorized
to do so, if the key has been delivered to him; or when the
instructions of the depositor as regards the deposit cannot
be executed without opening the box or receptacle.
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Way of the Deposit
Delivery in a specific manner to the depositary by the
depositor of the object of the deposit for safekeeping
Rules to be Followed by the Depositary
a) The depositary may not change the way of the deposit
unless:
1. There is a presumption of consent based on the
circumstances, and
2. The depositary notifies the depositor and waits for
the decision. The obligation to notify does not
apply if delay would cause danger to the object of
the deposit
b) The depositary must:
1. Collect the interest of certificates, bonds,
securities or instruments when they become due,
and
2. Must take necessary measures to preserve their
value and corresponding rights. This obligation
does not apply if the certificates, bonds, securities
or instruments are kept pursuant to a contract for
the rent of safety deposit boxes.
c) The depositary may commingle grain or other articles
of the same kind and quality unless there is a
stipulation to the contrary
d) The depositary cannot use the thing deposited unless:
1. There is express and proven permission of the
depositor, in which case the deposit is considered
an irregular deposit. In this first exception, the
principal purpose of the irregular deposit is still
safekeeping. If safekeeping is not the principal
purpose, then the contract is not a deposit and
may be a loan.
2. The preservation of the object of the deposit
requires its use. In this second exception, use of
the object by the depositary is for the limited
purpose of preservation.
e) The depositary must return a closed and sealed object
in the same condition and must keep the secret of the
deposit if the seal or lock is broken
f) The depositary may open a locked box or receptacle
only if:
1. There is express authority, since the parties are
free to stipulate on this.
2. There is presumed authority, such as when the
key to the lock has been delivered, or the
instructions of the depositor as regards the
deposit cannot be executed without opening the
box or receptacle.
CA Agro-Industrial Development Corporation v. CA (1993)
Davide, Jr., J
Concept: Voluntary deposit; Obligation to safekeep
Brief Facts: Agro-Industrial and Sps. Pugao rented a
safety deposit box from Security Bank which was kept in
the latters possession. Certificates of title of 2 lots sold by
Pugaos to Agro-Industrial were kept in the box until Agro-
Industrial has fully paid the purchase price of the sale. In
order for the box to be opened, a key in the possession of
the renters and the guard key in the possession of the
bank were needed. Joint signatures of the renters were
likewise required. When Agro-Industrial and the Pugaos
went to the bank to have the safety deposit box opened, it
was found that its contents were missing. Agro-Industrial
missed out on an offer to purchase said lots due to the
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delay in the reconstitution of titles. As a result, it sued the
bank for damages. The bank invokes the conditions in
their lease agreement of the safety deposit box, wherein
the bank explicitly declared that it is not a depositary of
the contents and assumes no liability in connection
therewith.
Doctrine: provides that banking institutions who receive
in custody funds, documents, and valuable objects, and
rent safety deposit boxes for safeguarding of such effects
are depositaries. The primary function is still found within
the parameters of a contract of deposit. The renting out of
the safety deposit boxes is not independent from, but
related to this principal function. Stipulations exempting a
depositary from liability in case of loss are contrary to law
and public policy.
Roman Catholic Bishop of Jaro v. De la Pena(1913)
Powell, J.
Concept: Obligation to Safekeep
Brief facts: Fr. De la Pena was a made a trustee by the
Bishop of Jaro to collect and safekeep funds to be used for
the construction of a leper hospital. He then deposited the
collected money in his personal account. When war and
the revolution broke out, he was arrested as a political
prisoner and his funds in the account were confiscated by
the government, as it was allegedly being used for
revolutionary purposes. Bishop wants the estate of the
trustee to repay the trust-money which was also
confiscated by the US armed forces.
Doctrine: Fortuitous events constitute a defense, with the
effect of relieving the debtor of his obligation to the
creditor.
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2.LIABILITY FOR LOSS AND DAMAGE
Art. 1972 The depositary is obliged to keep the thing
safely and to return it, when required, to the depositor, or
to his heirs and successors, or to the person who may
have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing,
shall be governed by the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into
account in determining the degree of care that the
depositary must observe.
Art. 1973 Unless there is a stipulation to the contrary, the
depositary cannot deposit the thing with a third person. If
deposit with a third person is allowed, the depositary is
liable for the loss if he deposited the thing with a person
who is manifestly careless or unfit. The depositary is
responsible for the negligence of his employees.
Art. 1977 The depositary cannot make use of the thing
deposited without the express permission of the depositor.
Otherwise, he shall be liable for damages.
However, when the preservation of the thing deposited
requires its use, it must be used but only for that purpose.
Art. 1981 When the thing deposited is delivered closed
and sealed, the depositary must return it in the same
condition, and he shall be liable for damages should the
seal or lock be broken through his fault.
Fault on the part of the depositary is presumed, unless
there is proof to the contrary.
As regards the value of the thing deposited, the statement
of the depositor shall be accepted, when the forcible
opening is imputable to the depositary, should there be no
proof to the contrary. However, the courts may pass upon
the credibility of the depositor with respect to the value
claimed by him.
When the seal or lock is broken, with or without the
depositary's fault, he shall keep the secret of the deposit.
Art. 1979 The depositary is liable for the loss of the thing
through a fortuitous event:
(1) If it is so stipulated;
(2) If he uses the thing without the depositor's
permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself
may have been authorized to use the same.
Art. 1990 If the depositary by force majeure or
government order loses the thing and receives money or
another thing in its place, he shall deliver the sum or other
thing to the depositor
Art. 1993 The depositor shall reimburse the depositary
for any loss arising from the character of the thing
deposited, unless at the time of the constitution of the
deposit the former was not aware of, or was not expected
to know the dangerous character of the thing, or unless he
notified the depositary of the same, or the latter was
aware of it without advice from the depositor.
Purpose of safekeeping is the distinguishing characteristic
of a contract of deposit
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Responsibility for loss and damage are subject to specific A. LIABILITY OF DEPOSITARY
rules under the Civil Code
Responsibility for loss & damage will attach to the
DEPOSITARY if:
1. The depositary deposits the object with a third
person, unless there is a stipulation allowing it.
2. If deposit with a third person is allowed, the
depositary deposits the thing with a person who is
manifestly careless or unfit.
3. The employees of the depositary are negligent.
4. The depositary uses the object of the deposit, unless
there was express permission of the depositor, or the
use was necessary for the limited purpose of
preservation.
5. The seal or lock of a thing delivered closed and sealed
is broken through the fault of the depositary. Fault is
presumed, unless there is proof to the contrary. If the
forcible opening of a thing delivered closed and sealed
is imputable to the depositary, the value of the thing
deposited shall be based on the statement of the
depositor, unless:
a. There is contrary proof, and
b. The courts determine otherwise based on the
credibility of the depositor.
6. Even in case of a fortuitous event, the depositary is
liable if:
a. It has been stipulated,
b. The depositary uses the thing without the
depositors permission,
c. The depositary delays the return of the object of
the deposit, or
d. The depositary allows others to use it, even
though the depositary may have been authorized
to use the same.
7. Even if the depositary is not liable, if the depositary
loses the thing by force majeure or government order,
but receives money or a replacement, the depositary
shall deliver the money or replacement to the
depositor.

B. LIABILITY OF DEPOSITOR

Responsibility for loss or damage will attach to the

depositor ONLY IF the depositor delivers a thing the
character of which causes any loss to the depositary,
unless:
1. At the time of the constitution of the deposit the
depositor was not aware of, or was not expected
to know the dangerous character of the thing, or
2. The depositor notified the depositary of the
dangerous character, or the depositary was in any
case aware of the character.

C. LIABILITY FOR EXPENSES

Art. 1992 If the deposit is gratuitous, the depositor is

obliged to reimburse the depositary for the expenses he
may have incurred for the preservation of the thing
deposited.

If the deposit is gratuitous, the depositor bears the

expenses for the preservation of the thing deposited

If the deposit is onerous, the depositary bears the

expenses of preservation

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C. OBLIGATION TO RETURN
1. BY WHOM AND TO WHOM
Art. 1972 The depositary is obliged to keep the thing
safely and to return it, when required, to the depositor, or
to his heirs and successors, or to the person who may
have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing,
shall be governed by the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into
account in determining the degree of care that the
depositary must observe.
Art. 1970 If a person having capacity to contract accepts
a deposit made by one who is incapacitated, the former
shall be subject to all the obligations of a depositary, and
may be compelled to return the thing by the guardian, or
administrator, of the person who made the deposit, or by
the latter himself if he should acquire capacity.
Art. 1971 If the deposit has been made by a capacitated
person with another who is not, the depositor shall only
have an action to recover the thing deposited while it is
still in the possession of the depositary, or to compel the
latter to pay him the amount by which he may have
enriched or benefited himself with the thing or its price.
However, if a third person who acquired the thing acted in
bad faith, the depositor may bring an action against him
for its recovery.
Art. 1984 The depositary cannot demand that the
depositor prove his ownership of the thing deposited.
Nevertheless, should he discover that the thing has been
stolen and who its true owner is, he must advise the latter
of the deposit.
If the owner, in spite of such information, does not claim it
within the period of one month, the depositary shall be
relieved of all responsibility by returning the thing
deposited to the depositor.
If the depositary has reasonable grounds to believe that
the thing has not been lawfully acquired by the depositor,
the former may return the same.
Art. 1985 When there are two or more depositors, if they
are not solidary, and the thing admits of division, each one
cannot demand more than his share.
When there is solidarity or the thing does not admit of
division, the provisions of Articles 1212 and 1214 shall
govern. However, if there is a stipulation that the thing
should be returned to one of the depositors, the
depositary shall return it only to the person designated
Art. 1212 Each one of the solidary creditors may do
whatever may be useful to the others, but not anything
which may be prejudicial to the latter.
Art. 1214 The debtor may pay any one of the solidary
creditors; but if any demand, judicial or extrajudicial, has
been made by one of them, payment should be made to
him.
Art. 1986 If the depositor should lose his capacity to
contract after having made the deposit, the thing cannot
be returned except to the persons who may have the
administration of his property and rights.
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Art. 1991 The depositor's heir who in good faith may
have sold the thing which he did not know was deposited,
shall only be bound to return the price he may have
received or to assign his right of action against the buyer
in case the price has not been paid him.
To whom:
1. Depositor; or
2. Heirs and successors; or
3. Person designated in the contract
On issues of capacity to contract:
1. If depositor is incapacitated, depository must return to
(Art. 1970):
a. Guardian or administrator of the depositor
b. Depositor if he should acquire capacity
2. If depositor loses capacity to contract after depositing,
depositor must return to persons who may have
administration of depositors property and rights
When there are two or more solidary depositors OR
when the thing is not divisible:
1. If there is a stipulation to return to one of the
depositors, depository shall return it only to the
person designated
2. If there is no stipulation:
a. But there is a demand, judicial or extrajudicial,
payment should be made to him
b. If there is no demand, depositary may pay any
one of the depositors
2. WHAT TO RETURN
Art. 1983 The thing deposited shall be returned with all
its products, accessories and accessions.
Should the deposit consist of money, the provisions
relative to agents in article 1896 shall be applied to the
depositary.
Art. 1986 If the depositor should lose his capacity to
contract after having made the deposit, the thing cannot
be returned except to the persons who may have the
administration of his property and rights.
What must be returned:
Thing itself
Plus all its products, accessories and accessions
Interest on sums applied to depositarys own use from
day on which he did so and on those which he still
owes after extinguishment of agency
3. WHERE TO RETURN
Art. 1987 If at the time the deposit was made a place
was designated for the return of the thing, the depositary
must take the thing deposited to such place; but the
expenses for transportation shall be borne by the
depositor.
If no place has been designated for the return, it shall be
made where the thing deposited may be, even if it should
not be the same place where the deposit was made,
provided that there was no malice on the part of the
depositary.
Where to return:
If place is designated; expenses to be borne by depositor
If no designated place: where thing deposited may be,
even if not where deposit was made
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 4. WHEN TO RETURN

Art. 1988 The thing deposited must be returned to the

depositor upon demand, even though a specified period or
time for such return may have been fixed.

This provision shall not apply when the thing is judicially

attached while in the depositary's possession, or should he
have been notified of the opposition of a third person to
the return or the removal of the thing deposited. In these
cases, the depositary must immediately inform the
depositor of the attachment or opposition.

Art. 1989 Unless the deposit is for a valuable

consideration, the depositary who may have justifiable
reasons for not keeping the thing deposited may, even
before the time designated, return it to the depositor; and
if the latter should refuse to receive it, the depositary may
secure its consignation from the court.

Principal purpose of delivering object to depository:

safekeeping

One of the primary obligations: return object upon demand

GR: Return upon demand, even though a specified period
or time has been fixed
XPN:
o Thing deposited is judicially attached while in the
depositarys possession; or
o Depository was notified of the opposition of a third
person to the return or the removal of the thing
deposited

For the above exceptions, depository must immediately

inform the depositor of the attachment or the opposition,
but it does not imply that obligation to return ceases
o They are exceptions to return upon demand
o Depository may take measures to protect itself,
such as seeking appropriate protective measures
from a court

5. RIGHT TO RETENTION

Art. 1994 The depositary may retain the thing in pledge

until the full payment of what may be due him by reason
of the deposit.

Depository has a right of retention as a means or device

for the depository to be able to obtain payment of what
may be due

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III. NECESSARY DEPOSIT
A. GENERAL CONCEPTS
Art. 1964 A deposit may be constituted judicially or
extrajudicially.
Art. 1967 An extrajudicial deposit is either voluntary or
necessary.
Art. 1996 A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity,
such as fire, storm, flood, pillage, shipwreck, or other
similar events.
Art. 1966 Only movable things may be the object of a
deposit.
A deposit may be constituted:
Judicially
Extrajudicially
o Voluntary
o Necessary
In compliance with a legal obligation
Takes place on the occasion of any calamity
NECESSARY DEPOSIT
Extrajudicial deposit constituted over movable property as
a consequence of law or quasi-contract, so that no unjust
enrichment will result from the juridical relation
B. EXAMPLES OF NECESSARY DEPOSIT
1. COMPLIANCE WITH A LEGAL OBLIGATION
Art. 1996 A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity,
such as fire, storm, flood, pillage, shipwreck, or other
similar events.
Art. 1997 The deposit referred to in No. 1 of the
preceding article shall be governed by the provisions of
the law establishing it, and in case of its deficiency, by the
rules on voluntary deposit.
The deposit mentioned in No. 2 of the preceding article
shall be regulated by the provisions concerning voluntary
deposit and by Article 2168
2. ON THE OCCASION OF A CALAMITY
Art. 1996 A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity,
such as fire, storm, flood, pillage, shipwreck, or other
similar events.
Art. 1997 The deposit referred to in No. 1 of the
preceding article shall be governed by the provisions of
the law establishing it, and in case of its deficiency, by the
rules on voluntary deposit.
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The deposit mentioned in No. 2 of the preceding article
shall be regulated by the provisions concerning voluntary
deposit and by Article 2168.
Art. 2168 When during a fire, flood, storm, or other
calamity, property is saved from destruction by another
person without the knowledge of the owner, the latter is
bound to pay the former just compensation.
If it is saved from destruction during a calamity without
the knowledge of the owner, the owner is bound to pay
the one who saved just compensation
Person who saves movable property from destruction is
considered by law as the depositary
Owner of the property is bound to pay just compensation
and is considered by law as the depositor
3. PASSENGER BAGGAGE WITH COMMON CARRIERS
Art. 1754 The provisions of Articles 1733 to 1753 shall
apply to the passenger's baggage which is not in his
personal custody or in that of his employee. As to other
baggage, the rules in Articles 1998 and 2000 to 2003
concerning the responsibility of hotel-keepers shall be
applicable.
Common carriers: persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the
public
Law on common carriers governs baggage not in the
custody of the passenger or the passengers employees
requires extraordinary diligence in the vigilance over
goods
Passenger baggage deposited with the common carrier is
considered a necessary deposit, subjecting the common
carrier, considered by law as the depository, to the same
rules on necessary deposit as hotels or inns
4. HOTELS OR INNS
Art. 1998 The deposit of effects made by the travellers in
hotels or inns shall also be regarded as necessary. The
keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to
their employees, of the effects brought by the guests and
that, on the part of the latter, they take the precautions
which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects.
Art. 1999 The hotel-keeper is liable for the vehicles,
animals and articles which have been introduced or placed
in the annexes of the hotel.
Art. 2000 The responsibility referred to in the two
preceding articles shall include the loss of, or injury to the
personal property of the guests caused by the servants or
employees of the keepers of hotels or inns as well as
strangers; but not that which may proceed from any force
majeure. The fact that travellers are constrained to rely on
the vigilance of the keeper of the hotels or inns shall be
considered in determining the degree of care required of
him.
Art. 2001 The act of a thief or robber, who has entered
7
the hotel is not deemed force majeure, unless it is done
with the use of arms or through an irresistible force.
Art. 2002 The hotel-keeper is not liable for compensation
if the loss is due to the acts of the guest, his family,
servants or visitors, or if the loss arises from the character
of the things brought into the hotel.
Art. 2003 The hotel-keeper cannot free himself from
responsibility by posting notices to the effect that he is not
liable for the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in articles 1998 to
2001 is suppressed or diminished shall be void.
Art. 2004 The hotel-keeper has a right to retain the
things brought into the hotel by the guest, as a security
for credits on account of lodging, and supplies usually
furnished to hotel guests.
YHT REALTY CORP V. CA
Brief Facts: Tropicana, owned by YHT, rents safety
deposit boxes to its guests, disclaiming, through the rental
agreement, liability for lost items. On two occasions,
McLoughlin lost money placed within the safety deposit
box rented by him from the hotel.
Doctrine: Disclaimer of liability by a hotel or inn or items
deposited with it contravenes Article 2003 of the Civil
Code. The hotel or inn can only be exculpated from liability
when loss occurs through force majeure, which in case of
stolen items, when the stealing is done with the use of
arms or through an irresistible force, or when the loss is
due to acts of the guest, his family or visitors, but in the
latter case, only when there is no concurrent negligence
on part of the hotel or inn.
IV. JUDICIAL DEPOSIT
Art. 1964 A deposit may be constituted judicially or
extrajudicially.
Art. 2005 A judicial deposit or sequestration takes place
when an attachment or seizure of property in litigation is
ordered.
Art. 2006 Movable as well as immovable property may be
the object of sequestration.
Art. 2007 The depositary of property or objects
sequestrated cannot be relieved of his responsibility until
the controversy which gave rise thereto has come to an
end, unless the court so orders.
Art. 2008 The depositary of property sequestrated is
bound to comply, with respect to the same, with all the
obligations of a good father of a family.
Art. 2009 As to matters not provided for in this Code,
judicial sequestration shall be governed by the Rules of
Court
A judicial deposit or sequestration is a deposit
constituted by judicial order, as a consequence of
litigation.
It is suppletorily governed by the provisions of the Rules of
Court on attachment and seizure of the property.
Unlike the general rule on deposit, judicial deposit is the
only type of deposit that may have for its object an
immovable property.

The provisions in the hotels undertaking that the

depositor shall hold the hotel free from any liability from
the loss of the items deposited directly contravenes Art.
2003 of the NCC.

Art. 2002, in exempting the hotel-keeper from the loss if

caused by the acts of the guest, his family, or visitors,
presupposes that the hotel-keeper is not guilty of
concurrent negligence. Otherwise, the hotel-keeper may
still be held liable despite the loss being caused by the
acts of the individuals enumerated in Art. 2002

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V. WAREHOUSE RECEIPTS
A. GENERAL CONCEPTS
APPLICABILITY; PURPOSE
Act 2137, Sec. 1 Persons who may issue receipts
Warehouse receipts may be issued by any warehouseman.
DEFINITION, FORM, CONTENTS OF RECEIPT
Act 2137, Sec. 2 Form of receipts; essential terms
Warehouse receipts need not be in any particular form but
every such receipt must embody within its written or
printed terms:
(a) The location of the warehouse where the goods are
stored,
(b) The date of the issue of the receipt,
(c) The consecutive number of the receipt,
(d) A statement whether the goods received will be
delivered to the bearer, to a specified person or to a
specified person or his order,
(e) The rate of storage charges,
(f) A description of the goods or of the packages
containing them,
(g) The signature of the warehouseman which may be
made by his authorized agent,
(h) 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, and
(i) A statement of the amount of advances made and of
liabilities incurred for which the warehouseman claims a
lien. If the precise amount of such advances made or of
such liabilities incurred is, at the time of the issue of,
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.
A warehouseman shall be liable to any person injured
thereby for all damages caused by the omission from a
negotiable receipt of any of the terms herein required.
Act 2137, Sec. 3 Form of receipts. What terms may be
inserted A warehouseman may insert in a receipt issued
by him any other terms and conditions provided that such
terms and conditions shall not:
(a) Be contrary to the provisions of this Act.
(b) In any wise impair his obligation to exercise that
degree of care in the safe-keeping of the goods entrusted
to him which is reasonably careful man would exercise in
regard to similar goods of his own.
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NON-NEGOTIABLE, NEGOTIABLE RECEIPTS
Act 2137, Sec. 4 Definition of non-negotiable receipt 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.
Act 2137, Sec. 5 Definition of 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 is a negotiable receipt.
No provision shall be inserted in a negotiable receipt that
it is non-negotiable. Such provision, if inserted shall be
void.
Act 2137, Sec. 6 Duplicate receipts must be so marked
When more than one negotiable receipt is issued for the
same goods, the word "duplicate" shall be plainly placed
upon the face of every such receipt, except the first one
issued. A warehouseman shall be liable for all damages
caused by his failure so to do to any one who purchased
the subsequent receipt for value supposing it to be an
original, even though the purchase be after the delivery of
the goods by the warehouseman to the holder of the
original receipt.
Act 2137, Sec. 7 Failure to mark "non-negotiable" A
non-negotiable receipt shall have plainly placed upon its
face by the warehouseman issuing it "non-negotiable," or
"not negotiable." In case of the warehouseman's failure so
to do, a holder of the receipt who purchased it for value
supposing it to be negotiable, may, at his option, treat
such receipt as imposing upon the warehouseman the
same liabilities he would have incurred had the receipt
been negotiable.
This section shall not apply, however, to letters,
memoranda, or written acknowledgment of an informal
character.
It is a formal contract because although the law states
that a warehouse receipt need not be in a particular form,
the Warehouse Receipts Law requires that it must be
written and must contain specific terms.
9
B. OBLIGATIONS AND RIGHTS OF A be liable to any one who purchases for value in good faith
WAREHOUSEMAN
1. OBLIGATION TO DELIVER
Act 2137, Sec. 8 Obligation of warehousemen to deliver
A warehouseman, in the absence of some lawful excuse
provided by this Act, is bound to deliver the goods upon a
demand made either by the holder of a receipt for the
goods or by the depositor; if such demand is accompanied
with:
(a) An offer to satisfy the warehouseman's lien;
(b) An offer to surrender the receipt, if negotiable,
with such indorsements as would be necessary for
the negotiation of the receipt; and
(c) A readiness and willingness to sign, when the
goods are delivered, an acknowledgment that
they have been delivered, if such signature is
requested by the warehouseman.
In case the warehouseman refuses or fails to deliver the
goods in compliance with a demand by the holder or
depositor so accompanied, the burden shall be upon the
warehouseman to establish the existence of a lawful
excuse for such refusal.
Act 2137, Sec. 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.
Act 2137, Sec. 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 deliver;
or
(b) Had information that the delivery about to be
made was to one not lawfully entitled to the
possession of the goods.
Act 2137, Sec. 11 Negotiable receipt 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
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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.
Act 2137, Sec. 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.
Act 2137, Sec. 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 purchase.
Act 2137, Sec. 14 Lost or destroyed receipts Where a
negotiable receipt has been lost or destroyed, a court of
competent jurisdiction may order the delivery of the goods
upon satisfactory proof of such loss or destruction and
upon the giving of a bond with sufficient sureties to be
approved by the court to protect the warehouseman from
any liability or expense, which he or any person injured by
such delivery may incur by reason of the original receipt
remaining outstanding. The court may also in its
discretion order the 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.
Act 2137, Sec. 15 Effect of duplicate receipts A
receipt upon the face of which the word "duplicate" is
plainly placed is a representation and warranty by the
warehouseman that such receipt is an accurate copy of an
original receipt properly issued and uncanceled at the
date of the issue of the duplicate, but shall impose upon
10
him no other liability.
Act 2137, Sec. 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 directly or indirectly from a transfer made by
the depositor at the time of or subsequent to the deposit
for storage, or from the warehouseman's lien, shall excuse
the warehouseman from liability for refusing to deliver the
goods according to the terms of the receipt.
Act 2137, Sec. 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.
Act 2137, Sec. 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 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 claimants to
interplead.
Act 2137, Sec. 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.
Act 2137, Sec. 36 Effect of sale After goods have been
lawfully sold to satisfy a warehouseman's lien, or have
been lawfully sold or disposed of because of their
perishable or hazardous nature, the warehouseman shall
not thereafter be liable for failure to deliver the goods to
the depositor or owner of the goods or to a holder of the
receipt given for the goods when they were deposited,
even if such receipt be negotiable.
Act 2137, Sec.58 Definitions (a) In this Act, unless the
content or subject matter otherwise requires:
"Action" includes counterclaim, set-off, and suits in equity
as provided by law in these islands.
"Delivery" means voluntary transfer of possession from
one person to another.
"Fungible goods" means goods of which any unit is, from
its nature by mercantile custom, treated as the equivalent
of any other unit.
"Goods" means chattels or merchandise in storage or
which has been or is about to be stored.
"Holder" of a receipt means a person who has both actual
possession of such receipt and a right of property therein.
"Order" means an order by indorsement on the receipt.
"Owner" does not include mortgagee.
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"Person" includes a corporation or partnership or two or
more persons having a joint or common interest.
To "purchase" includes to take as mortgagee or as
pledgee.
"Receipt" means a warehouse receipt.
"Value" is any consideration sufficient to support a 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
therefor.
"Warehouseman" means a person lawfully engaged in the
business of storing goods for profit.
(b) A thing is done "in good faith" within the meaning of
this Act when it is in fact done honestly, whether it be
done negligently or not.
The obligation of the warehouseman to deliver is not the
delivery required for the perfection of real contracts, but is
similar to the obligation of the depositary to return.
Because of the commercial nature of the transactions of a
warehouseman, this obligation is subjected to stricter
rules.
2. LIABILITY FOR GOODS
Act 2137, Sec. 20 Liability 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 purport, 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.
Act 2137, Sec. 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 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.
Act 2137, Sec. 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.
Act 2137, Sec. 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
11
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.
Act 2137, Sec. 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.
Act 2137, Sec. 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 can not
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.
Act 2137, Sec. 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 can not readily
be attached or levied upon by ordinary legal process.
The liability of a warehouseman for the goods stored is
similar to the liability of the depositary for the safekeeping
of the property deposited.
The rules on warehousemans liability for goods take into
consideration the commercial nature of the credit
transaction.
3. WAREHOUSEMANS LIEN
Act 2137, Sec. 31 Warehouseman need not deliver until
lien is satisfied A warehouseman having a lien valid
against the person demanding the goods may refuse to
deliver the goods to him until the lien is satisfied.
Act 2137, Sec. 32 Warehouseman's lien does not
preclude other remedies Whether a warehouseman has
or has not a lien upon the goods, he is entitled to all
remedies allowed by law to a creditor against a debtor for
the collection from the depositor of all charges and
advances which the depositor has expressly or impliedly
contracted with the warehouseman to pay.
Act 2137, Sec. 33 Satisfaction of lien by sale A
warehouseman's lien for a claim which has become due
may be satisfied as follows:
(a) An itemized statement of the warehouseman's
claim, showing the sum due at the time of the
notice and the date or dates when it becomes
due,
(b) A brief description of the goods against which the
lien exists,
(c) A demand that the amount of the claim as stated
in the notice of such further claim as shall accrue,
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shall be paid on or before a day mentioned, not
less than ten days from the delivery of the notice
if it is personally delivered, or from the time when
the notice shall reach its destination, according to
the due course of post, if the notice is sent by
mail,
(d) A statement that unless the claim is paid within
the time specified, the goods will be advertised
for sale and sold by auction at a specified time
and place.
In accordance with the terms of a notice so given, a sale of
the goods by auction may be had to satisfy any valid claim
of the warehouseman for which he has a lien on the
goods. The sale shall be had in the place where the lien
was acquired, or, if such place is manifestly unsuitable for
the purpose of the claim specified in the notice to the
depositor has elapsed, and advertisement of the sale,
describing the goods to be sold, and stating the name of
the owner or person on whose account the goods are held,
and the time and place of the sale, shall be published once
a week for two consecutive weeks in a newspaper
published in the place where such sale is to be held. The
sale shall not be held less than fifteen days from the time
of the first publication. If there is no newspaper published
in such place, the advertisement shall be posted at least
ten days before such sale in not less than six conspicuous
places therein.
From the proceeds of such sale, the warehouseman shall
satisfy his lien including the reasonable charges of notice,
advertisement and sale. The balance, if any, of such
proceeds shall be held by the warehouseman and
delivered on demand to the person to whom he would
have been bound to deliver or justified in delivering goods.
At any time before the goods are so sold, any person
claiming a right of property or possession therein may pay
the warehouseman the amount necessary to satisfy his
lien and to pay the reasonable expenses and liabilities
incurred in serving notices and advertising and preparing
for the sale up to the time of such payment. The
warehouseman shall deliver the goods to the person
making payment if he is a person entitled, under the
provision of this Act, to the possession of the goods on
payment of charges thereon. Otherwise, the
warehouseman shall retain the possession of the goods
according to the terms of the original contract of deposit.
Act 2137, Sec. 34 Perishable and hazardous goods If
goods are of a perishable nature, or by keeping will
deteriorate greatly in value, or, by their order, leakage,
inflammability, or explosive nature, will be liable to injure
other property , the warehouseman may give such notice
to the owner or to the person in whose names the goods
are stored, as is reasonable and possible under the
circumstances, to satisfy the lien upon such goods and to
remove them from the warehouse and in the event of the
failure of such person to satisfy the lien and to receive the
goods within the time so specified, the warehouseman
may sell the goods at public or private sale without
advertising. If the warehouseman, after a reasonable
effort, is unable to sell such goods, he may dispose of
them in any lawful manner and shall incur no liability by
reason thereof.
Act 2137, Sec. 35 Other methods of enforcing lien The
remedy for enforcing a lien herein provided does not
preclude any other remedies allowed by law for the
enforcement of a lien against personal property nor bar
the right to recover so much of the warehouseman's claim
12
as shall not be paid by the proceeds of the sale of the
property.
Act 2137, Sec. 36 Effect of sale After goods have been
lawfully sold to satisfy a warehouseman's lien, or have
been lawfully sold or disposed of because of their
perishable or hazardous nature, the warehouseman shall
not thereafter be liable for failure to deliver the goods to
the depositor or owner of the goods or to a holder of the
receipt given for the goods when they were deposited,
even if such receipt be negotiable.
The warehousemans lien is the warehousemans legal
right or interest in the depositors property. It is similar to
the depositorys right of retention under the NCC, which is
a means or device by which the depositary is able to
obtain payment of what may be due because of the
deposit.
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C. NEGOTIATION AND TRANSFER
Act 2137, Sec. 37 Negotiation of negotiable receipt of
delivery A negotiable receipt may be negotiated by
delivery:
(a) Where, by 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 where a negotiable receipt has
been indorsed in blank or to bearer, 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 of such indorsee.
Act 2137, Sec. 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.
Act 2137, Sec. 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 can not be negotiated, and the
indorsement of such a receipt gives the transferee no
additional right.
Act 2137, Sec. 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.
Act 2137, Sec. 41 Rights of person to whom a 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 and contracted directly with him.
Act 2137, Sec. 42 Rights of person to whom receipt has
13
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.
Act 2137, Sec. 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.
Act 2137, Sec. 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.
Act 2137, Sec. 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.
Act 2137, Sec. 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.
Act 2137, Sec. 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
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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.
Act 2137, Sec. 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.
Act 2137, Sec. 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.
D. CRIMINAL LIABILITY
Act 2137, Sec. 50 Issue of receipt for goods not received
A warehouseman, or an officer, agent, or servant of a
warehouseman who issues or aids in issuing a receipt
knowing that the goods for which such receipt is issued
have not been actually received by such warehouseman,
or are not under his actual control at the time of issuing
such receipt, shall be guilty of a crime, and, upon
conviction, shall be punished for each offense by
imprisonment not exceeding five years, or by a fine not
exceeding ten thousand pesos, or both.
Act 2137, Sec. 51 Issue of receipt containing false
statement A warehouseman, or any officer, agent or
servant of a warehouseman who fraudulently issues or
aids in fraudulently issuing a receipt for goods knowing
that it contains any false statement, shall be guilty of a
crime, and upon conviction, shall be punished for each
offense by imprisonment not exceeding one year, or by a
fine not exceeding two thousand pesos, or by both.
Act 2137, Sec. 52 Issue of duplicate receipt not so
marked A warehouse, or any officer, agent, or servant
of a warehouseman who issues or aids in issuing a
duplicate or additional negotiable receipt for goods
knowing that a former negotiable receipt for the same
goods or any part of them is outstanding and uncanceled,
without plainly placing upon the face thereof the word
"duplicate" except in the case of a lost or destroyed
receipt after proceedings are provided for in section
fourteen, shall be guilty of a crime, and, upon conviction,
shall be punished for each offense by imprisonment not
exceeding five years, or by a fine not exceeding ten
thousand pesos, or by both.
Act 2137, Sec. 53 Issue for warehouseman's goods or
receipts which do not state that fact Where they are
deposited with or held by a warehouseman goods of which
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he is owner, either solely or jointly or in common with
others, such warehouseman, or any of his officers, agents,
or servants who, knowing this ownership, issues or aids in
issuing a negotiable receipt for such goods which does not
state such ownership, shall be guilty of a crime, and, upon
conviction, shall be punished for each offense by
imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.
Act 2137, Sec. 54 Delivery of goods without obtaining
negotiable receipt A warehouseman, or any officer,
agent, or servant of a warehouseman, who delivers goods
out of the possession of such warehouseman, knowing
that a negotiable receipt the negotiation of which would
transfer the right to the possession of such goods is
outstanding and uncanceled, without obtaining the
possession of such receipt at or before the time of such
delivery, shall, except in the cases provided for in sections
fourteen and thirty-six, be found guilty of a crime, and,
upon conviction, shall be punished for each offense by
imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.
Act 2137, Sec. 55 Negotiation of receipt for mortgaged
goods. Any person who deposits goods to which he has
no title, or upon which there is a lien or mortgage, and
who takes for such goods a negotiable receipt which he
afterwards negotiates for value with intent to deceive and
without disclosing his want of title or the existence of the
lien or mortgage, shall be guilty of a crime, and, upon
conviction, shall be punished for each offense by
imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.
A fundamental distinction between special commercial
laws on credit transactions and their Civil Code
counterparts, such as the Warehouse Receipts Law in
relation to deposits, is the inclusion of provisions
criminalizing certain acts and omissions relating to the
credit transaction.
E. GENERAL BONDED WAREHOUSES
Act 3893
Sec. 1 This Act shall be known by the short title of
"BONDED WAREHOUSE ACT."
Sec. 2 As used in this Act, the term "warehouse" shall be
deemed to mean every building, structure, or other
protected inclosure in which rice is kept for storage. The
term "rice" shall be deemed to mean either palay in
bundles, or in grains, or clean rice, or both. "Person"
including corporation or partnership or two or more
persons having joint or common interest; "warehouseman"
means a person engaged in the business receiving rice for
storage; and "receipt" means any receipt issued by a
warehouseman for rice delivered to him. For the purpose
of this Act, the business of receiving rice for storage shall
include (1) any contract or transaction wherein the
warehouseman is obligated to return the very same rice
delivered to him or pay its value;(2) any contract or
transaction wherein the rice delivered is to be milled for
and on account of the owner thereof; (3) any contract or
transaction wherein the rice delivered is commingled with
the rice delivered by or belonging to other persons and
the warehouseman is obligated to return the rice of the
same kind or pay its value.
Sec. 3 No person shall engage in the business of receiving
rice for storage without first securing a license therefore
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from the Director of the Bureau of Commerce and Industry.
Said license shall be annual and shall expire on the thirty-
first day of December.
Sec. 4 Any person applying for a license to engage in the
business of receiving rice for storage shall set forth in the
application the place or places where the business and
warehouse are to be established or located and the
maximum quantity of rice to be received. The application
shall be accompanied by a cash bond or a bond secured
by real estate or signed by a duly authorized bonding
company, the amount of which shall be fixed by the
Director of the Bureau of Commerce and Industry at not
less than thirty-three and one third percent of the market
value of the maximum quantity or rice to be received. Said
bond shall be so conditioned as to respond for the market
value of the rice actually delivered and received at any
time the warehouseman is unable to return the rice or to
pay its value. The bond shall be approved by the Director
of the Bureau of Commerce and Industry before issuing a
license under this Act, to satisfy himself concerning the
sufficiency of such bond, and to determine whether the
warehouse for which such license is applied for is suitable
for the proper storage of rice.
Sec. 5 Whenever the Director of the Bureau of Commerce
and Industry shall determine that a bond approved by him,
is or any cause, has become insufficient, he may require
an additional bond or bonds to be given by the
warehouseman concerned, conforming with the
requirements of the preceding section, and unless the
same be given within the time fixed by a written demand
therefor the license of such warehouse may be suspended
or revoked.
Sec. 6 Every person licensed under this Act to engage in
the business of receiving rice for storage shall insure the
rice so received and stored against fire.
Sec. 7 Any person injured by the breach of any obligation
to secure which a bond is given, under the provisions of
this Act, shall be entitled to sue on the bond in his own
name in any court of competent jurisdiction to recover the
damages he may have sustained by such breach. Nothing
contained herein shall except any property of assets of
any warehouseman from being sued on in case the bond
given is not sufficient to respond for the full market value
of the rice received by such warehouseman.
Sec. 8 Every warehouseman licensed under this Act shall
receive for storage, so far as his license and the capacity
of his warehouse permit, any rice, of the kind customarily
stored therein by him, which may be tendered to him in a
suitable condition for warehousing, in the usual manner
and in the ordinary and usual course of business, without
making any discrimination between persons desiring to
avail themselves of warehouse facilities.
Sec. 9 Every warehouseman licensed under this Act shall
keep a complete record of the rice received by him, of the
receipts issued therefor of the withdrawals, of the
liquidations and of all receipts returned to and cancelled
by him. He shall make reports to the Director of Bureau of
Commerce and Industry concerning his warehouse and the
conditions, contents, operations, and business thereof in
such form and at such time as the said Director may
require, and shall conduct said warehouse in all other
respects in compliance with this Act and the rules and
regulations made in accordance therewith.
Sec. 10 The Director of Bureau of Commerce and Industry
shall from time to time make such rules and regulations as
15
he may deem necessary for the efficient execution of the c. The commodity delivered is commingled with the
provisions of this Act. commodity belonging to other persons, and the
warehouseman is obligated to return the commodity
Sec. 11 Any person engaging in the business of receiving of the same kind or to pay its value.
rice for storage in violation of Section three of this Act
shall be deemed guilty of misdemeanor, and upon
conviction thereof shall be punished by imprisonment of
not less than one month or by a fine of not more than five
thousand pesos, or both, in the discretion of the court. Duties of the bonded warehouseman:

Sec. 12 Any warehouseman licensed under this Act
receiving a quantity of rice greater than that specified in
his application and license, shall, upon conviction, be fined
double the market value of the rice so received in excess
of the quantity of rice he is authorized to receive.
Sec. 13 Any person entering into connivance or
combination with any warehouseman that is not licensed
under this Act, with the purpose of evading the provisions
of section three of this Act, shall be deemed guilty of
misdemeanor, and upon conviction thereof, shall be fined
not more than two hundred pesos or imprisonment for not
more than one months, or both, in the discretion of the
court.
Sec. 14 The Director of the Bureau of Commerce and
Industry may, after opportunity for hearing has been
afforded to the license concerned, suspend or revoke any
license issued to any warehouseman, conducting a
warehouse under this Act, for any violation or failure to
comply with any provision of this Act or of the rules and
regulations made by virtue thereof.
Sec. 15 This Act shall not be applicable to cooperative
marketing associations of rice producers organized under
Act Numbered Three Thousand Four Hundred and Twenty-
five known as the "Cooperative Marketing Law," provided
such associations shall not receive, for storage, rice from
non-members which is greater in quantity than one-half of
the total quantity of rice received from members, at any
time.
Sec. 16 If any clause, sentence, or paragraph, or part of
this Act shall, for any reason, be adjusted by any court of
competent jurisdiction to be invalid, such judgment shall
not affect, impair, or invalidate the remainder thereof, but
shall be confined in his operation to the clause, sentence,
paragraph or part thereof directly involved in the
controversy in which such judgment shall have been
rendered.
Sec. 17 This Act shall take effect on January First,
nineteen hundred and thirty-two.
a. To insure the commodity received for storage against
fire;
b. To receive for storage any commodity of the kind
customarily stored by him in the warehouse so far as
his license and the capacity of his warehouse will
permit, without making any discrimination between
the persons desiring to avail themselves of warehouse
facilities;
c. To keep a complete record of all commodities received
by him, of the receipts issued therefor, of the
withdrawals, of the liquidation, and of all the receipts
returned to and cancelled by him.
Philippine National Bank v. Se (1996) Hermosisima, Jr., J.
Concept: General Bonded Warehouses Act
Brief Facts: In accordance with Act No. 2137, the
Warehouse Receipts Law, Noahs Ark Sugar Refinery
issued on several dates, 5 Warehouse Receipts (Quedans).
These were endorsed and negotiated to Ramos and
Zoleta. They failed to pay their loans upon maturity so
PNB wrote to Noahs Ark Sugar Refinery demanding
delivery of the sugar stocks covered by the quedans
endorsed to it by Zoleta and Ramos. Noahs Ark Sugar
Refinery refused. PNB filed a complaint for Specific
Performance with Damages and Application for Writ of
Attachment.
Doctrine: Where the judgment creditor makes an
unconditional presentment of warehouse receipts for
delivery of sugar stocks against the warehouseman, it
thereby admits the existence and validity of the terms,
conditions and stipulations written on the face of the
warehouse receipts, including the unqualified recognition
of the payment of warehousemans lien for storage fees
and preservation expenses.

Purpose: to regulate the business of receiving

commodities for storage in order to protect persons who
may want to avail themselves of warehouse facilities and
to encourage the establishment of more warehouses.

The business: includes entering into any contract or

transaction wherein:

a. The warehouseman is obligated to return the very

same commodity to the person depositing or pay its
value;

b. The commodity delivered is to be milled for the owner

thereof;

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