THE WAREHOUSE RECEIPTS LAW (ACT NO.

2137, AS AMENDED) 1

PURPOSE OF THE WRL

a. To prescribe the rights and duties of a warehouseman;
b. To regulate the relationship between a warehouseman and the depositor of
goods, or the holder of a warehouse receipts for the goods, or other persons;
c. To render title to, and right of possession of, property stored in warehouse
more easily convertible;
d. To protect those who, in good faith and for value, acquire negotiable
warehouse receipts by negotiation.

WAREHOUSE RECEIPT
1. It is a written acknowledgement by a warehouseman that he has received and
holds certain goods therein described in store for the person to whom it is
issued. (Talengtan Bros. & Sons vs. CA, G.R. No. L-110581, Sept. 21, 1994)
2. It is a simple written contract between the owner of the goods and the
warehouseman to pay the compensation for that service.
3. It is a bilateral contract. It imports that goods are in the hands of a
warehouseman and is a symbolical representation of the property itself.

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

business of storing goods for profit.

WHO MAY ISSUE WAREHOUSE RECEIPTS

Only a warehouseman may issue warehouse receipts to put said warehouse receipts
within the purview of the WRL.

FORM OF RECEIPTS; ESSENTIAL TERMS

1. The location of the warehouse where the goods are stored;
2. The date of issue of the receipt;
3. Consecutive number of the receipt;
4. A statement whether the goods received will be delivered to the bearer, to a
specified person, or to a specified person or his order;
5. The rate of storage charges;
6. A description of the goods or of the package containing them;
7. The signature of the warehouseman which may be made by his authorized
agent;
8. 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;
9. A statement of the amount of advances made and of liabilities incurred for
which the warehouseman claims as lien. If the precise amount for such
advances made or of such liabilities incurred is, at the same time of the issue
of the receipt, unknown to the warehouseman or his agent who issues it, a
statement of the fact that advances have been made or liabilities incurred and
the purpose thereof is sufficient.

EFFECT OF OMISSION OF THE ESSENTIAL CONTENTS

1. A warehouseman shall be liable to any person injured thereby all damages
caused by the omission from a ngotiable receipt of any of the terms herein
required;
2. Validity of receipt not affected;
3. Negotiability of receipt not affected.
TERMS THAT CANNOT BE INCLUDED IN THE WAREHOUSE RECEIPT
1. Those contrary to any provision of the law;
2. In any wise impair the warehouseman's obligation to exercise that degree of
care in the safekeeping of the goods entrusted to him which a reasonably
careful man would exercise with regard to similar goods of his own.

Document of Title to Goods – Any document used in the ordinary course of business,
in the sale/transfer of goods, as proof of possession or control of the goods, or
authorizing or purporting to authorize the possessor of the document to transfer
or receive either by indorsement or by delivery, goods represented by such document.
(Art. 1636,NCC)

COMMON TYPES OF DOCUMENT OF TITLE

1. Bill of Lading - written acknowledgement of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a person
named therein or on his order.
a. On Board Bill of Lading – issued when the goods have been
actually placed aboard the ship with very reasonable expectation
that the shipment is as good as on its way.
b. Port Bill of Lading – issued by the carrier to whom the goods have
been delivered and the vessel indicated in the bill of lading by which
the goods are to be shipped is already in the port where the goods
are held for shipment.
2. Quedan – warehouse receipt that covers sugar.
3. Dock Warrant – warrant given by dock owners to the owner of merchandise
imported and warehoused on the dock, upon the faith of the bills of lading, as a
recognition of his title to the goods.

FUNCTIONS OF DOCUMENTS OF TITLE

1. Evidence of receipt of goods;
2. Represents the goods and therefore operates as transferrable document that
carries with it the control over the goods. It is used to pass title to the
goods;
3. It is a contract.

MEANING OF NEGOTIABLE UNDER THE ACT

It indicates that in the passage of warehouse receipts through the channels of
commerce, the law regards the property which they describe as following them and
gives to their regular transfer by indorsement the effect of manual delivery of the
things specified in them.

Negotiable Warehouse Receipts - A negotiable warehouse receipt is one in which it

is stated that the goods received will be delivered either:
1. To the bearer; or
2. To the order of any person named in such receipt. (Sec. 5, WRL)

Non-Negotiable Warehouse Receipts - A non-negotiable warehouse receipt is one in

which it is stated that the goods received will be delivered to the depositor or to
any specified person.

DUPLICATE RECEIPTS MUST BE MARKED

• When more than one is issued for the same goods, the word "duplicate" shall be
plainly placed upon the face of every such receipt, except the first one issued.
• A warehouseman shall be held liable for damages for failure to do so to anyone
who purchased the subsequent receipt for value supposing it to be original,
even though the purchaser be after the delivery of the goods by
the warehouseman to the holder of the original receipt.

NEGOTIATION OF WAREHOUSE RECEIPTS

A. By Delivery
1. Where by the terms of the receipt, the warehouseman undertakes to
deliver the goods to the bearer; or
2. 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 bearer.
The bearer document is not always a bearer document. A special indorsement
has the effect of converting the bearer instrument into an order instrument.

B. By Indorsement Coupled with Delivery

1. If the receipt states that the goods are to be delivered to the order
of a person named therein;
2. Effects when indorsement is necessary but the negotiable receipt was
only delivered:
a. The transferee acquires title against the transferor;
b. There is no direct obligation of the warehouseman to deliver the
goods to such holder of the receipt;
c. The transferee can compel the transferor to complete the
negotiation by indorsing the instrument (Sec.43, WRL).The
negotiation takes effect on the date of the indorsement only.

EFFECT OF NEGOTIATION OF WAREHOUSE RECEIPT

Negotiation of the document has the effect of manual delivery so as to constitute
the transferee the owner of the goods.

RIGHTS OF A PERSON TO WHOM A RECEIPT HAS BEEN NEGOTIATED:

1. In case of receipt negotiable by delivery, 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;
2. In case of receipt negotiable by indorsement coupled by delivery, 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 has or had ability to convey to a
purchaser in good faith for value;
3. The direct obligation of the warehouseman to hold possession of the goods for
him according to the terms of the receipt as fully as if the warehouseman had
contracted directly with him. (Sec.41, WRL)

RIGHTS OF A PERSON TO WHOM A RECEIPT HAS BEEN TRANSFERRED:

1. The title to the goods as against the transferor with respect to a negotiable
warehouse receipt not duly negotiated (merely steps into the shoes);
2. The right, thereafter, to acquire the obligation of the warehouseman to hold
the goods for him; and
3. If the receipt is non-negotiable, such person acquires the right to notify the
warehouseman of the transfer thereof. (Sec. 42, WRL)

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:
1. The levy of an attachment or execution upon the goods by a creditor of the
transferor; or
2. A notification to the warehouseman by the transferor or a subsequent
purchaser from the transferor of the subsequent sale of the goods by the
transferor.
But-
-unpaid seller’s lien or right of stoppage in transitu cannot defeat the
right of the holder in good faith of NWR.
-Goods covered by NWR cannot be attached or levied upon unless receipt is
surrendered.

WAREHOUSEMAN’S DEFENSES FOR NON-DELIVERY OR MISDELIVERY

1. Loss or destruction of the goods without the fault of the bailee
2. Failure to satisfy the bailee’s lien
3. Failure to surrender a negotiable document of title
4. Lack of willingness to sign acknowledgement
5. Delivery to a claimant with better right
6. Where the document of title is attached by a creditor
7. Receipt by the bailee of a request by or on behalf of the person lawfully
entitled to a right of property or possession in the goods, not to make such
delivery
8. The bailee has information that the delivery about to be made was to one not
lawfully entitled to the possession of the goods
9. Attachment/levy of the goods by a creditor where the document is surrendered
or its negotiation is enjoined or the document is impounded

IN CASE OF ADVERSE CLAIM, THE BAILEE MAY:

1. Refuse to deliver the goods to anyone of them until he has had reasonable time
to check the validity of the claims.
2. File as action for interpleader and allow the claimants to prove their claims or
in case an action is filed against the bailee, he can set up the defense of
adverse claims.

WAREHOUSEMAN’S OBLIGATIONS
A. Under the WRL
1. Deliver the goods upon a demand made either by the holder of a
receipt for the goods or depositor.
2. Obligation to deliver arises only if the demand is accompanied by:
a. An offer to satisfy the warehouseman’s lien;
b. An offer to surrender the receipt, if negotiable, with such
indorsement as may be necessary for the negotiation of the receipt;
and
c. A readiness and willingness to sign, when the goods are delivered, an
acknowledgement that they have been delivered, if such signature
is requested by the warehouseman.
B. Under the General Bonded Warehouse Law (Act No. 9893; R.A. 247)
1. Secure a license from the Department of Trade and Industry;
2. File a bond equivalent to 33 ½ % of the market value of maximum
quantity of goods to be received for the protection of the depositors;
3. Not discriminate and must open his warehouse to the public;
4. Be liable in the amount equivalent to double the market value of the
goods in case of damage to the goods because the warehouseman
accepts goods in excess of the capacity of his warehouse; and
5. Insure the goods against fire.

LIABILITY OF WAREHOUSEMAN FOR STOLEN AND DEPOSITED GOODS

If stolen goods are deposited by the thief with a warehouseman, the latter shall
not be liable to the holder of the receipt even if he delivers the goods to the real
owners without the receipt being surrendered to him. (Sec.11 and 141, WRL)

WAREHOUSEMAN’S LIEN
A warehouseman shall have a lien on the goods deposited or on the proceeds
thereof in his hands for:
1. All lawful charges for storage and preservation of the goods;
2. All lawful claims for money advanced, interest, insurance, transportation, labor,
weighing, coopering, and other charges and expenses in relation to such goods;
and
3. All reasonable charges and expenses for notice and advertisements of sale, and
for the sale of the goods where default had been made in satisfying the
warehouseman’s lien.

REMEDIES OF A WAREHOUSEMAN TO ENFORCE HIS LIEN

1. Refuse to deliver the goods until his lien is satisfied (Sec. 31, WRL);
2. Sell the goods and apply the proceeds thereof to the value of the lien (Sections
33 & 34, WRL);
3. By other means allowed by law to a creditor against his debtor (Sec. 32, WRL);
4. Such other remedies allowed by law for the enforcement of a lien against
personal property (Sec. 35, WRL).

LOSS OF LIEN
Warehouseman’s lien is lost either by:
1. Surrendering possession thereof; or
2. Refusing to deliver the goods when a demand is made with which he is bound to
comply (Sec. 29, WRL).

Note: When warehouseman withholds the delivery of the goods without any valid
reason, he is liable for the loss of the goods and the liability cannot be eliminated by
proof of exercise of due diligence.
ATTACHMENT OR LEVY
• Negotiable receipt – the goods cannot be attached/levied in execution unless:
1. The receipt is first surrendered
2. Its negotiation is enjoined
3. The receipt is impounded by the court (Sec. 25, WRL)

• Creditor's Remedies To Reach Negotiable Receipt:

A creditor whose debtor is owner of a negotiable warehouse receipt
may seek for the attachment of the receipt or seek aid from the
courts to compel the debtor to satisfy claims by means allowed by law
 in regard to property which cannot readily be attached or levied upon
by ordinary legal process. (Sec. 26, WRL)

It does not apply when:

1. The depositor is not the owner of the goods (thief) or one who
has no right to convey title to the goods binding upon the owner;
2. The action for recovery or manual delivery of goods by the real
owner;
3. Where attachment is made prior to the issuance of receipt.
• Non-negotiable – the goods can be attached, provided it is done prior to the
notification of the bailee of the transfer. (Sec. 42, WRL)

WARRANTIES OF TRANSFEROR
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 that:
1. The receipt is genuine;
2. He has a legal right to negotiate or transfer it;
3. He has knowledge of no fact which would impair the validity or worth of that
receipt;
4. He has a right to transfer the title to the goods; and
5. 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. (Sec. 44, WRL)

REVIEW QUESTIONS1

BQ (1999)
A Warehouse Company received for safekeeping 1,000 bags of rice from a
merchant. To evidence the transaction, the Warehouse Company issued a
receipt expressly providing that the goods be delivered to the order of said
merchant.
A month after, a creditor obtained judgment against said merchant for a
sum of money. The sheriff proceeded to levy on the rice and directed the
Warehouse Company to deliver to him the deposited rice.
Q1:What advice will you give the Warehouse Company. Explain your answer.
Q2:Assuming that a week prior to the levy, the receiptwas sold to a rice mill
on the basis of which it filed a claim with the sherill. Would the rice mill
have better rights to the rice than the creditor?
A1: The 1,000 bags of rice were delivered to the Warehouse Company by a
merchant, and a negotiable receipt was issued therefor. The rice cannot
thereafter, while in the possession of the Warehouse Company, 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 Warehouse Company cannot be compelled to deliver the actual
possession of the rice until the receipt is surrendered to it or impounded by
the court.
A2: Yes. The rice mill, as holder for value of the receipt, has a better right to
the rice than the creditor. It is the rice mill that can surrender the receipt
which is in its possession and can comply with the other requirements which
will oblige the warehouseman to deliver the rice, namely, to sign a receipt
 for the delivery of the rice, and to pay the warehouseman’s liens and fees
and other charges.

*****
BQ (2005)
Jojo deposited several cartons of goods with SN Warehouse Corporation.
The corresponding warehouse receipt was issued to the order of Jojo. He
endorsed the warehouse receipt to EJ who paid the value of the goods
deposited. Before EJ could withdraw the goods, Melchor informed SN
Warehouse Corporation that the goods belonged to him snd were taken by Jojo
without his consent. Melchor wants to get the goods, but EJ also wants to
withdraw the same.
Q1: Who has a better right to the goods? Why?
Q2: If SN Warehouse Corporation is uncertain as to who is entitled to the
property, what is the proper recourse of the corporation? Explain.
A1: EJ has better right to the goods. The goods are covered by a negotiable
warehouse receipt which was indorsed to EJ for value. The negotiation to
EJ was not impaired by the fact that Jojo took the goods without the
consent of Melchar, as EJ had no notice of such fact. Moreover, EJ is in
possession of the warehouse receipt and only he can surrender it to the
warehouseman. (Sec. 8, WRL)
A2: Since there are conflicting claims of ownership of title, SN Warehouse
Corporation should file a complaint in interpleader. The matter involves a
judicial question as to whose claim is valid.

BQ (2007)
Alex deposited goods for which Billy, a warehouseman, issued a negotiable
warehouse receipt wherein the goods were delivered to Alex or order. Alex
negotiated the receipt to Caloy. Thereafter, Dario, a creditor, secured
judgment against Alex and served notice of levy over the goods on the
warehouseman.
Q1: To whom should the warehouseman deliver the goods upon demand?
Q2: Would your answer be the same if the warehouseman issued a non-
negotiable warehouse receipt? Reason briefly.
A1: The warehouseman should deliver the goods to Caloy. The goods cannot be
attached by garnishment or otherwise, or levied upon, unless the receipt be
first surrendered to the warehouseman, or its negotiation is enjoined. (Sec.
25, WRL)
A2: No. The non-negotiable warehouse receipt does not confer upon the
transferee the direct obligation of the warehouseman to hold possession of
the goods for him. (Sec, 42, WRL). In such a case, the law provides that
when a non-negotiable warehouse receipt is transferred to Caloy, he only
gets such title to the goods as alex had and aso a right to notify the
warehouseman to hold the goods for Caloy’s account. Prior to such notice,
Caloy’s claim can be defeated by a levy of execution upon the goods by a
creditor of Alex.

*****
Q: Coco was issued by a warehouseman a negotiable receipt for safekeeping by the
latter of his goods. Can the judgment creditor of Coco levy by execution the goods
covered by the negotiable receipt?
A: The goods cannot, 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 cannot be compelled to deliver the actual possession of the goods
until the receipt is surrendered to it or impounded by the court.

*****
Q. X deposits his goods in Y's warehouse, for which Y issues Warehouse receipt No.
00021 which stated that the goods received will be delivered to the bearer or to
the order of any person named in such receipt.
1. Suppose X negotiates the warehouse receipt to Z, can Z convert the
receipt to a non-negotiable warehousr receipt by writing on its face the
word "non-negotiable"?
A: No. Z cannot conver the receipt in that manner. According to Section 5
of the WRL, a negotiable warehouse receipt cannot be converted into a non-
negotiable warehouse receipt by inserting any provision in the negotiable
receipt that it is non-negotiable.
2. X negotiates the warehouse receipt to M. M, in claiming the goods covered
by the receipt, does not bring with him the receipt, but simply makes an
oral demand on Y and nothing more. Can Y validly refuse to deliverthe
goods? Explain.
A: Yes, Y can validly refuse to deliver the goods. The warehouseman is
bound to deliver the goods upon demand either by the holder of a receipt
for the goods or by the depositor, provided that such demand is
accompanied by:
a. an offer to satisfy the warehouseman ‘lien;
b. an offer to surrender the receipt if it is negotiable, and
c. a readiness and willingness to sign an acknowledgement, when the goods
are delivered, that they have been dleivered if such is requested by the
warehouseman.
3. Suppose instead of claiming the goods himself, M indorses the receipt in
blank to N. O, sees this and waits for an opportunity to steal the receipt.
O succeeds and got to Y, demanding the goods. A few minutes before,
however, Y was informed that Warehouse Receipt No. 00021 had been
stolen. Should Y deliver the goods to O? Explain.
A: No. Y should not deliver the goods to O. If Y were to deliver the goods
to O, Y could be liable for misdelivery under Sec. 10, WRL, as Y had
information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods. Y, being aware of the theft, is
justified in refusing delivery to O.

DEFINITION OF TERMS3

"action" includes counterclaim and set-off;

"fungible goods" means goods of which any unit is, from its nature or by mercantile
custom, treated as the equivalent of any other unit;

"goods" includes all chattels personal other than things in action and money;
"holder", as applied to a negotiable receipt, means a person who has possession of
the receipt and a right of property therein, and, as applied to a non-negotiable
receipt, means a person named therein as the person to whom the goods are to the
delivered or his transferee;

"negotiable receipt" means a receipt in which it is stated that the goods therein
specified will be delivered to bearer or to the order of a named person;

"non-negotiable receipt" means a receipt in which it is stated that the goods

therein specified will be delivered to the holder thereof;

"purchase" includes to take as mortgagee or as pledgee;

"purchaser" includes mortgagee and pledgee;

"receipt" means a warehouse receipt;

"warehouse receipt" means an acknowledgment in writing by a warehouseman of

the receipt for a storage of goods not his own;

"warehouseman" means a person who received goods for storage for reward. R.S.,
c. 333, s. 1.