The Warehouse Receipts Law

Act 2137 (As amended) [enacted on Feb. 5, 1912]

Scope
Covers all warehouses whether private or public Covers bonded and non-bonded warehouses

A. General Concepts
Sec. 1 Who may issue receipts: Warehouseman (lawfully engaged in the business of storing goods for profit (WRL 58a) If not issued by a WH-man, its not a WR (except through WH-mans agent) Meaning of warehouse: Building/ place where goods are deposited and stored for profit.

A. General Concepts
Sec. 2 Definition and nature of warehouse receipt: 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. A simple written contract to pay compensation for service (storing) A bilateral contract (between owner of the goods and WH-man) WR is a symbolic representation of the property. Must be complied with (i.e. have the force of law between them) (NCC 1159)

A. General Concepts
Form and contents of the receipt: Location of warehouse Date of issue of receipt Consecutive number of receipt Person to whom goods are deliverable Rate of storage charges Description of goods or packages Signature of warehouseman Warehousemans ownership of or interest in goods Statement of advances made and liabilities incurred

A. General Concepts
Effect of omission of any essential terms: Validity of receipt not affected Warehouseman liable for damages (to those injured) Negotiability of receipt not affected Contract converted to ordinary deposit

A. General Concepts
Sec. 3 Terms that cannot be included in a warehouse receipt: Gen Rule: WH-man can insert any stipulation Except: 1. Exemption from liability for misdelivery (against WRL 10) 2. Exemption from liability for negligence (e.g. for acct and at the risk of the depositor) 3. Any other stipulation contrary to law, moral, good customs, public order, public policy

A. General Concepts
Sec. 4 and 5 Meaning of the word negotiable under the WRL: Not used like in the case of PNs and BOEs Only indicates on that in the passage of the WR, the property described therein follows it. Doesnt comply with NIL 1b (no unconditional promise/ order)

A. General Concepts
Sec. 6 and 7 Effect of failure to mark negotiable/ non-negotiable Failure to indicate negotiable doesnt make it nonnegotiable IF it contains words of negotiability (WRL 5) Failure to indicate non-negotiable WILL make it negotiable IF holder bought it supposing its negotiable

A. General Concepts
Construction of WRs: Liberal construction in favor of bona fide holder

Because of the important role it plays modern commerce

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 8 Demand must be accompanied by: Offer to satisfy lien Offer to surrender receipt Readiness and willingness to sign Principal obligations of the WH-man: Take care of the goods (WRL 21) Deliver to holder of WR/ to depositor (IF WRL 8 requirements are met)

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Necessity of demand: Gen Rule: demand should be made to WH-man to make him deliver Exception: WH-man rendered it beyond his power to deliver/ demand dispensed with. Offer to satisfy WH-mans lien: WH-man may refuse to deliver until lien satisfied (WRL 31) If he delivers (surrender possession), he loses hi lien on the goods (WRL 29a)

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Offer to surrender receipt: Offer to surrender is required (to protect WHman) WH-man will be criminally liable if he delivers goods w/o getting the WR Can refuse to deliver if WR not obtained

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 9 Person to whom goods must be delivered: (not liable for mis-delivery) 1. Person lawfully entitled to possession/ his agent:
To whom a court has ordered delivery to (WRL 14, 17) To an attaching creditor (WRL 33) Goods are perishable/ hazardous (WRL 34)

2. Person entitled to delivery under a non-negotiable WR 3. Person in lawful possession of negotiable instrument (indorsee)

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 10 Warehousemans liability for misdelivery: 1. Liability similar to a bank paying forged check:
WH-man needs to devise appropriate measures to avoid being deceived

2. Liability for conversion:

Conversion: unauthorized assumption and exercise of the right of ownership over goods belonging to another to the alteration of their condition or the exclusion of the owners rights If WH-man delivers despite being requested not to prior to delivery, he can still be liable even if he delivered to persons mention in WRL 9b and 9c.

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 13 Effect of alteration on liability: 1. IF alteration IMMATERIAL: WH-man liable to original tenor 2. IF authorized alteration MATERIAL: WH-man liable to terms as altered 3. IF innocent alteration MATERIAL: liable to original tenor 4. IF fraudulent alteration MATERIAL: liable to original tenor
Liable to purchaser for value w/o notice Even Liable (to deliver only, other liabilities excused) to the one who altered and subsequent purchasers w/o notice.

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 14 Liability of WH-man in case of lost/ destroyed receipts: Court decides if the receipt is really lost/ destroyed before ordering delivery or issuance of new receipt Requisites when the court may order delivery of goods: > Proof of loss/ destruction > Giving of bond w/ sureties (must be approved by the court)

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 15 Liability (warranty) of WH-man as to duplicate: Duplicate is an accurate copy of the original Original receipt is not yet cancelled at the date of duplicate is issued

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 16 Ownership not a defense for refusal to deliver: Gen Rule: WH-man cant refuse delivery because he claim ownership Exception: > title is directly/ indirectly transferred by depositor at the time/ subsequent to deposit > title derived from WH-mans lien

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Duty of WH-man where there are several claimants: 1. WH-man must determine w/in reasonable time who has right then deliver to him. (WRL 18) In case WH-man delivered to wrong person, he may be liable (WRL 10) 2. WH-man must bring complaint in interpleader, then let the claimant litigate amongst themselves (ROC 62.1) WH-man will be relieved

B. Obligations and Rights of a Warehouseman (Obligation to deliver)

Sec. 19 Adverse title of 3P not a defense for refusal to deliver: Cant set up title to himself/ 3P as a defense in refusal/ failure to deliver the goods. WH-man cant also set up adverse title as an excuse for failure to deliver when demanded.

B. Obligations and Rights of a Warehouseman (Liability for Goods)

Sec. 20 Liability of WH-man for non-existence or Misdescription of goods: Gen Rule: WH-man liable to deliver identical property stored with him Exception: if description consists merely of marks/ labels upon goods/ upon the package Note: not practical for business if WH-man were to examine every box, crate, barrel, etc.

B. Obligations and Rights of a Warehouseman (Liability for Goods)

Sec. 22, 23, 24 Commingling of deposited goods: Gen Rule: cannot commingle (WRL 22) Exception: can mix fungibles if customs/ agreement allows (WRL 23) Effect: Different owners become co-owners of the mass (WRL 24)

For the benefit of the owners, not the WH-man NCC 1976: can commingle unless theres contrary stipulation

B. Obligations and Rights of a Warehouseman (Liability for Goods)

Acts for which a WH-man is liable: Failure to stamp duplicate on copies of negotiable WR (WRL 6) Failure to place non-/ not-negotiable on a non-negotiable WR (WRL 7) Misdelivery (WRL 10) Failure to cancel negotiable WR upon delivery of goods (WRL 11) Issuance of receipt for non-existent/ mis-described goods (WRL 20) Failure to take care of the goods (WRL 21) Failure to give notice in case goods are sold to satisfy lien (WRL 33) Failure to give notice in case goods are perishable/ hazardous (WRL 34)

B. Obligations and Rights of a Warehouseman (Warehousemans Lien)

Remedies of WH-man: 1. Refuse to deliver goods until lien satisfied (WRL 31) 2. Extra-judicial sale of property then apply proceeds to lien (WRL 33, 34) 3. File civil action (WRL 32, 35) *note: WH-man not liable for non-delivery even if WR is negotiable > a qualification (condition/ exception) to the right of a purchaser of a negotiable WR

C. Negotiation and Transfer

Sec. 37-39 Negotiation and transfer of receipts: (Provided for in NCC 1508, 1509, 1511) 1508: can be negotiated by delivery, if: In the T/C, the WH-man, or other bailee issuing the WHreceipt undertakes to deliver good to the bearer In the T/C, the WH-man, or other bailee issuing undertakes to deliver to a specified person and that person indorses the receipt in blank or to a bearer In the T/C, the good are deliverable to bearer The WH-receipt has been indorsed in blank or to bearer

C. Negotiation and Transfer

1511: in case receipt is not negotiable by delivery, in ca be transferred by delivery to a purchaser or donee. In case a non-negotiable document is indorsed, the transfer gives no additional right to the transferee. 1509: can be negotiated by the indorsement of the person to whose order the goods are deliverable. Indorsement can be in blank, to bearer, or to a specified person

C. Negotiation and Transfer

Advantages of a negotiable WR: (vs. non-negotiable WR) Protects IPV of WR (WRL 41) Goods covered by WR CANNOT be garnished/ levied UNLESS WR is surrendered/ impounded/ negotiation is enjoined (WRL 25) IPV holds the WH-man liable to him for the possession/ delivery of the goods (WRL 41) > Still possible even w/o notice to WH-man that WR has been negotiated Goods covered by WR not subject to sellers lien/ stoppage in transitu (WRL 49)

C. Negotiation and Transfer

Sec. 40 Persons who may negotiate a WR: (as provided in NCC 1512) By the owner Any person to whom the owner entrusted the document to (one who has possession or custody)

C. Negotiation and Transfer

Sec. 41-43 Rights of indorsee/ transferee of a receipt: (Provided for in NCC 1513, 1514, 1515) 1513: rights of indorsee/ transferee Title to the goods same with that of the transferor and the ability to convey or transfer it to a purchaser for value Obligation of the bailee (WH-man) to hold possession for him.

C. Negotiation and Transfer

1514: in case receipt was transferred but not negotiated: The transferee acquires title to the goods (but subject to any terms of agreement with the transferor) 1514 (par 2): in case receipt is non-negotiable: Transferee acquires the right to notify bailee (WH-man) and acquire the obligation of the WH-man to hold possession of the goods for him (par 3): before notifying the WH-man, the transferees rights can be defeated by 1. levy of an attachment of execution on the goods. 2. Notification of bailee (WH-man) by the transferor that the goods are already sold by the latter to a purchaser.

C. Negotiation and Transfer

1515: in case the transfer is by delivery and for value, and indorsement is essential for negotiation: The transferee can compel the transferor to indorse the document (unless contrary intention appears) Negotiation is effective at the time actual indorsement is made

C. Negotiation and Transfer

Ownership of goods covered by WR negotiated/ transferred: Indorsee/ transferee:
Regarded as owner of goods covered by WR Indorser/ transferor cannot dispose of goods w/o indorsee/ transferees consent Holder of WR is owner of the goods

Indorser/ transferor:
In case transferee/ indorsee is a creditor of the transferor/ indorser, transferee/ indorsee-creditor doesnt automatically become the owner Transferee/ indorsee-creditor merely retains right to sell the WR to satisfy obligation Not a sale, merely a mortgage/ pledge

Innocent 3Ps:
Indorsee-pledgee (the 3P) considered the owner

C. Negotiation and Transfer

Sec. 45 Liability of person negotiating/ transferring receipt: (Provided for in NCC 1516, 1517) 1516: warranties of a person who negotiates for value, or transfers by indorsement or delivery: Document (receipt) is genuine He has a legal right to negotiate/ transfer He has no knowledge of any fact which would impair the validity of the receipt The goods are merchantable/ fit for a particular purpose (otherwise stated, warranties that are implied had the goods been transferred absent the receipt) 1517: indorser is NOT liable for failure of the bailee (WH-man to fulfil his obligation)

C. Negotiation and Transfer

Sec. 46 Liability of mortgagee/ pledgee/ holder for security: DOES NOT warrant: genuineness of the WR quality/ quantity of the goods

C. Negotiation and Transfer

Sec. 47 Validity of negotiation: (provided for in NCC 1518 ) Validity not impaired by: 1. the fact that the negotiation was a breach of duty on the part of the person making the negotiation, or 2. the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress, or conversion. PROVIDED: transferee: > was in good faith, > paid value, > without notice of the breach of duty, or loss, theft, fraud, accident, mistake, duress or conversion

C. Negotiation and Transfer

Sec. 48 Effect of subsequent negotiation by seller, etc: imposes duty upon purchaser/ mortgagee/ pledgee to require negotiation to him Failure to do so mean express authorization to seller/ mortgagor/ pledger to make subsequent negotiation. Qualification: purchaser must be IPV

C. Negotiation and Transfer

Sec. 49 Indorsees right superior to vendors lien: WH-man not obliged to deliver unless WR is surrendered for cancellation WH-man justified in delivering goods to unpaid seller unless WR is surrendered for cancellation

D. Criminal Liability
Offenses criminally punishable by WRL 54 WRL 50-55 provides the criminally punishable acts Ingredients of offense punished by WRL 54 1. Delivery of goods out of possession of WH-man by: WH-man Officer/ agent of WH-man Servant of WH-man 2. Person who delivered knows negotiable WR is outstanding and uncancelled 3. Person who delivered did not obtain the WR at/ before delivery

D. Criminal Liability
Nature of criminal responsibility under WRL 54: Participation in the withdrawal of goods in question:
If theres no participation, no criminal liability (even if hes the WHman)

Violations by some other persons:

Can hold agent/ officer/ servant of WH-man liable WH-man cant be held liable unless theres conspiracy

Possibility that right to goods could have been transferred to a 3P:

WH-man can be punished even if right to possession of stored goods not transferred to 3P

Sufficient that such right could have been transferred to 3P in the course of his transaction with depositor.

E. General Bonded Warehouses Act. (Act 3893)

Special application to those engaged in the business of receiving commodities, goods, articles, or merchandise that may be traded openly and legally.

E. General Bonded Warehouses Act. (Act 3893)

Salient Features: Sec. 2: protect persons dealing with a warehouseman. Sec. 4 and 5: requires a person who wants to engage in the bonded warehouse business to acquire a license to operate first Sec. 6: requires warehouseman to insure goods received against fire Sec. 11 to 14: provides for penalties in case of violation of the Act.