DOCUMENT OF TITLE TO GOODS

DOCUMENTS OF TITLE TO GOODS

IN GENERAL
Laws governing documents of title to goods The New Civil Code, Articles 1507-1520, the Warehouse Receipts Act or Act No. 2137, and the General Bonded Warehouse Act or Act No. 3893.

Warehouse Receipts Law v. General Bonded Warehouse Law Act 2137 or the Warehouse Receipts Law prescribes the mutual rights and duties of a warehouseman, who issues warehouse receipts, and his depositor, and covers all warehouses, whether bonded or not. Act 3893, as amended, or the General Bonded Warehouse Law regulates and supervises warehouses which put up a bond.

Warehouse Receipts Law v. Documents of Title under the Civil Code The Warehouse Receipts Law refers to warehouse receipts issued by a warehouseman. Documents of title under the Civil Cod refer to other receipts of documents issued in bailment contracts other than warehouse receipts.

Common kinds of documents of title to goods 1. 2. 3. Bill of lading Warehouse receipt Dock warrant

Bill of lading A bill of landing is a written acknowledgment of the receipt of the goods and an agreement to transport and to deliver them at a specified place to a person named or his order. The person who delivers the goods for shipment or transportation is known as the shipper. The person to whom the goods are stated therein to be delivered is known as the consignee. The shipper and the

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consignee may be the same person or different persons as stated in the bill of lading. Warehouse receipt A warehouse receipt is a written acknowledgment by the warehouseman that he has received the goods described therein and holds the same for the person to whom it is issued or as the latter may order. It is a contract between the owner of the goods or the person authorized by the owner to transfer ownership or possession over the goods, on one hand, and the warehouseman, on the other hand, for the latter to store the goods and the former to pay the compensation for that service.

Quedan A quedan is a warehouse receipt.

Dock warrant A dock warrant is a warrant given by the dock owner to the owner of the goods imported and warehoused on the dock upon the faith of the bill of landing, as a recognition of the latters title t the goods.

DOCUMENTS

OF

TITLE

UNDER THE

CIVIL CODE

Negotiable document of title to goods It is a receipt or document in which it is stated that the goods received will be delivered to the bearer or to the order of any person named therein. [Article 1507, Civil Code]

How does a valid receipt or document of title to goods come into existence? A valid receipt or document of title to goods comes into existence when it is issued for goods delivered to the warehouseman or depositary/bailee by the owner or by a person whose act in conveying the title to be goods to a purchaser in good faith for value would bind the owner.

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WAREHOUSE RECEIPTS LAW

Act No. 2137

IN GENERAL
Warehouse receipt A warehouse receipt is a written acknowledgement by a warehouseman that he has received and holds certain goods in his warehouse for the person to whom the document is issued.

Warehouseman A warehouseman is a person lawfully engaged in the business of storing goods for profit.

Warehouse receipt v. negotiable instruments A warehouse receipt, even if negotiable, is not a negotiable instrument within the meaning of the Negotiable Instruments Law, for the following reasons: 1. In negotiable instruments, the subject is money; in warehouse receipts, the subject is merchandise; In negotiable instruments, the instrument itself is the object of value; in warehouse receipts, the goods are the objects of value; and In negotiable instruments, intermediate parties become secondarily liable; in warehouse receipts, intermediate parties are not liable for the warehouseman's failure to deliver the goods.

2.

3.

Who can issue warehouse receipt? A warehouse receipt may be issued by a warehouseman, whether public or private, bonded or not. A person authorized by a warehouseman may issue warehouse receipts.

Essential terms of a warehouse receipt 1. The location of the warehouse Prepared by:

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2. 3. 4.

Date of issue of the receipt Number of the receipt Statement whether the stored goods are deliverable to bearer, to a specified person, or his order Storage charge Description of the stored goods Signature of the warehouseman or his agent The fact of the warehouseman's ownership in the goods, if any Statement of advances made and liabilities incurred by the depositor for which the lien was constituted

5. 6. 7. 8. 9.

Terms which cannot be included 1. 2. Terms contrary to the Warehouse Receipts Law Terms reducing the degree of diligence imposed by the law on the warehouseman
OF RECEIPTS

CLASSES

Classes of receipts 1. 2. Negotiable warehouse receipts Non-negotiable warehouse receipts

Negotiable warehouse receipt A negotiable warehouse receipt is a warehouse receipt wherein it is expressly stated that the goods are deliverable to bearer or to the order of a person specified therein. A warehouse receipt stating that the goods are deliverable to bearer is a negotiable warehouse receipt. If the words "non-negotiable" are inserted in the receipt, the insertion is void, and the receipt remains negotiable.

Non-negotiable warehouse receipt Prepared by:

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A non-negotiable warehouse receipt is a warehouse receipt in which it is stated that the goods received will be delivered to the depositor or to any specified person. The receipt should be stamped on its face "non-negotiable." A holder of a non-negotiable receipt not stamped "non-negotiable" believing it to be negotiable may treat the receipt at negotiable. A non-negotiable warehouse receipt, if not stamped with the words "nonnegotiable," may make a warehouseman liable for damages suffered by a holder of such receipt who purchases it for value supposing it to be negotiable. The said holder may treat, as his option, such receipt as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been negotiable.

Negotiable v. non-negotiable warehouse receipt 1. Difference in manner of transfer. A negotiable warehouse receipt is negotiated by either by delivery or indorsement; a non-negotiable receipt may be transferred by its delivery to the transferee accompanied by a deed of assignment, donation or other form of transfer. Difference in effect on rights of indorsee/transfere. Whole transferee in either case acquires title, indorsee of a negotiable warehouse receipts acquires the direct obligation of the warehouseman to hold possession of the goods for him while a transferee of a non-negotiable warehouse receipt only acquires the right to inform the warehouseman of such transfer and thereafter acquires also the obligation of the warehouseman to hold possession of the goods for him.
AND

2.

OBLIGATIONS, DUTIES

RIGHTS

OF THE

WAREHOUSEMAN

Obligations of the warehouseman 1. Duty to delivery the goods upon demand made by the holder of the receipt or by the depositor. To exercise such care in regard to the goods as a reasonably careful owner of similar goods would exercise To keep the goods separate from the goods of other depositors, except in the case of fungible goods

2.

3.

Obligation of the warehouseman to deliver goods deposited Prepared by:

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In the absence of any lawful excuse provided by the law, a warehouseman is bound to deliver the goods upon a demand made by either the holder of the receipt for the goods or the depositor if such demand is accompanied with: 1. An offer to satisfy the warehousemans lien (only a preferential right which is not collectible), fees or charges; An offer to surrender the receipt, if negotiable, with such indorsements as would be necessary for the negotiation of the receipt (the one surrendering is the holder); and A readiness and willingness to sign a receipt, when the goods are delivered, and acknowledgment that they have been delivered, if such signature is requested by the warehouseman. [Section 8, Warehouse Receipts Act]

2.

3.

To whom to deliver 1. 2. 3. To the person lawfully entitled to the goods To the person named in a non-negotiable receipt or to his assignee To the lawful holder of a negotiable receipt

When refusal to deliver justified A warehouseman may legally refuse to deliver goods covered by a warehouse receipt: 1. If he had been requested by a person lawfully entitled to a right of property or possession in the goods not to make delivery to any person; if he had information that the delivery to be made was to one not lawfully entitled to the possession of the goods; or If several persons claim the goods.

2.

3.

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When several claim the goods In case three persons claim the right to the possession of certain goods in his warehouse, the warehouseman may do the following: 1. Firstly, he can refuse to deliver the goods to anyone of them until he has had reasonable time to ascertain the validity of the various claims; Secondly, he can require all claimants to interplead, either as a defense to an action brought against him for non-delivery of the goods, or as an original suit, whichever is appropriate.

2.

What is the liability of the warehouseman for the care of the goods stored? He is liable for any loss or injury to the goods caused by his future to exercise such care in regard to them as a reasonably careful owner of similar goods shall 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 or due diligence.

Is the warehouseman under obligation to keep the goods separately? What is his liability to depositors of commingled goods? Except in the case of fungible goods which can be commingled by the warehouseman if so authorized, a warehouseman shall keep the goods so far separate from the goods of the 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. If the goods are commingled, the warehouseman shall be solidarity or severally liable to each depositor for the case and redelivery of his share of such mass to the same extent or under the same circumstances as if the goods have been kept separately. [Section 24, Warehouse Receipts Act]

Goods deposited cannot be levied upon or attached While the goods are in the possession of a warehouseman, unless the receipt be first surrendered to the warehouseman or its negotiation enjoined, the warehouseman shall in no case be compelled to deliver the actual possession of the goods until the receipt is surrendered to him or impounded by the court.

What remedies are available to the creditors to reach the negotiable receipt? Prepared by:

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The 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 by law or equity in this jurisdiction regarding property which cannot readily be attached or levied upon by ordinary legal process.
OF THE

RIGHTS

WAREHOUSEMAN

Warehousemans liens The warehousemans lien on the good deposited or on the proceeds thereof in his hands consists of all lawful charges for storage and preservation of the goods, all lawful claims for money advanced, interest, insurance, transportation, labor, weighing, coopering, and other charges and expenses in relation to such goods, also all reasonable charges and expenses for notices and advertisements of sale, and for the sale of the goods where default has been made in satisfying the warehousemans lien.

Against what property may the lien be enforced? 1. Against all goods, whenever deposited, belonging to the person who is liable as a debtor for the claims in regard to which the lien is asserted; and Against all goods belonging to another which have been deposited at any time by the person who is liable as a debtor for the claims in regard to which the lien is asserted if such person had been so entrusted with the possession of the goods that a pledge of the same by him at the time of the deposit to one who took the goods in good faith and for value would have been valid.

2.

How lien enforceable The lien may be enforced by sale at auction of the goods, upon proper notice and publication, in such quantities sufficient to pay the lien.

How may the lien be lost? 1. 2. By surrendering possession of the goods By refusing to deliver the goods when a demand is made with which he is bound to comply under the law

Does the warehousemans lien preclude other remedies?

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No. The warehouseman is entitled to all remedies allowed by law to a creditor against his 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.
AND

NEGOTIATION

TRANSFER

OF

RECEIPT

NEGOTIABLE WAREHOUSE RECEIPT When negotiable A warehouse receipt is negotiable where the goods are deliverable to bearer, or to the order of any person named in such receipt.

How negotiated 1. 2. By delivery By indorsement

Negotiation by delivery Where the goods are deliverable to bearer, or where deliverable to a specified person or order and the latter indorses it in blank or to bearer, the receipt may be further negotiated by delivery.

Negotiation by indorsement Where the goods are made deliverable to the order of a specified person, the latter may negotiate by indorsement, and his indorsement may be to bearer, in blank, or to a specified person or his order.

Who can negotiate receipt The negotiable receipt may be negotiated by the owner thereof, or by a person to whom the possession or custody of the receipt is entrusted by the owner, if by the receipt, the goods are deliverable to the holder of the receipt.

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Rights of a person to whom negotiable receipt has been negotiated 1. Such title to the goods as the person negotiating the receipt to him has 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 has had ability to convey to a purchaser in good faith for value; and 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.

2.

Liability of the indorser The indorser warrants: 1. 2. 3. That the receipt is genuine; That he has a legal right to negotiate or transfer it; That he has knowledge of no fact which would impair the validity or worth of the receipt; and That he has a right to transfer title to the goods, and that the goods are merchantable.

4.

Indorser not a guarantor The indorser, by negotiating the receipt, is not liable for any failure on the part of the warehouseman or prior indorsers to fulfill their respective obligations.

Is an indorser of a receipt liable for the failure of a warehouseman or previous indorsers to fulfill their respect obligations? No. He has not a guarantor. The indorsement of a receipt shall not make the indorser liable for any future on the part of the warehouseman or previous indorsers of the receipt to fulfill their respect obligations. [Section 45, Warehouse Receipts Act]

Pledge, sale or chattel mortgage of negotiable receipt Under the Warehouse Receipts Law, an unpaid seller's lien or right of stoppage cannot defeat the rights of pledgee for value.

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DOCUMENT OF TITLE TO GOODS

The pledge of a warehouse receipt and its indorsement to the pledgee does not transfer ownership of the deposit to the pledgee. Thus, whether the cause of the loss is accidental or not, because ownership remains with him, the pledgor bears the loss.

Does negotiation of receipt defeat the lien of the vendor of the goods covered thereby? Yes. Where a negotiable receipt has been issued for goods, no vendors lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to who such receipt has been negotiated, whether such negotiation be prior or subsequent to the notification to the warehouseman who issued such receipt of the vendors claim to a lien or right of stoppage in transitu. Nor shall the warehouseman be oblige to deliver or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation. [Section 49, Warehouse Receipts Act] Such right of the unpaid seller is defeated by the indorsement of the receipt in favor of a person who pays value therefor in good faith.

NON-NEGOTIABLE WAREHOUSE RECEIPT How transferred A non-negotiable receipt may be transferred by its delivery to the transferee accompanied by a deed of assignment, donation or other form of transfer.

Rights of a person to a receipt which has been transferred but not negotiated 1. Such person 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 transfer 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. [Section 42, Warehouse Receipts Act]

2.

3.

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DOCUMENT OF TITLE TO GOODS

Right of a person to whom a negotiable receipt is transferred for value by delivery but not indorsed The transferee acquires the right against the transferor to compel him to indorse the receipt unless a contrary intention concerning the transfer appears. The negotiation shall take effect as of the time when the indorsement is actually made. The indorsement of the transferor is essential for negotiation where under the receipt, the goods are to be delivered by the warehouseman to the depositor or his order.

Several tests 1. Judgment creditor versus holder

Goods should be given to the holder who has the capacity to comply with the requirements of Section 8 of the Warehouse Receipts Act, namely: indorse and deliver the receipt of which he is the holder, pay the fees or liens of the warehouseman, and sign a receipt for the delivery of the goods. 2. Unpaid seller versus holder

Unpaid seller may get back the goods if the warehouse receipt is still with the buyer. However, if the receipt has already been indorsed and delivered to a holder who paid value therefor in good faith, the latter has a better right over the unpaid seller. 3. Lessor/landlord versus holder Holder can recover goods as he can comply with the requirements. 4. Owner (alleged) versus holder

In this case, warehouseman should not deliver the goods to either of the two as the title of ownership over the goods is in question which requires judicial authority to determine and decide. It is not for the warehouseman to do so. Otherwise, he will be taking the risk of being liable twice for the same goods. Since the title or ownership over the goods is in question or is disputed, the safe course of action for the warehouseman is to file a complaint in interpleader in order to compel both claimants to litigate against each other for the goods. Interpleader proper only if title is disputed Prepared by:

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DOCUMENT OF TITLE TO GOODS

The only justification for a warehouseman to resort to an action for interpleader is when the title to the goods is in issue, but not in cases where the title to the goods is not in dispute.

GENERAL BONDED WAREHOUSE LAW

Act No. 3893, as amended

Purpose The purpose of the law is to protect depositors by giving them a recourse in case of the insolvency of the warehouseman against the bond filed by him.

Salient features of the law 1. 2. License from the Bureau of Domestic Trade (now DTI) required Amount of bond is 33 1/3% of the value of the goods intended to be stored in the warehouse Depositor given warehouseman a direct recourse against the bond filed by the

3.

4.

All goods are insured against fire for their value

What deposits involved 1. Deposit with option to the warehouseman to return the stocks or to pay the price Contract to mill Contract to co-mingle with stocks of others and return the same quantity or pay their value

2. 3.

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