TITLE 1V: THE WAREHOUSE RECEIPTS LAW

INTRODUCTION

Scope of the law : All warehouses, whether public or private,

bonded or not.
Civil Code applicable where the receipts are not issued by a
warehouse man
Purposes of the law:
1) Regulate the status, rights, and liabilities of the parties in a
warehousing contract
2) Protect those who, in good faith and for value, acquire
negotiable warehouse receipts by negotiation
3) Render the title to, and the right of possession of, property
stored in warehouses
4) Facilitate the use of warehouse receipts as documents of
title
5) Place a much greater responsibility on the warehouseman

CHAPTER 1: THE ISSUE OF WAREHOUSE RECEIPTS

Section 1

Warehouseman person lawfully engaged in the business of

storing goods for profit
Only one authorized to issue warehouse receipts
A duly authorized officer/agent of a warehouseman may validly
issue a warehouse receipt.
Warehouse the building or place where goods are deposited
and stored for profit

Section 2

Warehouse receipt a written acknowledgment by a

warehouseman that he has received and holds certain goods
therein described in store for the person to whom it is issued
Simple written contract between the owner of the goods and
the warehouseman to pay the compensation for that service
A bilateral contract (symbolical representation of the
property itself)

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Not a negotiable instrument

Not require or specify any particular form
Essential terms of the receipt:
1) Location of warehouse for the benefit of the holders of
warehouse receipts
2) Date of issue of receipt not essential; indicates prima
facie the date when the contract of deposit is perfected and
when the storage charges shall begin to run against the
depositor
3) Consecutive number of receipt to identify each receipt
with the goods for which it was issued
- No express requirement as to when the consecutive
numbering shall begin
4) Person to whom goods are deliverable prima facie entitled
lawfully to the possession of the goods deposited
- Does not determine the negotiability of the receipt
5) Rate of storage charges the consideration for the contract
from the view of the warehouseman
- Presumption that depositor shall pay the
customary/reasonable compensation for the services
of the warehouseman (in the absence of express
agreement)
6) Description of goods or packages for identification so that
the identical property delivered to the warehouseman may
be delivered back by him upon the return of the warehouse
receipt
- Mere fact that the goods deposited are incorrectly
described does not make ineffective the receipt
when the identity of the goods is fully established by
evidence
7) Signature of the warehouseman best evidence of the fact
that the warehouseman has received the goods described
in the receipt and has bound himself to assume all
obligations in connection with it
8) Warehousemans ownership of or interest in goods the
document should carry the notice of the fact on its face
- Omission to state ownership of the goods in the
receipt issued render the warehouseman criminally
liable

9) Statement of advances made and liabilities incurred to

preserve the lien of the warehouseman over the goods
stored or the proceeds of it
Effect of omission of any of essential terms:
1) Validity of the receipt not affected
2) Warehouseman liable for damages to those injured
3) Negotiability of receipt not affected
4) Contract converted to ordinary deposit
Form provided by the law is merely permissive and directory

Section 3

Warehouseman given the power to insert additional terms or

conditions in receipts
Limitations:
a) Contrary to provisions of Act No. 2137
b) In any wise impair his obligation to exercise that degree
of care
c) Not contrary to law, morals, good customs, public order,
or public policy
Terms that cannot be included in a warehouse receipt:
1) Exemption from liability from misdelivery contrary to
Section 10 or Sections 33/34
2) Exemption from liability for negligence

CHAPTER 2: OBLIGATIONS AND RIGHTS

WAREHOUSEMEN UPON THEIR RECEIPTS

Negotiable 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
A warehouse receipt is no sense a negotiable instrument!

Sections 6-7

Section 6 refer to negotiable receipts

Section 7 refer to non-negotiable receipts
Effect of failure to mark negotiable or non-negotiable:
1) Negotiable not render the receipt non-negotiable

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OF

THE

Section 8

Sections 4-5

Usually written or printed on the face of a negotiable

warehouse receipt
2) Non-negotiable render it negotiable
- Provided : Holder of such unmarked receipt
purchased it for value supposing it to be negotiable
- Law imposes upon the warehouseman the duty to
mark the receipts non-negotiable or not
negotiable
Liberal construction of the law in favor of the bona fide holders
of such receipts
No application to actions against any party to the transactions
other than a warehouseman

Warehouseman is essentially a depositary with respect to the

goods received and stored by him in the warehouse.
Principal obligations of warehouseman:
1) Take care of the goods entrusted to his safekeeping
2) Deliver the goods to the holder of the receipt or the
depositor
Demand should be made on the warehouseman in order that
the duty to deliver the goods will arise
If demand is useless, demand is dispensed with.
Offer to satisfy the warehousemans lien is required before the
warehouseman is bound to deliver or return the goods
If offer is vain/useless, formal tender is not required.
Warehouseman criminally liable if he delivers goods without
obtaining possession of such receipts
Right to require production of the receipt as a condition
precedent to delivery is subject to waiver
Negotiable receipt = demand for the delivery of the goods
must be accompanied by an offer to surrender the receipt
properly indorsed

Not negotiable receipt = any person lawfully entitled to the

possession of the goods may be entitled to delivery without
the surrender of the receipt
Existence of a lawful excuse for such refusal to deliver is an
affirmative defense which the warehouseman must prove

Sections 11-12

Not applicable to non-negotiable receipts

Warehouseman may make delivery without requiring their
surrender and cancellation

Section 9

Person to whom goods must be delivered:

1) Person lawfully entitled to possession of goods or his agent
- Competent court has ordered the delivery of the
goods
- Attaching creditor
- Purchaser in case of sale of the goods by the
warehouseman to enforce his lien
- Goods are perishable or hazardous
2) Person entitled to delivery under a non-negotiable receipt or
with written authority
3) Person in possession of a negotiable receipt
- If delivered to one who acquired custody of the
goods through the use of falsified delivery permit,
warehouseman cannot sue for the value of the
goods unless he has been sued by the depositor or
consignee.

SECTION 11
Receipt must be cancelled
Except as provided in Section
36
Warehouseman delivers goods
for which he had issued a
negotiable receipt and fails to
take up and cancel the receipt

Liable to anyone who purchases

for value in good faith such
receipt for failure to deliver the
goods to him

SECTION 12
Receipt
must
be
either
cancelled or marked
Except as provided in Section
36
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
Liable to anyone who purchases
for value in good faith such
receipt for failure to deliver ALL
the goods specified in the
receipt

Section 10

Warehousemans liability for misdelivery:

1) Liability similar to a bank paying for a forged check duty
rests upon the warehouseman of devising appropriate
means by which deception can be avoided
2) Liability for conversion
- Liable if prior to delivery, he has been requested not
to make such delivery or he had received notice of
the adverse claim or title of a third person
Conversion unauthorized assumption and exercise of the
right of ownership over goods belonging to another through the
alteration of their condition or the exclusion of the owners
rights

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Warehouseman not liable to purchaser for value in good faith of

such receipt from a thief

Section 13

Effects of alteration on liability of warehouseman:

1) Alteration immaterial liable on the altered receipt
according to its original tenor
- Tenor of the receipt not changed
- Whether fraudulent or not
- Whether authorized or not
2) Alteration material liable according to the terms of the
receipt as altered

- Tenor of the receipt is changed

- Authorized
3) Material alteration innocently made liable on the altered
receipt according to its original tenor
- Unauthorized
4) Material alteration fraudulently made liable according to
the original tenor of the receipt to a purchaser for value
without notice
- Liability is limited only to delivery as he is excused
from any liability
Even a fraudulent alteration cannot divest the title of the owner
of stored goods
Warehouseman liable to return them to the owner
A bona fide holder acquires no right to the goods under a
negotiable instrument:
1) lost
2) stolen
3) indorsement of depositor has been forged

Section 14

Court shall pass upon the question and make sure that the
receipt is really lost or destroyed before the goods are
delivered or a new receipt is issued
Competent court may order the delivery of goods only:
1) Upon proof of loss or destruction of the receipt
2) Upon the giving of a bond with sufficient sureties to be
approved by the court
Warehouseman is still liable to a holder of the receipt for value
without notice

Section 15

When more than one negotiable receipt is issued for the same
goods, the word duplicate must be plainly placed by the
warehouseman upon the face of every receipt, except the first
one issued.
Duplicate is an accurate copy of the original receipt

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Original receipt is uncancelled at the date of the issue of the

duplicate
Duplicate imposes no other liability upon the warehouseman
Except for breach of warranty
Warehouseman may not be compelled to deliver the goods by
virtue of the duplicate only

Section 16

Warehouseman cannot refuse to deliver the goods on the

ground that he has acquired title or right to the possession of
the same
Unless such title or right is derived:
a) Directly or indirectly from a transfer made by the
depositor at the time of the deposit for storage or
subsequent thereto
b) From the warehousemans lien
Based on the doctrine of estoppel

Sections 17-18

If there are several claimants to the goods:

1) Determine within reasonable time the validity of the
conflicting claims
2) Deliver to entitled person the possession of the goods
3) Not excused from liability in case he makes a mistake
Warehouseman must bring a complaint in interpleader and
require the different claimants to litigate among themselves
Relieved from liability in delivering the goods to the person
whom the court finds to have a better right
Warehouseman liable for refusal to deliver to the rightful
claimant
Where he does not compel interpleader in a case requiring
it
Warehouseman held guilty of conversion as of the date of
original demand for the goods
Warehouseman neither interpleads nor investigates
After a lapse of reasonable time

Reasonable time determined in accordance with the

circumstances of the particular case
Section 18 not apply to cases where the warehouseman
himself makes claim to the goods

Section 19

Warehouseman cannot set up title in himself as an excuse for

his failure or refusal to deliver the goods
Adverse title of third person not a defense for refusal to deliver
Exceptions:
1) Section 9 person to whom goods must be delivered
2) Section 17 interpleader of adverse claimants
3) Section 18 warehouseman has reasonable time to
determine validity of claims
4) Section 36 effect of sale

Section 20

GENERAL RULE: Warehouseman is under obligation to deliver

the identical property stored with him and if he fails to do so, he
is liable directly to the owner.
Warehouseman is estopped to deny that he has received the
goods described in it.
As against a bona fide purchaser of a warehouseman
receipt
Whether the receipt is negotiable or not
Warehouseman is not liable even if the goods are not of the
kind as indicated in the marks or labels

Section 21

Required to exercise ordinary or reasonable care in the custody

of the goods
Diligence of a good father of a family (Article 1163 of CC)
Warehouseman not liable for any loss or injury to the goods
which could not have been avoided by the exercise of such
care

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In the absence of any agreement to the contrary

What constitutes ordinary or reasonable care depends upon
the circumstances
Warehouseman cannot stipulate with the depositor that he
would not be responsible for any loss
Even if caused by his negligence
Stipulation is VOID

Sections 22-24

GENERAL RULE: Warehouseman may not mingle goods

belonging to depositors
EXCEPTION: Warehouseman may mingle fungible goods with
the goods of the same kind and grade
Provided, he is authorized by agreement or custom
Different owner become co-owners of the whole mass
Intended for the benefit of the holders of the receipt

Section 25

Direct obligation to hold possession of the goods:

1) For the original owner
2) For the person to whom the negotiable receipt of title has
been duly negotiated
Goods cannot be attached or levied upon under an execution
unless:
1) Document be first surrendered
2) Negotiation is enjoined
3) Document is impounded by the court
Warehouseman cannot be compelled to deliver up the
possession of the goods until the receipt is surrendered to him
or impounded by the court
Section 25 do not apply:
1) Depositor is not the owner of the goods (thief)
2) Depositor has no right to convey title to the goods binding
upon the owner
3) Actions for recovery or manual delivery of goods by the real
owner

4) Attachment is made before the issuance of the negotiable

receipt of title
Rights acquired by attaching creditors cannot be defeated by
the issuance of a negotiable receipt of title thereafter

Section 29

Section 26

What is attached by the creditor is the negotiable receipt in the

debtors possession
Expressly gives the court full power to aid by injunction and
otherwise a creditor seeking to get a negotiable receipt
covering such goods

Section 27

Warehousemans lien over the goods deposited with him is his

security for the payment of the charges, money advanced, and
other expenses.
Lien exists for the benefit of the warehouseman
Section 30 prescribes the extent of lien when the receipt is
negotiable

Section 28

Goods subject to lien:

1) Goods belonging to depositor or his principal
2) Goods stored in fraud of true owners rights
Warehouseman may enforce his lien:
1) Against the goods of the depositor who is liable to the
warehouseman as debtor whenever such goods are
deposited
2) Against goods of other persons stored by the depositor who
is liable to the warehouseman as debtor with authority to
make a valid pledge
- To give the warehouseman a lien for charges against
the goods of persons who are primarily liable for the
charges incurred
- Create the relation of debtor and creditor

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Loss and waiver of lien upon goods:

1) By surrendering possession of goods
- By voluntarily surrendering the possession of it
without requiring payment of lien
- Presumption that lien has been waived or
abandoned where warehouseman permits a
depositor to remove the goods
- Involuntary parting with possession of goods
ordinarily does not result in loss of his lien by a
warehouseman.
- Claim a lien on other goods of the same depositor
for unpaid charges on the goods surrendered if the
goods were delivered to him under different
bailments
2) By wrongfully refusing to deliver goods
- Where the holder of the receipt offers to comply with
the requirements
- In case the warehouse receipt has been pledged as
security = depositor-pledgor as owner continues to
be liable
- The fact that the receipt was delivered and endorsed
in blank to the pledgee does not alter the situation.
Warehousemans lien concomitantly lost as to what the law
deems a valid demand
Valid demand by the lawful holder of a warehouse receipt
for the delivery of goods
Absence of a lawful excuse provided by the law
Valid reasons for refusing to deliver goods:
1) Holder of the receipt does not satisfy the conditions
prescribed in Section 8
2) Warehouseman has legal title in himself on the goods
3) Warehouseman has legally set up the title or right of third
person as lawful defense for nondelivery of the goods
3.1) Requested by or on behalf of the person lawfully
entitled to a right of property of or possession in the goods
not to make such delivery
= require all known claimants to interplead

3.2) Had information that the delivery about to be made was

to one not lawfully entitled to the possession of the goods
= excused from liability
3.3) Goods have already been lawfully sold to third person
to satisfy the warehousemans lien, or have been lawfully
sold or disposed of because of their perishable or
hazardous nature
4) Warehouseman having a lien valid against the person
demanding the goods refuses to deliver the goods to him
unless the lien is satisfied
5) Failure was not due to any fault on the part of the
warehouseman
- Good were stolen or destroyed by fire, flood, etc.
without any negligence on his part
- Goods taken by the mistake of a third person without
the knowledge or implied assent of the
warehouseman
- Other justifiable ground for non-delivery
Section 30

Lien exists only for the other charges expressly enumerated in

the receipt
Written within the terms of Section 26
Although amount not stated
Exception: Charges for storage and preservation of goods
Warehouseman shares pro rata with the other creditors of the
depositor the balance of the proceeds of the sale for the
satisfaction of said claims
Claims not specified in the receipt
After deducting the charges for storage

Sections 31-36

Remedies for enforcement of warehousemans lien:

1) Refusing to deliver the goods until the lien is satisfied
2) Causing the extrajudicial sale of the property and applying
the proceeds to the value of the lien
3) Filing a civil action for collection of the unpaid charges

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Or by way of counterclaim in an action to recover the

property from him
- Or other remedies allowed by law for the
enforcement of a lien against personal property
- Or to a creditor against his debtor
Warehouseman entitled to all the remedies allowed by the law
to a creditor against his debtor for the collection from the
depositor of all the charges which the depositor has bound
himself to pay.
Effect of sale:
1) Warehouseman not liable for nondelivery
- Even if receipt given for the goods when they were
deposited be negotiated
2) Sale without publication required and before time specified
by the law = VOID
- Purchases of the goods acquires no title
Acts for which warehouseman is liable:
1) Failure to stamp duplicate on copies of a negotiable
receipt
2) Failure to place non-negotiable or not negotiable on a
non-negotiable receipt
3) Misdelivery of goods
4) Failure to effect cancellation of a negotiable receipt upon
delivery of the goods
5) Issuing receipt for non-existing goods or misdescribed
goods
6) Failure to take care of the goods
7) Failure to give notice
- for sale of goods to satisfy his lien
- for perishable or hazardous goods