WAREHOUSE RECEIPT LAW

DEFINITION OF TERMS

Warehouse- means the building or place where goods are deposited and stored for profit.

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

Warehouse Receipt- is a written acknowledgment by a warehouseman that he has received

and holds certain goods described therein and in store for the person to whom it is issued. It
has also been defined as a simple written contract between the owner of the goods and the
warehouseman to pay the compensation for that service. It is included in document of title
to goods as used by the Civil Code in its provisions relating to sales. See Article 1636(1) of
the Civil Code).
Negotiable Receipt- is a receipt in which it is stated that the goods will be delivered to the
bearer or to the order of any person named is such receipt.
Non-Negotiable Receipt- is a receipt which it is stated that the goods will be delivered to the
depositor, or to any other specified person.

The terms purchaser as used in section 49 of the Warehouse Receipt Law, includes
mortgagee and pledgee. (Roman versus Asia Banking Corp., 46 Phil 705)

Form and Contents of Warehouse Receipt

(Who may issue?)

Warehouse receipt may be issued by any warehouseman or by his duly authorized officer or
agent.

Every warehouse receipt must embody within its written or printed terms the following; a)
the location of the warehouse where the goods are stored; b) the date of issue of the
receipt; c) the consecutive number of the receipt; d) a statement whether the goods
received will be delivered to 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 warehouse 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 as lien. If the precise amount of such advances made or of such
liabilities incurred is, at the time of the issue of the receipt, unknown to the warehouseman
or to his agent, a statement of the fact that advances has been made or liabilities incurred
and the purpose thereof is sufficient.
The omission of any of the essential requirements will not affect the validity of the
warehouse receipt or negotiability but will render the warehouseman liable for damages to
those injured by his omission.

Continuation-Contents
of Warehouse Receipt

When more than one negotiable receipt is issued for the same goods, the word duplicate
shall be plainly placed upon the face of every receipt except the one first issued. The
warehouseman shall be liable for all damages caused by his failure to mark duplicate the
other negotiable receipts issued for the same goods, to anyone who purchased the
subsequent receipt for value supposing it to be an original even though the purchase be
after delivery of the goods by the warehouseman to the holder of the original receipt.
Section 6 of the Warehouse Receipt law dealing on the aforementioned situation applies
only to negotiable receipt.
A non-negotiable receipt should be marked non-negotiable by the warehouseman,
otherwise, his failure to do so, shall make him liable as if the receipt is negotiable. Section 7
of the law applies only to non-negotiable receipt.

As instrument of credit, warehouse receipt plays an important role in modern commerce

and the present day tendency is towards a liberal interpretation of the law in favor of the
bona fide holders of such receipt.

Obligations and Rights of

Warehouseman upon their Receipts

The principal obligations of the warehouse are: 1) to take care of the goods entrusted to his safe keeping
and; 2) to deliver them to the holder of the receipt or to the depositor provided the conditions under
section 8 of the Warehouse Receipt Law are fulfilled.
The following are the conditions under section 8 of the law:
1. Generally, demand should be made in order that the duty to deliver the goods will arise.
2. An offer to satisfy the warehousemans lien
3. An offer to surrender the receipt, if negotiable with such endorsement as would be necessary for
negotiation of the receipt;
4. A readiness and willingness to sign, when goods are delivered, an acknowledgment that they have been
delivered, if such signature is requested by the warehouseman.
The warehouseman is obliged to ascertain the identity of the true owner of goods. He is justified in
delivering the goods to the persons lawfully entitled to the possession of the goods, or his agent; to the
person who is either himself entitled to the delivery by the terms of a non-negotiable receipt issued for the
goods or who has written authority from the person so entitled either endorsed upon the receipt or written
upon another paper; or to a person in possession of a negotiable receipt by the terms of which the goods
are deliverable to him or order, or bearer, or which has been endorsed to him or in blank by the person to
whom delivery was promised by the terms of the receipt or by his immediate endorsee.
The warehouseman losses his lien upon the goods by surrendering possession thereof.
Goods must be kept separate from goods of other depositors except fungible goods may be commingled if
warehouseman is authorized.

Acts of which warehouseman

is liable

The following are acts for which a warehouseman may be held liable:
1. Failure to stamp duplicate on copies of a negotiable receipt (sec.6)
2. Failure to place non-negotiable or not negotiable on a non-negotiable receipt (sec.7)
3. Misdelivery of the goods (sec.10)
4. Failure to effect cancellation of a negotiable receipt upon delivery of the goods (sec.11)
5. Issuing receipt for non-existing goods or mis-described goods (sec.20)
6. Failure to take good care of the goods (sec.21)
7. Failure to give notice in case of sale of goods to satisfy lien or because the goods are
perishable or hazardous (sec.33-34)

Kinds of Warehouse Receipt

There are two kinds of warehouse receipt:

1. Negotiable Warehouse Receipt

A. Negotiated by endorsement plus delivery if the negotiable receipt is deliverable to the order of
a specified person.

B. Negotiated by delivery if the negotiable receipt is deliverable to bearer.

2. Non-Negotiable Warehouse Receipt
Advantages of a negotiable warehouse receipt:
1.
It protects a purchaser for value and in good faith (sec.41)
2. The goods covered by the receipt cannot be garnished or levied upon under execution unless it is
surrendered or impounded or its negotiation enjoined. (sec.25)
3. In case of negotiation, the holder acquires the direct obligation of the warehouseman to hold
possession of the goods for him without notice to such warehouseman. (sec.41)
4. The goods it covers are not subject to sellers lien or stoppage in transitu. (sec.49)

A negotiable warehouse receipt may be negotiated by the owner or by any person to whom 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 possession
or custody of the receipt has been entrusted, or it may be negotiated by the holder where by the
terms of the receipt it is deliverable to such holder.

Rights of Person to whom a receipt

has been negotiated (Sec.41)

A person to whom a negotiable receipt has been duly negotiated acquires thereby:
1. 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;
2. 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 specifies the rights of a person to whom a negotiable warehouse receipt has been duly negotiated
either by delivery, in case of a receipt to bearer, or by endorsement and delivery, in case of a receipt to
order.
One who purchases, therefore, a negotiable receipt from a thief or stolen receipt acquires no rights over
the goods as the thief has no right to transfer notwithstanding that such purchaser is innocent.
The validity of the negotiation of a receipt is not impaired by the fact that such negotiation was 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 to entrust the possession or custody of such receipt to such person, if
the purchaser or the person to whom the receipt was subsequently negotiated paid value and without
notice of such breach or fraud. (sec.47).

Duty of Warehouseman where there are several

claimants

If more than one person claims 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 know claimants to interplead. Section 17
If there several claimants to the goods, the warehouseman must:
1. determine within a reasonable time the validity of the conflicting
claims.
2. deliver to the person whom he finds is entitled to the possession of
the goods, however, he is not excused from liability in case he makes a
mistakes.
3. For his own protection, he must bring an action for interpleader and
require the conflicting claimants to interplead or litigate among
themselves and let the court decides.
If he neither investigates or interpleads, he is liable for refusal to the
deliver the goods to the rightful claimant, after the lapse of reasonable
time.

Rights of Person to whom

receipt has been transferred (sec.42)

Section 42 refers to the rights of a person to whom a negotiable warehouse receipt (not duly negotiated)
has been transferred or of the transferee of a non-negotiable document. The rights of such persons are:
1. The title to the goods as against the transferor;
2. The right to notify the warehouseman of the transfer thereof;
3. The right, thereafter, to acquire the obligation of the warehouse to hold goods for him.
The right of the transferee is not absolute as it is subject to the terms of any agreement with the
transferor. He merely steps into the shoes of the transferor.
ATTACHMENT OF GOODS COVERED BY RECEIPT:
1. The transfer of non-negotiable receipt does not effect delivery of the goods covered by it. Accordingly,
before notification, the warehouseman is not bound to the transferee whose rights may be defeated by a
levy of an attachment or execution upon the goods by the creditor of the transferor or by a notification to
such warehouseman of the subsequent sale of the goods.
2. If the receipt is negotiable, the goods cannot be attached or be levied upon under execution unless the
receipt be first surrendered to the warehouseman or its negotiation enjoined.
Where a negotiable receipt is transferred for value by delivery, and the endorsement of the transferor is
essential for negotiation, the transferee acquires the right against the transferor to compel him to endorse
the receipt, unless a contrary intention appears. The negotiation shall take effect as of the time when the
endorsement is actually made.

WAREHOUSEMAN LIEN

A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands, for all
lawful charges for storage and preservation of the goods; also for all lawful claims of money advanced,
interest, insurance, transportation, labor, weighing, cooperating, and other charges and expenses in
relation to such goods; also for the reasonable charges and expenses for notice and advertisement of sale,
and for sale of the goods where default has been made in satisfying the warehouseman lien.
The warehouseman may enforce his lien against the goods of the depositor who is liable to the
warehouseman as debtor whenever such goods are deposited; and against the goods of other persons
stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge.
The warehousemans lien over the goods deposited with him is his security, just like a mortgage, for the
payment of charges, money advanced, and other expenses incurred as enumerated in section 27.
A warehouseman losses his lien upon the goods by:a) surrendering possession of the goods; b) by
refusing to deliver the goods when a demand is made with which he is bound to comply under the
provision of the Warehouse Receipt Law. (See Section 8-demand with offer to satisfy lien)
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.
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, whether the latter has or has not lien upon the goods.
Remedies available: 1) by refusing to deliver the goods until lien is satisfied; 2) by causing the extrajudicial
sale of the goods and applying the proceeds to the value of the lien; 3) by filing a civil action for the
unpaid charges or by way of counterclaim in an action to recover the property from him.

Criminal Offense under Warehouse

Receipt Law

Section 50- Issuance of receipt for goods not received or are not under his actual control at
the time of issuing such receipt.

Section 51- Issuance of receipt containing false statement.

Section 52- Issuance of duplicate receipt not so marked.

Section 53- Issue of Receipt by warehouseman without stating the fact of his ownership
over the goods deposited.

Section 54- A warehouseman or his authorized agent who delivers goods out of his
possession, knowing that a negotiable receipt is outstanding and un-cancelled, without
obtaining possession of such receipt at or before the time of such delivery.

Section 55- Negotiation of receipt for mortgaged goods with intent to deceive and without
disclosing his want of title or the existence of the mortgage lien.

Trust Receipt Law

(PD 115)

Definition- A trust receipt refer to the written or printed document signed by the entrustee
in favor of the entruster containing terms and conditions substantially complying with the
provisions of the Trust Receipts Law.

A trust receipt transaction is any transaction by and between a person as the entruster and
another person as entrustee, whereby the entruster, who owns or holds absolute title or
security interest over certain specified goods, documents or instruments, releases the same
to the possession of the entrustee upon the latters execution and delivery to the entruster
of a signed document called a Trust Receipt wherein the entrustee binds himself to hold
the designated goods, documents or instruments in trust for the entruster and to sell or
otherwise dispose of the goods, documents or instruments with the obligation to turn over
to the entruster or as appears in the trust receipt or the goods, documents or instruments
themselves if they are unsold or not otherwise disposed of, in accordance with the terms
and conditions specified in the trust receipt.

The entrustee assumes the risk of loss with or without his fault.

FORM OF TRUST RECEIPT

A trust receipt need not be in any particular form, but every such trust receipts must
substantially contain the following:
1. Description of the goods, documents or instruments subject of the TR.
2. The total invoice value of the goods, documents or instruments and the amount of the
draft to be paid by the entrustee;
3. An undertaking or commitment of the entrustee to hold in trust for the entruster the
goods, documents, instruments therein described; to dispose of them in the manner
provided for in the receipt; to turn over the proceeds of the sale to the entruster to the
extent of the amount owing to the entruster or as appears in the trust receipt or to return
the goods, documents, instruments in the event of their non-sale within the specified period
therein.
The trust receipt may contain other terms and conditions agreed upon by the parties in
addition to the aforementioned terms, provided such terms and conditions shall not be
contrary to the Trust Receipt Law, any existing laws, public policy or morals and pulbic
order.
The entruster is not responsible on sale made by the entrustee.

Violations of Trust Receipt Law

and Rights of the Entruster

The entruster;s security interest in goods, documents or instruments pursuant to a written

terms of a trust receipt shall be valid as against all creditors of the entrustee for the
duration of the trust receipt agreement.

The Trust Receipt Law is violated whenever the entrustee fails to: 1) turn-over the proceeds
of the sale of goods, or 2) return the goods covered by the trust receipt if the goods are not
sold. The mere failure to account or return gives rise to the crime which is malum
prohibitum. There is no requirement to prove intent to defraud.
It is a well-settled doctrine long before the enactment of the Trust Receipt Law, that the
failure to account, upon demand, for funds or property held in trust is evidence of
conversion or misappropriation. Under the law, mere failure by the entrustee to account for
the goods received in trust constitute estafa. If the violation is committed by a corporation,
partnership, association, or other juridical entity, the penalty shall be imposed upon the
directors, officers, employees and other officials or persons therein responsible for the
offense, without prejudice to the civil liabilities arising from the criminal offense.

BANKING

Definition- Banks are entities engaged in the lending of funds obtained in the form of
deposits. It is a moneyed institute founded to facilitate the borrowing, lending and
safekeeping of money and to deal, in notes, bill of exchange, and credits.
The relation existing between a depositor and a bank is that of creditor and debtor.
However, with regard to its safekeeping business, the relationship is that of a depositary.

Section 2 of Republic Act 8791 (General Banking Law of 2000) expressly imposes fiduciary
duty on banks when it declares that the State recognizes the fiduciary nature of banking
that requires high standards of integrity and performance . This statutory declaration
merely echoes the earlier pronouncement of the Supreme Court requiring banks to treat
the accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.

The business of banking is imbued with public interest. The stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks.

Classification of Banks

Banks are classified into:

1. Universal Banks- are large commercial banks licensed by BSP to do commercial and
investment banking.

2. Commercial Banks- has all the powers necessary to carry on the business of commercial
banking such as accepting drafts and issuing letters of credit, extending credit, investment
subject to regulations by Monetary Board.
3. Rural Banks- engaged in rural banking and caters with farmers, cooperatives and small
merchants.
4. Thrift Banks- include savings and mortgage bansk, private development banks. It is
primarily engaged in the accumulation of saving deposits and investing them in home
building and home development and others as may be allowed by law.
5. Cooperative Banks- defined under the Cooperative Code or RA 6938
6. Islamic Banks as defined in the Charter of Al Amanah Islamic Investment Bank of the
Philippines or RA 6848.

Restriction on Bank Exposure to

Directors, Officers,Stockholders and their
Related Interest (DOSRI)

No director or officer of any bank shall, directly or indirectly, for himself or as representative
or agent of others, borrow from such bank nor shall he become a guarantor, endorser,
surety for loans from such bank to others, or in any manner be an obligor or incur any
contractual liability to the bank except with the written approval of the majority of all
directors of the bank excluding the director concerned.
Such written approval shall not be required for loans, other credit accommodations and
advances granted to officer under a fringe benefit plan approved by the Central Bank.
The required approval shall be entered upon the records of the bank and a copy of such
entry shall be transmitted forthwith to the appropriate supervising and examining
department of the Central Bank.
Dealings of a bank with any of its directors, officers or stockholders and their related
interest shall be upon terms not less favorable to the bank than those offered to others.
Related interest- refers to spouse or relative within the first degree of consanguinity or
affinity, or relative by legal adoption, of a director, officer or stockholder of the bank.
Effect of violation- after due notice to the board of directors of the bank, the office of any
bank director or officer who violates the DOSRI rule may be declared vacant and he shall be
subject to the penal provisions provided under the Central Bank Act.

Single Borrowers Limit

The total amount of loans, credit accommodations and guarantees as may be defined by
the Monetary Board that may be extended by a bank to any person, partnership,
association, corporation or other entity shall at no time exceed twenty (20%) percent of the
net worth of such bank.
Exceptions:
1. As the Monetary Board may otherwise prescribed for reasons of national interest;
2. Deposits of rural banks with government-owned or controlled financial institution like the
Land Bank of the Philippines and the Development Bank of the Philippines are exempted
from the single borrowers limit imposed by the General Banking Act.
The basis for determining compliance with single borrower limit is the total credit
commitment of the bank to the borrower. Total credit commitment shall include outstanding
loans, and other credit accommodations, deferred letters of credit less margin deposits and
guarantees