HIGHLIGHTS OF WAREHOUSE RECEIPTS ACT REPUBLIC ACT
NO. 2137 indorsement of the receipt.
Introduction
The subject of Warehouse Receipts forms part of the study of Credit
Transaction but is taken up as part of the Negotiable
Instrument Law because of the highly negotiable character of
the versatile negotiable receipt.
Some of the varied uses of the Warehouse Receipt are –
Goods covered by the receipt may be object of a contract of sale by
merely indorsing the receipt to the buyer.
The receipt may be used as a mode of payment of an obligation by
indorsement.
It may be utilized as a property dividend by a corporation which may
be unable at the time to declare cash dividend.
A warehouse receipt is a special type of document of title similar to
bill of lading and dock warrant which is governed by the Civil
Code except for the warehouse receipt.
Document of title is governed by Articles 1507-1520 of the Civil
Code.
Document of title refers to goods and not to money.
money. They all have
this in common: 1. That they are receipt of a bailee or 2.
Orders upon a bailee.
Define Negotiable Document of Title:
A document of title in which it is stated that the goods referred to
therein will be delivered to the bearer, or to the order of the
any person named in such document is a negotiable
document of tile. (Art. 1507)
Functions: Being symbol of the goods covered by it, document of
title serves as:
a. Transfer of title
b. Transfer of possession
c. Contract between parties who are bound by its terms.
Common forms of Document of title:
Bill of Lading-
Lading- A contract or receipt for the transport of goods and
their delivery to the persons named therein, to order or to bearer. It
usually involves three persons - the carrier, the shipper and the
consignee. The shipper and the consignee may be one and the
same person.
Dock warrant- An instrument given by dock owners to an importer of
goods warehoused on the dock recognizing the importer's title
to the said goods;
Warehouse receipt - A contract or receipt for goods deposited with
the warehouseman containing the latter's undertaking to hold
and deliver the said goods to a specified person, to order or to
bearer. Quedan is warehouse receipt usually for sugar
received by warehouseman.
Chapter IIssue
IIssue of Warehouse Receipt
WAREHOUSE RECEIPT, defined: “ A receipt showing storage of
goods or property in a warehouse. It is the evidence of Title to
the property in storage.” (Hemphill’s Law Dictionary)
It is a written acknowledgment by the warehouseman that
he has received and is holding for safekeeping and storage,
goods or property deposited with him, with the obligation to
deliver such goods or property to the depositor or to any
person who may legally entitled to such goods or property
upon payment of his storage charges and surrender of the
warehouse receipt.
Functions of Warehouse Receipt
To establish contract for storage and safekeeping of goods or
property covered by the warehouse receipt.
To serve as evidence of title or ownership of goods or property
deposited in the warehouse.
To facilitate transactions covering the goods or property deposited by
the negotiation of the receipt.
May be used as a mode of payment of an obligation by the
May be utilized as a property dividend by a corporation which may be
unable to declare “cash dividends”.
Parties to a Warehouse Receipt
Depositor – The party who deposits goods or property for storage and
safekeeping. Also referred to as the Bailor.
Warehouseman – The party who owns the business of warehousing
and who receives the goods or property for storage. Also called the
Bailee.
Warehouseman vs. carrier.
Although warehousemen and common carriers are similar to the
extent that both are bailees for ire, it is ordinarily not difficult a
carrier of goods from a warehouseman, the former engaged in
moving the goods and the latter in keeping them at storage.
One cannot be a warehouseman where the only property stored is
that which he himself owns. Technically, the contract of storage
requires two parties, the bailor and the bailee, and strictly speaking,
the owner of a warehouse cannot be a warehouseman with respect to
his own goods.
Who may issue warehouse receipts? Warehousemen and their
agents may issue warehouse receipts.
Form of warehouse receipt (Sec. 2)
The law does not require a particular form but it must of course be in
writing and certain essential terms are required to be stated in
the receipt.
Effect of omission of essential terms
(1) The negotiability is not affected. Sec. 2 does not deal with
negotiability of warehouse receipts. This provision is inconsistent
with the claim that the omission renders the receipt non-negotiable,
for it refers expressly to the omission from a negotiable receipt and
not from a receipt which would otherwise be negotiable.
(2) The validity is not affected. The requirement is for the benefit of
holders and to hold a receipt void because of an omission
therein would be to punish holders for the bad faith or
negligence of the warehousemen.
(3) Liability of warehouseman for all damages caused by omission to
any person injured.
Importance of essential terms:
The requirement as to location is to enable the holder to determine
where the goods are deposited especially when warehouseman has
several warehouses.
The date of issue is prima facie the date of perfection of the contract,
although inasmuch as the contract is one of deposit, its perfection is
as of the time of the delivery of goods, deposited with the
warehouseman. Furthermore, unless otherwise agreed upon, the
storage charges begin to run from the date of issue.
c. The purpose of the number of receipt is to identify such receipt with
the goods for w ofhich it was issued. But there is no express
requirement as to when the consecutive numbers shall begin.
d. A person to whom the goods are deliverable, the receipt may be
made deliverable to bearer, to order or to a specified person.
e. The rate of storage charge states the consideration of the contract
of the deposit at the standpoint of the warehouseman.
f. The description of the goods is for the purpose of identification so
that the identified properties delivered to the warehouseman
may be delivered back by him upon return of the warehouse
receipt. Assuming the goods deposited was incorrectly
described, the receipt is not ineffective so long the identity of
the goods is established by evidence.
g. The signature of the warehouseman is the best evidence of the
fact that the warehouseman has bound himself to take care of
the goods received by him.
h. The warehouseman’s interest in the goods is required to be stated
as some abuses have risen from the warehouseman issuing
receipts on their own goods. It seems wise that, where they
issue negotiable receipts in this way, the document shall carry
notice of the fact on its face.
i)Examples of the advances and liabilities required to be stated is the
money advanced by the warehouseman to a carrier or the
depositor to enable the latter to transport the goods to the
warehouse. The reason is said advances or liabilities
constitute as claim for lien which should be stated in the
receipt to make the lien effective, except for storage charges.
What terms that can be inserted in the receipt? (Sec. 3)
He may insert any terms or conditions provided not contrary to law,
morals, good customs, public order or public policy.
Cannot insert terms which omits the standard of care required of the
warehouseman.
Exercise the degree of care which reasonably are careful man would
exercise in regard to similar goods of his own.
Illustrative Examples:
“ At risk of the depositor.’ this would impair the warehouseman’s
obligation to safely keep the goods.
Terms exempting the warehouseman in case of misdelivery of goods.
He cannot set up title in himself.
A warehouse receipt deliverable to the depositor or to a specific
person is non-negotiable. (Sec. 4)
A warehouse receipt deliverable to Bearer or to specific person
or his order is negotiable.( Sec. 5)
Carbon copies of warehouse receipt must be properly marked
“duplicate” otherwise the warehouseman becomes liable if such
extra copies are negotiated for value as original receipts. (Sec.
6)
If warehouseman issues a non-negotiable
non-negotiable receipt, it must be properly
marked “non-negotiable”. If he fails to do so and the receipt is
negotiated to a person who believes it is negotiable and for value, he
will liable as if the receipt is negotiable, (Sec. 7).
Obligation and Rights of Warehouseman
1) Bailee is obliged to deliver the goods to the depositor or the holder
of the receipt upon:
presentation of the warehouse receipt, accompanied by
the offer to pay all the storage and other charges and
the surrender of the warehouse receipt upon receipt of the
goods, (Sec. 8)
To whom?
a person lawfully entitled to the possession of the goods or his
authorized representative;
The holder or bearer of the negotiable warehouse receipt;
To the specified person in the non-negotiable receipt or his
authorized representative (Sec. 9)
2) Liable for CONVERSION (Sec. 10)
Conversion, defined: “The unauthorized appropriation of another’s
property for the use of the wrongdoer or the
destruction or alteration of the nature of the property.
(Hemphill’s Law Dictionary)
The warehouseman or bailee shall be liable for conversion:
if he makes a misdelivery of the goods covered by the warehouse
receipt to parties other than those mentioned in section 9 or if he
makes delivery if the goods to those entitled to the goods mentioned
in Section 9 under the following circumstances.
if before delivery to the holder of the receipt, the bailee or
warehouseman has received prior notice not to deliver the goods; or
if the warehouseman has information that the delivery to be made is
to one not lawfully entitled to the possession of the goods.
Example:
If before delivery to the holder of the receipt, the warehouseman has
previously received notice not to deliver the goods.
goods.
A bought goods from B and deposited the goods to
warehouseman C who issued a receipt deliverable to
“Pedro Cruz”. Then B, the unpaid seller promptly notified
C not deliver the goods to anybody as A has failed to pay
the purchase price on agreed date. If, in spite of the
prior notice of B, the unpaid seller, C delivered the goods
to Pedro Cruz, C the warehouseman will be liable for
conversion.
Example
If the warehouseman had information that the delivery to be made
was to one lawfully entitled to the possession of the goods.
goods.
A negotiable warehouse receipt was issued “Deliverable to D or
order” Suppose D lost the warehouse receipt which was
later found by X who presented the receipt to C for
delivery of the goods. D notified C that he had lost the
receipt an instructed him not to deliver the goods to
anyone who would present the receipt. C in spite of
such notice went ahead and delivered the goods to X, C
then would be liable for conversion. C should not have
validly delivered the goods to X because X could not be
rightfully considered the holder of the receipt as it was
not properly indorsed to him, the receipt being an order
instrument.
3) If after the delivery of the goods, the warehouseman fails or
neglects to ask for the surrender of the negotiable receipt, he
becomes liable for the goods covered by the receipt to a
purchaser in good faith and for value to whom the holder has
subsequently negotiated the receipt (Sec. 11).
Example:
X is the holder of a warehouse receipt for 100 cans of evaporated
milk. He took delivery of the 100 cans but C the
warehouseman negligently failed to ask for the surrender of
the receipt in order to cancel it. If X should negotiate the
receipt again to Y who is in good faith and for value, Y can
hold C, the warehouseman liable for the failure to deliver the
100 cans of milk to him.
4.) It is the duty of the warehouseman to annotate in the
warehouse receipt the partial delivery he has made; otherwise
he becomes liable for the entire goods if the receipt is
negotiated by the holder to a purchaser in good faith and for
value. (Sec. 12)
Example: In relation to the previous example, if X the holder of the
negotiable receipt for 100 cans of milk takes partial delivery of
50 cans and the warehouseman failed to annotate that he has
made partial delivery, he will be liable for the entire 100 cans
of milk instead of the remaining 50 cans if assuming X
subsequently negotiates the receipt to Y who is a purchaser in
good faith and for value.
5) Liability of the warehouseman as to the following alterations
in the warehouse receipt: (Sec. 13)
Immaterial alteration – warehouseman is liable according to such
immaterial alteration.
Authorized alteration- He will also be liable according to the
authorized alteration.
Unauthorized alteration- If the unauthorized alteration is made:
Without fraudulent intent-
Warehouseman will be liable in accordance with the
original tenor of the receipt.
With fraudulent intent –
Warehouseman will still be liable according to the original tenor of the
receipt to the person who made the fraudulent alteration and to
subsequent persons who took the receipt with knowledge of the
fraudulent alteration;
alteration; but not for any other liability.
Warehouseman will be liable according to the original tenor of the
receipt in addition to whatever other liabilities to a purchaser of the
receipt for value and without knowledge of the alteration.
6) In the event of negotiable warehouse receipt is lost or
destroyed, the holder must take the following steps to be
able to make delivery of the goods; (sec. 14)
Secure an order from a competent court directing the warehouseman
to deliver the goods covered by the lost or destroyed receipt, after
presentation of satisfactory proof of such loss or destruction;
Post a bond with sufficient sureties as approved by the Court, to
answer for whatever liability or expense the warehouseman or an
injured party may incur in case the original receipt still remains
outstanding;
Pay the total warehouseman’s reasonable costs and attorney’s fees
at the discretion of the Court.
Effect of delivery under the Court Order:
The warehouseman will still be liable to a purchaser in
good faith and for value to whom the original receipt has been
negotiated, but he can recover from the bond posted by the holder
whatever damages he may have incurred.
In order to avoid making a wrong delivery of the goods to the
wrong claimant, in case there are two or more persons claiming
title or possession of the goods, the warehouseman, at his own
initiative or as a matter of defense, may require all claimants to
interplead so that the court may determine who among them is
truly entitled to the goods. (Sec. 17)
Interpleader,
Interpleader, defined: A legal proceeding that enables a
person holding money or property to compel other parties claiming
the person or property to litigate the matter between or among
themselves. (Hemphill’s law Dictionary)
8) Warehouseman is obligated to determine the existence and
correct description of all goods being deposited before he
issues corresponding receipt, otherwise, he shall be liable to
the holder of such receipt for:
The non-existence of the goods, or
The failure of the goods in his care to tally with the description in the
receipt he issued.
9) Goods covered by negotiable warehouse receipt and still in
the possession of the warehouseman, cannot be attached
or levied upon under an execution unless (sec. 23)
The warehouse receipt is first surrendered to the warehouseman; or
Its negotiation is enjoined through a court order.
10) The creditor of the depositor of goods has the following
remedies with regards to the goods (Sec. 26)
attach the warehouse receipt by injunction; or request the court to
order that bailee to deliver the goods to the depositor to him;
11) Bailee’s exercise of his warehouseman’s lien
Warehouseman’s lien, defined: “Right of the
warehouseman to retain possession of the goods deposited or to
refuse delivery of the goods to the holder or depositor until the total
legitimate charges of the warehouseman have been fully paid.
Bailee may exercise his right of warehouseman’s lien on goods
deposited to him for non-payment of all charges, advances,
expenses of the sale of goods, etc (Sec. 27).
Bailee may refuse to deliver goods until his lien is fully satisfied.
(Sec. 31)
To create a warehouseman’s lien, all charges, etc. must be
clearly indicated in the negotiable warehouse receipt when
issued. Otherwise only charges for storage will be the basis for
his lien. (sec. 30)
The warehouseman’s lien is lost by the bailee (Sec. 32)
if he surrenders the possession of the goods or;
if he refuses to deliver the goods when there is legal demand for
delivery.
12) Other remedies of a Warehouseman’s Lien (Sec. 32)
Exercise his warehouseman’s lien
Sue for collection of debt for unpaid charges
Attachment of debtor’s property, real or personal
Assignment of 3rd party credit by debtor to the bailee
Sale of goods to satisfy lien
13) The warehouseman may give notice to the owner or
depositor of the goods to remove immediately the goods
deposited upon payment of the warehouseman’s lien if (sec. 34):
The goods under storage are perishable or
Hazardous in nature or
The goods will deteriorate if storage is prolonged.
Upon failure to remove the goods within reasonable time after notice
and pay the warehouseman’s lien, the warehouseman has the
right to sell goods at the public or private auction without need
of advertisement.
After the sale of the goods, the warehouseman will no
longer be liable to deliver the goods to the depositor, or to
the owner of the goods, or to the holder of the negotiable
receipt. (section 36)
Negotiation and Transfer of Receipts
A negotiable warehouse receipt may be negotiated in the same
manner as any negotiable instruments to wit:
a) Deliverable to Bearer – it may be negotiated by –
by mere delivery, or
by blank indorsement plus delivery
b) Deliverable to Order - by proper indorsement plus delivery
Notes:
1) A negotiable warehouse receipt may be negotiated by (sec.
40)
The owner of the goods
By the person entrusted with the custody of the goods
By the holder of the warehouse receipt
2) The person to whom the warehouse receipt is negotiated
acquires: (sec. 41)
such title to the goods as the indorser may have on the receipt, and
such title as the depositor or the person to whose order it was
indorsed had on the instrument, and
the direct obligation of the bailee to hold possession of the goods for
him, as if the bailee had contracted directly with him.
Example 1:
A negotiable warehouse receipt is issued deliverable to A or bearer.
Suppose A loses the receipt which is eventually found by B. B
negotiates the receipt by mere delivery to X, a purchaser in
good faith and for value. Because the receipt is a bearer
receipt, X acquires valid title to the goods covered by the
receipt and the warehouseman is obliged to hold the goods for
him.
Example 2:
A negotiable warehouse receipt is issued deliverable to A or order.
The above receipt is an order receipt which can be validly negotiated
only by A by making a proper indorsement and delivery. In
the event A loses the receipt and is found by B, B negotiates
it by mere delivery to X, a purchaser in good faith and for
value. X does not acquire valid title for two reasons:
Two reasons:
The receipt being an order receipt was not properly indorsed to him.
An order receipt can only be negotiated by proper indorsement plus
delivery.
B passes no valid title to him because B merely found the receipt. B
is not a valid holder / indorsee because there is no proper
indorsement and delivery to him by A.
Example 3:
In reference to Ex. 2, suppose A is dealing with X who is a
purchaser in good faith and for value. A inadvertently
transferred the receipt to C without the proper
indorsement.
Is the transaction between A and X a valid negotiation? No, it is not
because there in no proper indorsement. It is called a mere equitable
assignment.
b. Does X acquires a valid title to the goods? It depends. X becomes
an assignee only and acquires whatever rights A, the
assignor may have on the receipt. If A has a legal right to
the goods, X can take delivery of the goods; X can
likewise compel A to make proper indorsement so that
there can be a valid negotiation of the receipt.
If the warehouse receipt is a negotiable receipt and is transferred to a
third person for value but without the proper indorsement, the transfer
is considered a mere equitable assignment and not a negotiation.
The transferee or assignee acquires:
*whatever rights the assignor may have on their receipt, and
*The right to compel the assignor to make the proper indorsement,
upon which the transferee becomes the holder of the receipt and
The warehouseman must hold the goods for him without the
necessity of notification. (Sec. 42-43).
If the receipt is non-negotiable,
non-negotiable, either the transferor or
transferee must notify the warehouseman of such transfer in
order that the latter may hold the goods for the transferee
according to the terms of the receipt. Failure to notify the
warehouseman of such transfer or prior right to require the
warehouseman to hold the goods for him, may be defeated by;
*A
A levy attachment or execution upon the goods by the creditor of the
transferor; or
*A notification to the warehouseman by the transferor that the goods
have been sold to another purchaser, or
*A notification to the warehouseman by the subsequent
purchaser to hold the goods for him (Sec. 42)
A person who for value negotiates or transfers a receipt by
indorsement or delivery, and one who assigns a claim secured
by a receipt, warrants : (sec. 44)
*that the receipt is genuine;
*that he has legal title to negotiate or transfer it;
*that he has no knowledge of any fact which would impair the validity
or worth of the receipt;
*that he has the right to transfer the title to the goods; and
*that the goods are merchantable or fit for the purpose intended.
5) As a rule an indorser is not liable to the holder of the receipt
for any failure on the part of the warehouseman or previous
indorsers, unless there is a violation of any warranty
enumerated under Sec. 14. INDORSER IS NOT A GUARANTOR
(Sec. 45)
6) The mortgagee or pledge who receives a warehouse receipt
as a security or collateral for the loan he granted, will not
be answerable for the genuineness of the receipt or the
quantity or quality of the goods covered by the receipt, to
the party who pays him the loan and to whom the pledge
or mortgagee has surrendered the receipt. (Sec. 36)
Example:
A borrows P 5,000.00 from X and A gave as collateral a warehouse
receipt issued to him by Y, warehouseman, for certain goods.
On maturity of the loan, B, third person, pays X the P 5,000.00
and X surrenders to B the warehouse receipt. Later B
presents to Y who refuses to deliver the goods because the
receipts is a forgery. Can B hold X liable on the fake receipts?
No, X cannot be held liable because he does not warrant the
genuineness of the receipt offered by A as collateral.
7) A purchaser in good faith and for value acquires valid title to the
goods even if the warehouse receipt:
*was negotiated to him in breach of faith or duty or;
*was acquired by the person negotiating it through fraud,
mistake or duress. (Sec. 47)
Example: A negotiable receipt issued “deliverable to A or
Bearer”. A delivers the receipt to B for safekeeping and B negotiates
it to X, a purchaser in good faith and for value, in breach of faith.
Does X acquire valid title to the goods? Yes despite the breach of
faith on the part of B, X acquires valid title as purchaser in good faith
and for value.
if the depositor or holder of the negotiable warehouse receipt
sells, mortgages or pledges the goods covered by such receipt,
but retains possession of the receipt and subsequently
thereafter negotiates the receipt to a purchaser in good faith and
for value (without knowledge of the prior sale, mortgage or
pledge), such subsequent purchaser shall have the better title to
the goods. The effect is as if the first purchaser of the goods or
the receipt had expressly authorized the subsequent sale. (Sec.
48)
9) A purchaser for value and in good faith of the receipt shall have
better rights over the goods than an unpaid seller who is
exercising right of possessory lien or stoppage in transitu,
irrespective of whether such negotiation is prior or subsequent
to the unpaid seller’s notice to the bailee.
Warehouseman is not justified to deliver the goods to
an unpaid seller unless the negotiable warehouse receipt is first
surrendered for cancellation. (Sec. 49)
Criminal Offenses
issue of receipt for goods not received – warehouseman shall be
punished by imprisonment of not exceeding one year or by fine
not exceeding P 2,000 (Sec. 50)
Issue of receipt containing false statement – warehouseman
shall be punished by imprisonment of not to exceed one year or
fine not to exceed P 2,000 (Sec. 51)
Issuance of duplicate receipt not so marked duplicate-
warehouseman shall be punished by imprisonment of not
exceeding 5 years or fine not to exceed P 10,000 (Sec. 52)
Issuance for warehouseman’s goods of receipt which does not
state the fact – warehouseman shall be punished by
imprisonment of not exceeding 1 year or fine not more than P
2,000 (Sec. 53)
Delivery of goods without obtaining negotiable receipt – same as
no. 4 (Sec. 54)
Negotiation of receipt for mortgaged goods- any person who
deposit goods to which he has no title or upon which there is a
lien or mortgage and who takes for such goods a negotiable
receipt which he afterwards negotiates for value with intent to
deceive shall be punished by imprisonment same as no. 4 (Sec.
55)