Warehouse Receipt Law 3

COMMERCIAL LAW – Warehouse Receipt Law2009 BAR OPERATIONS

WAREHOUSE RECEIPT LAW(Act no. 2137)

Definition:1. Warehouseman – person lawfully

engaged in the business of storing goods for profit

2. Warehouse – the building or place where goods are deposited and stored for profit

3. Warehouse receipts – a 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 written contract between the owner of the goods and the warehouseman to pay the compensation for that service

4. Non-negotiable receipts – a receipt in which it is stated that the goods received will be delivered to the depositor, or to any other specified person

5. Negotiable receipts – a receipt in which it is stated that the goods received will be delivered to the bearer or to the order of any person named in such receipt

Notes:

1. Section 1 of the law provides that only a warehouseman may issue warehouse receipts, those not issued by a warehouseman are not warehouse receipts.

2. Warehouse receipts are not negotiable instruments under the Negotiable Instruments Law

Negotiable Instruments

Warehouse Receipt

The subject is money The subject is merchandise

The instrument itself is the object of value

The goods are the object of value

Intermediate parties become secondarily liable

Intermediate partied are not liable for the warehouseman’s failure to deliver the goods.

3. No provision shall be inserted in a negotiable receipt that it is non-negotiable. Such provision if inserted, shall be void.

4. The warehouse receipt is negotiable under this act, meaning

that in the passage of the warehouse receipts through the channels of commerce, the law regards the property which they describe as following them and gives to their regular transfer by endorsement the effect of manual delivery of the things specified in them.

Contents of a Warehouse receipt Generally, the warehouse receipt is not required to be in any particular form. However it should contain the following contents:

1. Location of the warehouse where goods are stored

2. Date of issue of the receipt3. Consecutive number of the receipts4. Statements whether the goods received

will be delivered to the bearer, to a specified person, or to a specified person or his order

5. Rate of storage charges6. Description of the goods or of the

packages containing them7. Signature of the warehouseman which

may be made by his authorized agent8. Warehouseman’s ownership of or interest

in the goods9. Statement of advances made and

liabilities incurred

The requirements are for the protection of the depositor and those succeeding to his rights. If the warehouseman omits any of the required information and injury is caused thereby to a person, the warehouseman shall be liable to the said person for all damages caused by such omission.

INSERTIONS BY THE WAREHOUSEMANThe warehouseman may insert any other terms and conditions PROVIDED it shall not;

1) be contrary to the provisions of this Act and

2) in anywise, impair his obligations to exercise that degree of care in the safekeeping of the goods entrusted to him

KEY: Not CI The warehouseman is required to exercise that degree of care which a reasonably careful man would exercise in regard to similar goods of his own.

Kinds of receipt a warehouseman may issue

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1. Non-negotiable receipt – one which provides that the goods will be delivered to the depositor or to any other specified person

This may not be transferred by negotiation but may be assigned

2. Negotiable receipt – one which that the goods will be delivered to the bearer or to the order of any person named in the receipt.

Non-negotiable mark – a non-negotiable receipt shall have plainly placed upon its face by the warehouseman issuing it as “non-negotiable” or “not negotiable”. Failure to do so, the holder of the receipt believing it to be negotiable may, at his option, treat it as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been negotiable.

A negotiable receipt cannot be converted into a non-negotiable one such as by inserting a provision in the receipt stating that it is non-negotiable. Such a provision shall be void.

Duplicate receipts – when more than one negotiable receipt is issued for the same goods, the word “duplicate” shall be plainly placed upon the face of every such receipt EXCEPT THE ONE FIRST ISSUED.

Warranties if the term “Duplicate” is indicated in the receipt?Sec 15 provides that if the term “duplicate’ is indicated in the receipts it warrants the ff:

a. That the duplicate is an accurate copy of the original receipt; and

b. Such original receipt is uncancelled at the date of the issue of the duplicate

Obligation of the warehouseman to deliver goods delivered with him A warehouseman is bound to deliver the goods upon a demand made either by;

1. The person lawfully entitled to the possession of the goods or his agent (e.g. buyer in an auction sale, donee of the goods)

2. A person who is entitled to delivery by the terms of the non-negotiable receipt or who has written authority from the person so entitled either indorsed or written upon another paper

3. Person in possession of a negotiable receipt

PROVIDED such demand is accompanied by:1.an offer to satisfy the warehouseman’s

lien2.an offer to surrender the receipt, if

negotiable with such endorsements as

would be necessary for negotiation of the receipts

3.a readiness and willingness to sign, when the goods are delivered, an acknowledgment that the goods had been delivered.

Refusal or failure to deliver – the burden shall be upon the warehouseman to establish the existence of a lawful excuse for the refusal. Ownership is not a defense for the refusal to deliver goods

Doctrine of Estoppel - The 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:

1. Directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto;

2. From the warehouseman’s lien. (Sec.16)

Neither can the warehouseman, as a depositary for hire, set up an adverse title in another as an excuse for his failure to deliver the property to his bailor on demand. (Sec.19)

DISTINCTIONS BETWEEN NEGOTIABLE AND NON-NEGOTIABLE WR

NEGOTIABLE WR NON-NEGOTIABLE WR

May be acquired through negotiation

May be acquired through transfer or assignment

Rights of the person to whom it is negotiated (holder):1. Title to the goods of the person negotiating the receipt and title of the person to whose order the goods were to be delivered.2. Direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him.

Rights of the transferee:1. Title of the goods, as against the transferor (merely steps into the shoes);2. Right to notify the warehouseman of the transfer and acquire the direct obligation of the warehouseman to hold the goods for him.

Negotiation defeats the lien of the seller of the goods (Sec. 49)

Goods represented cannot be subject to attachment or levy by execution, unless in proper circumstances (Sec. 25)

Goods represented can be subject to attachment or levy by execution (Sec. 42)

LIABILITIES OF A WAREHOUSEMAN

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CIVIL CRIMINALWarehouseman or his agent

For damages suffered by reason of failure to comply with legal duties

1. Issuance of receipts for goods not received (Sec. 50)2. Issuance of receipt containing false statement (Sec. 51)3. Issuance of duplicate negotiable WR not marked as such (Sec.52)4. Issuance of a negotiable WR for goods of which he is an owner without stating such fact of ownership (Sec. 53)5. Delivery of goods without obtaining negotiable WR (Sec.54)

Third personsNegotiation of WR issued for mortgaged goods with intent to deceive

1. Liability of warehouseman for misdelivery

a. A warehouseman would be liable for misdelivery or conversion if he delivers the goods to one who is not in fact lawfully entitled to the possession of the goodsConversion – is 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 owner’s right.

b. He would also be liable for misdelivery even if he delivers to a person holding a non-negotiable receipt or a negotiable receipt if prior to such delivery he had either:

1. Been requested, by or on behalf of the person lawfully entitled to a right or property or possession in the goods, not to make such delivery; or

2. Had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods

Refusal of delivery of goods, when allowed:1. If he had been requested, by or on

behalf of the person lawfully entitled to a right or property or possession in the goods, not to make such delivery to anyone

2. If he had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods

3. If several persons claim the goods4. If the warehouse lien is not yet been

satisfied5. If the goods were loss by fortuitous

event except when guaranteed liability of loss (e.g. fire, flood etc) without his fault prior to demand for delivery and refusal

6. Where the goods have already been lawfully sold to third persons to satisfy a warehouseman’s lien or have been lawfully sold or disposed because of their perishable or hazardous nature

KEY: R(o)N-S FeW Sold

Where a warehouseman delivers goods or part of the goods for which he had issued a negotiable receipts and fails to take up and cancel the receipt , or to place plainly upon it a statement of what goods or packages have been delivered, he shall be liable to any one who purchases for value in good faith such receipt, for failure to deliver the goods specified in the receipt, whether such purchaser acquired title to the receipt before or after the delivery of the goods by the warehouseman.

2. Liability of warehouseman for alteration of receipts The liability would depend on the nature of the alteration

1.If the alteration is immaterial, that is the tenor of the receipt is not changed, whether fraudulent or not, authorized or not, the warehouseman is liable on the altered receipt according t its original tenor

2.If the alteration is material, that is the tenor of the receipt is changed, but authorized, the warehouseman is liable according to the terms of the receipt as altered.

3.If the alteration is material but innocently made though unauthorized, the warehouseman is liable on the altered receipt according to its original tenor; and

4.If the alteration is material and fraudulently made, the warehouseman is liable according to the original tenor of the receipt to a purchaser of the receipt for value without notice and even to the alterer and subsequent purchases with notice.

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3. Liability of warehouseman for lost or destroyed receipts

If the receipt is claimed to have been lost or destroyed, it is essential that the 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.

Section 14 provides that a competent court may order the delivery of the goods only

1.Upon proof of the loss or destruction of the receipt; and

2.Upon the giving of a bond with sufficient sureties to be approved by the court

4. Liability of warehouseman as to duplicate

Where more than 1 negotiable receipt is issued for the same goods, the word “duplicate” must be plainly placed by the warehouseman upon the face of every such receipt, except the one first issued

Effect of failure to place the word “Duplicate” in a duplicate receipt

Failure to do so will make the warehouseman liable for all the damages to anyone who purchased such receipt believing it to be an original, even if the purchase be after the delivery of the goods by the warehouseman to the holder of the original receipt. (Sec 6)

He shall be guilty of a crime punishable of a crime punishable by fine or imprisonment, or both, if he issues a duplicate or additional negotiable receipt for goods knowing that a former negotiable receipt for the same goods or any part of then is outstanding or and uncancelled, without plainly placing upon the face of the receipt the word duplicate.

Exception: In the case of a lost or destroyed receipt after proceedings

5. Liability of warehouseman to rightful claimant

Duty of the warehouseman where there are several claimants

1. 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;

2. He can require all claimants to interplead, either as a defense

to an action against him for non-delivery of the goods, or as an original suit, whichever is appropriate

INTERPLEADER – this is a remedy given to the warehouseman in case there is more than one person who claims title or possession of the goods either as a defense to an action brought against him for non-delivery or as an original suit; this would require the different claimants to litigate among themselves.

Sec18 provides that if someone other than the depositor or person claiming has a claim to the title or possession of the goods, the warehouseman shall be excused from liability for refusing to deliver the goods until he has a reasonable time to ascertain the validity of the adverse claim or bring legal proceedings to compel claimants to interplead.

6. Liability of warehouseman for non-existence or misdescription of goods

General Rule: the 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 or holder of a receipt for damages.Exception: if the description consists merely of marks or labels upon the goods or upon the packages containing them, the warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels.

7. Liability of the warehouseman for loss due to lack of care

General rule: The warehouseman is required to exercise ordinary or reasonable care in the custody of goods, that is, the care a reasonably careful owner would exercise over similar goods of his own. This is the “diligence of a good father of a family”Exception: But in the absence of any agreement to the contrary, the warehouseman is not liable for any loss or injury to the goods which could not have been avoided by the exercise of such care.

8. Liability of warehouseman to depositors of commingled goodsCommingling of deposited goods

General Rule: a warehouseman shall keep the goods so far separate from

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goods of other depositors, and from other goods of the same depositor for which a separate receipt has been issued.Purpose: to permit at all times the identification and redelivery of the goods depositedException:

(1) If authorized by agreement or by custom, (2) Or if the goods are fungible goods with other goods of the same kind and grade.

In this case, the various depositors of the mingled goods shall own the entire mass in common and each depositor shall be entitled to such portion as the amount deposited by him bears to the whole.

The warehouseman shall be severally liable to each depositor for the care and redelivery of his share of such mass to the same extent and under the same circumstances as if the goods had been kept separate.

9. Liability in failure to mark a receipt intended to be non-negotiable as “non-negotiable”

Effect: the holder of the receipt believing it to be negotiable may, at his option, treat it as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been negotiable.

The “holder” referred herein cannot be the original holder because, as the depositor, he is presumed to know whether he is getting a negotiable or a non0negotiable receipt.

10. Liability in Failure to take up and cancel a negotiable receipt when goods are delivered. OR failure to take up and cancel a negotiable receipt or to place upon it a statement of what goods have been delivered, when the goods are partly delivered

The warehouseman shall be liable for failure to deliver the goods to any one who purchases for value in good faith such receipt whether the purchaser acquired title to the receipt before or after delivery of the goods by the warehouseman. He shall also be guilty in such case of crime punishable by fine or imprisonment.Exception:

1. Where the goods have been lawfully sold to satisfy a warehouseman’s lien

2. the goods have been lawfully sold or disposed of because of their perishable or hazardous nature.

11. Issuing receipts for goods not received by him or are not under his actual control at the time of issuance of the receipt

12. Issuing receipts for the warehouseman’s goods which do not state that factA warehouseman shall be guilty of a crime punishable by fine or imprisonment, or by both, if he issues a negotiable receipt for the same goods deposited with or held by him of which he knows he is the owner, solely or jointly or in common with others, if he fails to state such ownership in the receipt

13. For delivery of goods without obtaining negotiable receipt or knowing that a negotiable receipt is outstanding and uncancelled.

Exception: 1. Where the goods have been lawfully

sold to satisfy a warehouseman’s lien or

2. The goods have been lawfully sold or disposed of because of their perishable or hazardous nature or

3. In case of lost or destroyed receipt after proceedings

Attachment or levy of negotiable receiptsThe warehouseman has the direct obligation to hold possession of the goods for the original owner or for the person to whom the negotiable receipt of title has been duly negotiated.(Sec 41) While in possession of such, the goods cannot be attached or levied upon under an execution unless:

a. The document be first surrendered; orb. The negotiation is enjoined;c. The document is impounded by the

court.

The prohibition is for the protection of the warehouseman since he could be made liable to a subsequent purchaser for value in good faith.

This provision of Sec 25 does not apply to the following:

a. If the person depositing is not the owner of the goods or one who has no right to convey title to the goods binding upon the owner;

b. Actions for recovery or manual delivery of goods by the real owner;

c. Cases where the attachment is made before the issuance of the negotiable receipt of title

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BUT IN SEC 26, it provides that: a creditor whose debtor is the owner of a negotiable receipt CAN ATTACH THE NEGOTIABLE RECEIPT IN THE DEBTOR’s POSSESSION and NOT the goods covered by such receipt. This provision expressly gives the court full power to aid by injunction and otherwise a creditor seeking to get a negotiable receipt covering such goods.

The warehouseman has a lien on goods deposited or on the proceeds thereof in his hands for:

a. All lawful charges for storage and preservation of the goods

b. All lawful claims for money advanced, interest, insurance, transportation, labor, weighing, cooperating and other charges or expenses in relation to the goods

c. All reasonable charges and expenses for notice and advertisements of sale, and

d. Sale of goods where default has been made in satisfying the warehousing lien.

The warehouseman’s lien over the goods deposited with him is his security for the payment of the charge, money advanced and other expenses.

The warehouseman’s lien can be enforced against:

a. The goods of the depositor who is liable to the warehouseman as debtor whenever such goods are deposited; and

b. The goods of other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge.

This is to give the warehouseman a lien for charges against goods of persons who are primarily liable for the charge incurred, and who by their agreement create the relation of debtor and creditor.

Extinguishment of lien a. By surrendering possession of goods

– a warehouseman loses his lien upon the goods by voluntary surrendering the possession without requiring payment of the lien, it will be presumed that the lien has been waived or abandoned where the warehouseman permits a depositor to remove the goods BUT NOT where the property is taken without warehouseman’s consent or by force

b. By wrongfully refusing to deliver goods when demand is made with which he is bound to comply under provisions of Sec8

Satisfaction of lien by salea. Procedure: (Sec33)

1. The warehouseman shall give a WRITTEN NOTICE to the person on whose account the goods were held or to any person who has a claim or interest in the goods. The notice shall be given either by delivery in person or by registered mail to the last known place of business or abode. The notice shall contain the following:

a. An itemized statement of the warehouseman’s claim, the sum due and the date(s) when it became due.

b. A brief description of the goods against which the lien exists.

c. A demand that the amount of the claim shall be paid on or before a day mentioned (not less than 10 days from the delivery of the notice if personally delivered or from the time when the notice should reach its destination if the notice is sent by mail)

d. A statement that unless the claim is paid within the time specified, the goods will be advertised for sale and sold by auction at a specified time and place.

2. In accordance with the terms of the notice, a sale of the goods by auction may be had to satisfy any valid claim of the warehouseman for which he has a lien over the goods.

3. After the time for payment ahs elapsed, an advertisement of the sale, describing the goods to be sold and stating the name of the owner or person on whose account the goods has been held and the time and place of the sale.

4. The ad shall be published once a week for two consecutive weeks in a newspaper published in the place where the sale shall be held. It can be in the place where the lien was acquired or if such place is manifestly unsuitable, at the nearest suitable place.

b. If there is no newspaper published in such place, the advertisement shall be posted at least 10 days before such

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sale in not less than six (6) conspicuous places therein.

5. The sale shall be held not less than 15 days from the time of the first publication.

6. From the proceeds of the sale the warehouseman shall satisfy his lien including the reasonable charges of notice, advertisement and sale.

7. The balance, if any, shall be held by the warehouseman, and delivered on demand to the person to whom he would have been bound to deliver the goods.

At any time before the goods are sold, ANY PERSON CLAIMING A RIGHT OF POSSESSION on the goods MAY PAY THE WAREHOUSEMAN THE AMOUNT NECESSARY:

1. To satisfy his lien and 2. to pay the reasonable expenses

and liabilities incurred in serving notices, advertisements and preparing for the sale up to time of payment.

If the same is satisfied, the warehouseman shall deliver the goods to the person making payment. Otherwise, the warehouseman shall retain possession of the goods according to the terms of the original contract of deposit.

Remedies available to warehouseman to enforce his 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; and

3. Filing a civil action for the unpaid charges or by way of counterclaim in an action to recover the property from him.

Whether a warehouseman has or has not lien upon the goods, he is entitled to all remedies allowed by law to a creditor against his debtor, for the collection from the depositor of all the charges and advances which the depositor has expressly or impliedly contracted with the warehouseman to pay. (Sec 32)

Perishable and Hazardous goods refers to goods which by keeping will deteriorate greatly in value, or by odor, leakage, inflammability or explosive nature and will make warehouseman liable in case it will injure other property.

In cases of perishable and hazardous goods, the warehouseman may give NOTICE to the

owner, or to the person in whose name the goods are stored, to satisfy the lien upon such goods and to remove them from the warehouse. Failure to do so may entitle the warehouseman to sell the goods at public or private sale without advertisements. In case he was unable to sell, he may -dispose of them in any lawful manner, and shall incur no liability by reason thereof.

Effect of sale of goods to satisfy the warehouseman’s lien on account of the good’s perishable or hazardous nature

The warehouseman shall not thereafter be liable for failure to deliver the goods to the depositor or owner of the goods even if such receipt be negotiable.

Negotiation and Transfer of Receipts

How negotiated (Sec37):A negotiable receipt may be negotiated by delivery where, by the terms of the receipt,

a. The warehouseman undertakes to deliver the goods to the bearer;

b. The warehouseman undertakes to deliver the goods to the order of a specified person, and such person or a subsequent endorsee of the receipt has indorsed it in blank or to bearer

Under this circumstance, any holder may indorse the same to himself, or to any other specified person, and in such case the receipt shall thereafter be negotiated only by the endorsement by such endorsee.

Negotiation of a negotiable receipt by endorsementIt may be negotiated only by the endorsement of such person:

a. If indorsed in blank or to bearer, the document becomes negotiable by delivery

b. If indorsed to a specified person, it may be again negotiated by the endorsement of such person in blank, to bearer or to another specified person. Delivery alone is not sufficient.

Person who negotiate a receipt (Sec 40)a. The owner thereof; orb. By any person to whom the

possession or custody of the receipt is entrusted by the owner

Rights Acquired by Indorseea) Such title to the goods which the

person negotiating had, or such title as the depositor had the ability to convey;

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b) The direct obligation of the warehouseman to hold the possession of the goods for him.

Transferability of non-negotiable receipt A non-negotiable receipt of title cannot

be negotiated. Nevertheless, it can be transferred or assigned by delivery to a purchaser or donee. Even if the receipt is indorsed, the transferee acquires no additional right

Advantages of a negotiable receipt from a non-negotiable receipt

1. Protects a purchaser for value and in good faith

2. The goods covered by the receipt cannot be garnished or levied upon under execution unless it is surrendered, impounded or its negotiation enjoined;

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.

4. The goods it covers are not subject to seller lien or stoppage in transitu

Rights of a person to whom a negotiable receipt has been negotiated (Sec. 41) The rights acquired by such person are the following:

a. The title of the person negotiating the receipt over the goods covered by the receipt;

b. The title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered over such goods; and

c. The direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him.

Rights of a person to whom a non-negotiable receipt has been transferred (Sec42) The rights acquired by such person are the following:

a. The title to the goods as against the transferor;

b. The right to notify the warehouseman of the transfer thereof; and

c. The right, thereafter, to acquire the obligation of the warehouseman to hold the 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.

Rights of a transferee of a negotiable eceipt delivered without endorsement (Sec43) The rights acquired by such person are the following:

a. The right to the goods as against the transferor; and

b. The right to compel the transferor to indorse the receipt

The negotiation shall take effect as of the time when the endorsement is actually made.

The endorsement of a receipt shall not make the endorser liable for any failure on the part of the warehouseman or previous endorsers of the receipt to fulfill their respective obligations. (Sec45)

Warranties on sale of receipta. That the receipt is genuine; b. That he has a legal right to negotiate

or transfer it;c. That he has the knowledge of no fact

which would impair the validity or worth of the receipt; and

d. That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied, if the contract of the parties had been without receipt the goods represented thereby

A holder for security of a receipt who in good faith accepts payment of the debt from a person DOES NOT thereby warrant the genuineness of the receipt nor the quality or quantity of the goods therein described. (Sec46)

It is the duty of the purchaser, mortgagee, pledge of goods for which a negotiable receipt has been issued to require the negotiation of the receipt to him, otherwise his failure will have the same effect as an express authorization on his part to the seller, mortgagor or pledgor in possession of such receipt to make any subsequent negotiation. The subsequent purchaser must have taken the receipt in good faith and for value.

A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he purchases from the owner’s agent within the actual or apparent scope of his authority. In sum, negotiation is valid despite having been made in breach of trust.

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If a) there was a breach of duty on the part of the person making the negotiation; or b) the owner of the receipt was induced by fraud, mistake or duress to entrust the possession or custody of receipt to such person, the validity of the negotiation is NOT IMPAIRED if the person to whom the receipt was negotiated, or a person to whom the receipt was subsequently negotiated PAID VALUE THEREFOR, WITHOUT NOTICE OF THE BREACH OF DUTY OR FRAUD, MISTAKE OR DURESS.

Effect of subsequent negotiation by seller of a receipt There is a duty upon the purchaser, mortgagee, or pledgee of goods for which a negotiable receipt has been issued, to require the negotiation of the receipt to him otherwise, his failure will have the same effect as an express authorization on his part to the seller, mortgagor or pledgor in possession of such receipt to make any subsequent negotiation.

Negotiation defeats vendor’s lienWhere a negotiable receipt has been issued for the goods:

a. No seller’s lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to whom such receipt has been negotiated whether it be prior or subsequent to the notification to the warehouseman who issued such receipt;

b. The warehouseman shall not be obliged to deliver or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation.

Criminal Offenses1. Warehouseman, or any officer, agent or servant of the warehouseman, issues or aids in issuing a receipt knowing that the goods have not actually been received or are not under his actual control at the time of issuing of such receipt. LIABILITY: Imprisonment not exceeding 5 yrs or by a fine not exceeding P10, 000.00, or by both.

2. Warehouseman, or any officer, agent or servant of warehouseman, fraudulently issues or aids in fraudulently issuing a receipt for goods knowing that it contains any false statements.LIABILITY: Imprisonment not exceeding 1 yr, or by a fine not exceeding P2,000.00, or by both.

3. Warehouseman, or any officer, agent or servant of warehouseman, issues or aids in issuing a duplicate or additional negotiable receipt for goods knowing that a former negotiable receipt for the same goods is outstanding and uncancelled, without plainly placing “duplicate” (except in case of loss or destroyed receipts)LIABILITY: Imprisonment not exceeding 5 yrs, or by a fine not exceeding P10,000.00, or by both.

4. If there are goods deposited or held by the warehouseman as an owner, either solely or jointly with others, and that warehouseman, or any officer, agent or his servant, knowing such ownership, issues or aids in issuing a negotiable receipt not stating such ownership.LIABILITY: Imprisonment not exceeding 1 yr, or by a fine not exceeding P2,000.00, or by both.

5. Warehouseman, or any officer, agent or servant of warehouseman, delivers goods out of the possession of such warehouseman, knowing that a negotiable receipt is outstanding and uncancelled, without obtaining the possession of such receipt at or before the time of deliveryLIABILITY: Imprisonment not exceeding 1 yr, or a fine not exceeding P2,000.00, or by both.

6. Any person who deposits 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 without disclosing his want of title or existence of the lien or mortgage.LIABILITY: Imprisonment not exceeding 1 yr, or by a fine not exceeding P2,000.00, or by both.

GENERAL BONDED WAREHOUSE ACT(ACT NO 3893 as amended by RA 247)

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

To achieve this purpose, any person who wants to engage in the business of receiving commodities for storage is required by the Act to first secure a license therefore from the Department of Trade and Industry.

A warehouseman is a person engaged in the business of receiving commodity for storage. (Compare it in the Warehouse Receipt Act)

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Salient Features 1. License from the Bureau of Domestic

Trade required;2. Amount of bond – 33 1/3% of the

value of the goods intended to be stored in the warehouse;

3. Depositor given a direct recourse against the bond filed by the warehouseman;

4. All goods are insured against fire for their value.

Business of receiving commodity for storage

It includes entering into any contract or transaction wherein:

1. The warehouseman is obligated to return the very same commodity delivered to him or to pay its value

2. The commodity delivered is to be milled for the owner thereof

3. The commodity delivered is commingled with the commodity belonging to other persons, and the warehouseman is obligated to return commodity of the same kind or to pay its value

Commodities that can be stored in a bonded warehouse

Generally, these commodities could be any raw, processed, manufactured or finished product or by-product, goods, article, or merchandise, either domestic or of foreign production or origin, which may be traded or dealt in openly and legally. Thus, prohibited substances, the possession of which is prohibited by law, may not be validly received for storage in a bonded warehouse.

Bond by the warehouseman1. The bond may either be cash or

property bond or bond issued by a duly authorized bonding company

2. The amount of the bond must not be less than 33 1/3 % of the market value of the maximum quantity of the commodity to be received by the warehouseman.

3. It shall be conditioned as to respond for the market value of the commodity actually delivered and received at any time by the warehouseman in case the latter is unable to return the commodity or to pay its value.

Duties of a bonded warehouseman1. To insure the commodity received

for storage against fire2. To receive for storage any

commodity of the kind customarily stored by him in the warehouse, so far as his license or the capacity of the warehouse will permit, without making any discrimination between persons desiring to avail themselves of warehouse facilities

3. To keep complete record of all commodities received by him, of the receipts issued therefore, of the withdrawals, of the liquidation, and of all receipts returned to and canceled by him.

Rights of a person injured by the breach by the warehouseman of any of his obligation under the actHe may sue on the bond put up by the warehouseman to recover the damages he may have sustained on account of such breach. In case the bond given is not sufficient to cover the full market value of the commodity stored, he may sue on any property or assets of the warehouseman not exempt by law form attachment and execution.

Offenses penalized under the act1. Engaging in the business of receiving

commodities for storage without the proper license

2. Receiving a quantity of commodity greater that that specified in the license of the warehouseman

3. Conniving or entering into a combination with an unlicensed warehouseman for the purpose of avoiding compliance with the requirement of obtaining a license before engaging in the business of receiving commodities for storage

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Documents

Warehouse Receipt Law 3