WAREHOUSE RECEIPTS LAW.docx

8/12/2019 WAREHOUSE RECEIPTS LAW.docx

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WAREHOUSE RECEIPTS LAW

Purposes of Warehouse Receipts Law:

Warehousea building or place where goods are deposited and stored for profit.

Warehousemanperson lawfully engaged in the business of storing goods for profit. Only a warehouseman may issue warehouse receipts.

Warehouse Receiptwritten acknowledgment by a warehouseman that he has received andholds certain goods therein described in store for the person to whom it is issued.

Non-negotiable Receiptreceipt deliverable to a specified person.

Negotiable Receiptreceipt deliverable to order or to bearer.

Essential Terms Which MUST Be Embodied in a Warehouse Receipt:

a. Location of the warehouseb. Date of the issue of the receipt

c. Consecutive number of the receiptd. Statement whether the goods received will be delivered to bearer, or a specified

person, or his order

e. Rate of storage charges

f. Description of the goods or packages containing them for identification purposesg. Signature of the warehouseman

h. Statement of the amount of advances made and of liabilities incurred for which the

warehouseman claims as lien

Effect of Omission of Any of the Essential Terms:a. The validity of the warehouse receipt is not affected.b. The warehouseman shall be held liable for damages to those injured by his

omission.

c. The negotiability of the warehouse receipt is not affected.

d. The issuance of a warehouse receipt in the form provided by the law is merelypermissive and directory and not mandatory in the sense that if the requirements

are not observed, then the goods delivered for storage become ordinary deposits.

Terms which may be inserted in a Warehouse Receipt:Any other terms except

(a) those contrary to the provisions of this Act;(b) those that would impair a warehousemans obligation to exercise that degree of care

in the safekeeping of the goods entrusted to him

Marks to be made on a warehouse receipt:

a. A non-negotiable receipt must be clearly marked non-negotiable or not negotiable,otherwise, the holder of the receipt who purchased it for value and who supposed

it to be negotiable, may treat it as negotiable.


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b. Duplicate receipts must be so marked, otherwise, the warehouseman is held liable

for all damages suffered by a holder believing the same to be the original.

Warranties of a Warehouseman as to Duplicate Receipts:a. The duplicate is an accurate copy of the original receipt.

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

Effects of Alteration on the Liability of the Warehouseman:a. If the alteration is IMMATERIAL (the tenor of the receipt is not changed), whether

fraudulent or not, authorized or not, the warehouseman is liable on the alteredreceipt according to its original tenor.

b. If the alteration is MATERIAL but AUTHORIZED, the warehouseman is liable

according to the terms of the altered receipt.

c. If the alteration is MATERIAL, UNAUTHORIZED but INNOCENTLY MADE,the warehouseman is liable on the altered receipt according to its original tenor.

d. If the alteration is MATERIAL and FRAUDULENTLY MADE, the

warehouseman is liable:(1)

To the purchaser of the receipt for value and without notice of the alteration

according to the tenor of the altered receipt

(2) To the alterer, according to the terms of the original receipt

(3) To subsequent purchasers with notice of the alteration, according to theterms of the original receipt

Effects of Misdescription of Goods:a. A warehouseman is under the obligation to deliver the identical property

stored with him and if he fails to do so, he is liable directly to the owner.

b. As against a bona fide purchaser of a warehouse receipt, the warehouseman is

estopped from denying that he has received the goods described in the receipt.c.

If the description consists merely of marks or label 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.

Principal Obligations of a Warehouseman:

a. To take care of the goods entrusted to his safekeeping

General Rule: A warehouseman is required to exercise such degree of care which a

reasonable careful owner would exercise over similar goods of his own. He shall be liable

for any loss or injury to the goods caused by his failure to exercise such care.

Exception: He shall not be liable for any loss or injury which could not have been

avoided by the exercise of such care.

Exception to the Exception: He may limit his liability to an agreed value of the property

received in case of loss. He cannot stipulate that he will not be responsible for any loss

caused by his negligence.


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b. To deliver the goods to the holder of the receipt or the depositor upon

demand, provided demand is accompanied with:

(1) an offer to satisfy the warehousemans lien;(2) an offer to surrender the negotiable receipt properly endorsed. If the

receipt is non-negotiable, any person lawfully entitled to the possession of

the goods may be entitled to delivery without surrender of the receipt.(3) a readiness and willingness to sign an acknowledgment that thegoods have been delivered if such is requested by the warehouseman.

Persons to Whom Goods Must Be Delivered:A. Persons lawfully entitled to the possession of the goods or his agent:

a. Persons to whom a competent court has ordered the delivery of the goods

(1) Where a negotiable instrument has been lost or destroyed, the court may

order delivery to a person upon satisfactory proof of such loss or destruction and

upon proper posting of a bond to protect the warehouseman from any liability orexpense which he may incur by reason of the original receipt remaining

outstanding.

(2) Where more than one person claims title or possession of the goods the

warehouseman may require all claimants to interplead. The court will then order

delivery to the person having a better right.

b. An attaching creditorGoods, while in the possession of the warehouseman

and covered by a negotiable receipt, cannot be attached or levied upon under an

execution unless:

(i) The negotiable receipt is first surrendered to the warehouseman, or

(ii) Its negotiation is enjoined, or

(iii) The receipt is impounded by the court

c. To the purchaser in case of sale of the goods by the warehouseman to enforce

his liend. To the purchaser where perishable or hazardous goods are sold at private or

public sale

B. If goods are covered by a non-negotiable receipt:

a. A person entitled to the delivery by the terms of the receipt, orb. One who has written authority from letter a

C. If goods are covered by a negotiable receipt, a person in possession of the receipt,

the terms of which the goods are deliverable:a. To him or order

b. To bearer

c. Indorsed to him

d. Indorsed in blank by the person whom delivery was promised


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When is There Misdelivery?

When the warehouseman delivers the goods to a person who is not in fact lawfully entitled to thepossession of the goods because:

a. The person does not fall under letter B or C above; or

b. The person falls under letter B or C but prior to delivery, the warehouseman hadeither:

(1) Been requested by the person lawfully entitled to the delivery 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

Effects of Misdelivery:

The warehouseman shall be liable for conversion to all having a right to property or possession

of the goods.

What happens if there is proper delivery or partial delivery but the warehouseman fails to

cancel the receipt or record on the receipt of such partial delivery?a. If goods covered by a negotiable warehouse receipt are delivered by a

warehouseman but he fails to take the receipt and cancel it, then he is still liable to

one who purchases for value and in good faith such receipt.b. If he makes partial delivery of the goods but fails to record the partial delivery on

the receipt then he may still be held liable for the entire receipt to one who

purchases for value and in good faith such receipt.

Lawful Excuses for Refusal to Deliver Goods:a.

The warehouseman can refuse to deliver the goods if he has acquired title or right

to the possession of the goods:(1) directly or indirectly from a transfer made by the depositor at the time of the

deposit for storage or subsequent thereto; or

(2) from the warehousemans lien

b. If someone other than the depositor or person claiming under the depositor has aclaim to the title or possession of the goods and the warehouseman has information

of such claim, the warehouseman shall be excused from liability for refusing to

deliver the goods either to the depositor or person claiming under him until he has

had a reasonable time to ascertain the validity of the adverse claim or to bring legalproceedings to compel all claimants to interplead.

c.

The warehouseman will not be required to deliver the goods if such had been lost.

But this is without prejudice to liabilities which may be incurred by him due tosuch loss.

d. The warehouseman having a valid lien against the person demanding the goods

may refuse to deliver the goods to him until the lien is satisfied.e. If goods have been lawfully sold or disposed of because of their perishable or

hazardous nature, the warehouseman shall not be liable for failure to deliver the

goods.


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A warehouseman cannot refuse to deliver goods to the depositor or to a person claiming

under him on the ground that adverse title to the goods belongs to a third person.

Rules as Regards Co-Mingling of Deposited Goods:

General Rule: A warehouseman may not co-mingle goods belonging to differentdepositors or belonging to the same depositor for which separate receipts had been issued.

Exception: A warehouseman may co-mingle fungible goods of the same kind and grade

provided he is authorized by agreement or by custom.

Effect of Co-Mingling of Goods:

a. The different owners become co-owners of the whole mass.

b. The warehouseman shall be severally liable to each depositor for the care andredelivery of his share of such mass to the same extent and under the same

circumstances as if the goods had been kept separate.

Remedies of a Creditor: (the debtor being the owner of the negotiable receipt)

Creditors of the depositors, before negotiation, may protect themselves by obtaining a writ of

preliminary injunction and serve the same on the depositor before he has a chance to negotiate

the receipt. Once enjoined, there will be no longer a danger that a 3rd

person will be prejudiced

so the goods may now be attached, levied upon, or that the vendors lien or the right of stoppage

in transit be exercised.

Warehousemans Lien

Extent of Warehousemans Lien:A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his

hands for:a. All lawful charges for storage and preservation of the goodsb. All lawful claims for money advances, interest, insurance, transportation, labor,

weighing, cooperating and other charges and expenses in relation to such goods

c. All reasonable charges and expenses for notice and advertisements of sale and ford. Sale of the goods where default has been made in satisfying the warehouse lien

Goods Subject to lien:

a. Goods belonging to the depositor who is liable to the warehouseman as debtorwhenever such goods are deposited and

b. Goods belonging to other persons stored by the depositor who is liable to the

warehouseman as debtor with authority to make a valid pledge

How is a lien enforced?a. By refusing to deliver the goods until the lien is satisfied

b. By causing the extrajudicial sale of the property and applying the proceeds to thevalue of the lien

c. By filing a civil action for unpaid charges or by way of counterclaim in an action to

recover the property from him


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How is a lien lost?

a. When the warehouseman voluntarily surrenders possession of the goods withoutrequiring payment of his lien; or

b. When the warehouseman wrongfully refuses to deliver the goods when a demand is

made with which he is bound to comply

Negotiation and Transfer of Receipts

How do we negotiate a receipt deliverable to order?

a. By indorsing it in blank thereby making it deliverable to bearer orb. By special indorsementwhich would require further indorsements for further

negotiations.

In both cases, the indorsements must be coupled with delivery.

How do we negotiate a receipt deliverable to bearer?There is no need to indorse for negotiation. Physical delivery of the instrument will suffice. But

if the instrument is indorsed specially, the bearer character of the receipt is destroyed and for

further negotiation, there will be a need for indorsement.

Who may negotiate warehouse receipts?

a. The owner of the receipt, orb. The person to whom possession of the receipt was entrusted to by the owner

Rights acquired by a person to whom the receipt has been negotiated:

a. The title of the person negotiating the receipt over the goods covered by the receiptb. The title of the person (depositor or owner) to whose order by the terms of the

receipt the goods were to be delivered

c.

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

May non negotiable receipts be negotiated?No, even if the receipt is indorsed, the transferee acquires no additional right. That is why they

are called non negotiable receipts. But they may be transferred or assigned by delivery.

Rights of a person to whom a non negotiable receipt has been transferred: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


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Distinction between a non negotiable receipt from a negotiable receipt with regard to

attachment or execution upon goods:

Non-negotiable Receipt Negotiable Receipt

Prior to notification of the warehouseman bythe transferor or transferee, the warehouseman

is not bound to the transferee whose right maybe defeated by a levy of an attachment orexecution upon the goods by the creditor of the

transferor or by a notification to such

warehouseman of the subsequent sale of thegoods.

The goods cannot be attached or levied underan execution unless the receipt be first

surrendered to the warehouseman or itsnegotiation enjoined.

Rights of a person to whom a negotiable receipt has been transferred, not indorsed:a. The right to the goods as against the transferor

b. The right to compel the transferor to indorse the receipt. But if the intention of the

parties is that the receipt should merely be transferred, the transferee has no right to

require the transferor to indorse the receipt.

Note: Negotiation takes effect as of the time when the indorsement is actually made.

Warranties of a person negotiating or transferring a receipt:a. The receipt is genuine

b. He has a legal right to negotiate or transfer it

c. He has knowledge that would impair the validity or worth of the receipt andd. He has a right to transfer the title to the goods and that the goods are merchantable

A holder for security of a receipt (mortgagee or pledgee) who in good faith acceptspayment of the debt from a person does not warrant the genuineness of the receipt not the

quality or quantity of the goods therein described.

It is the duty of the purchaser, mortgagee or pledgee of goods for which a negotiablereceipt 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 owners 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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Distinctions between a negotiable instrument and a negotiable warehouse receipt:

Non-negotiable Receipt Negotiable Receipt

When a negotiable instrument is altereddeliberately, it becomes null and void.

When a warehouse receipt is altered, it is stillvalid but it may be enforced only in accordance

with its original tenor.If a negotiable instrument is originally payable

to bearer, it will always remain so payable

regardless of the way it is indorsed, whetherspecially or in blank

If a warehouse receipt, payable to bearer, is

indorsed specially, it will be converted into a

receipt deliverable to order and can only benegotiated further by indorsement and delivery

A holder in due course may be able to obtain atitle better than that which the party who

negotiated the instrument to him had.

An indorsee even if a holder in due courseobtains only such title as the person negotiating

has over the goods

The indorsement of a negotiable instrumenthas a double effect. It is at the same time a

conveyance of the instrument and a contract

the indorser has with the indorsee that oncertain conditions, the indorser will pay the

instrument if the party primarily liable fails to

do so.

The indorsement of a warehouse receiptamounts merely to a conveyance by the

indorser. Accordingly, an indorser of a receipt

shall not be liable to the holder if, for example,the warehouseman fails to deliver the goods

because they were lost due to his fault or

negligence

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WAREHOUSE RECEIPTS LAW.docx