THE WAREHOUSE RECEIPTS LAW

WHO MAY ISSUE WAREHOUSE RECEIPT?

> A warehouseman is  a  person  lawfully  engaged  in  the business of storing goods for profit.
> Only a warehouseman may issue warehouse receipts
 

WHAT SHOULD BE DONE TO PUT THE RECEIPT WITHIN THE PURVIEW OF WAREHOUSE RECEIPTS LAW?

> The   warehouse   receipt   should   be   issued   by   the warehouseman
 

FORM OF RECEIPTS; ESSENTIAL TERMS

1.   The location of the warehouse where the goods are stored
2.   The date of issue of the receipt  
3.   Consecutive number of the receipt
4.   A statement whether the goods received  will be  delivered to the bearer, to a specified person or to a specified person or his order
5.   The rate of storage charges
6.   A  description  of  the  goods  or  of  the  packages  containing them
7.   The  signature  of  the  warehouseman  which  may  be  made by his authorized agent
8.   If   the   receipt   is   issued   for   goods   of   which   the warehouseman  is  owner,  either  solely  or  jointly  or  in common with others, the fact of such ownership
9.   A  statement  of  the  amount  of  advances  made  and  of liabilities  incurred  for  which  the  warehouseman  claims  as lien.  If the precise amount for such advances made or of such liabilities incurred is, at the same time of the issue of the receipt, unknown to the warehouseman or to his agent
who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient
 

EFFECT OF OMISSION OF THE ESSENTIAL CONTENTS

> A  warehouseman  shall  be  liable  to  any  person  injured thereby  all  damages  caused  by  the  omission  from  a negotiable receipt of any of the terms herein required  
> Validity of the receipt not affected
> Negotiability of the receipt not affected
 

TERMS  THAT  CANNOT  BE  INCLUDED  IN  THE  WAREHOUSE RECEIPT

1.   Those contrary to any provision of the law
2.   In  any  wise  impair  the  warehouseman’s  obligation  to exercise  that  degree  of  care  in  the  safekeeping  of  the goods  entrusted  to  him  which  a  reasonably  careful  man would exercise with regard to similar goods of his own
 

NON-NEGOTIABLE WAREHOUSE RECEIPT

> Receipt in which it is stated that the goods received will be delivered to the depositor or to any specified person  
 

NEGOTIABLE WAREHOUSE RECEIPT

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

DUPLICATE RECEIPTS MUST BE MARKED

> When  more  than  one  is  issued  for  the  same  goods,  the word  “duplicate”  shall  be  plainly  placed  upon  the  face  of every such receipt, except the first one issued

> A  warehouseman  shall  be  held  liable  for  damages  for failure to do so to anyone who purchased the subsequent receipt  for  value  supposing  it  to  be  original,  even  though the  purchaser  be  after  the  delivery  of  the  goods  by  the warehouseman to the holder of the original receipt
 
OBLIGATIONS  AND   RIGHTS  OF  WAREHOUSEMAN  UPON THEIR RECEIPTS
 

PRINCIPAL OBLIGATIONS OF THE WAREHOUSEMAN

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

2.   To  deliver  them  to  the  holder  of  the  receipt  or  the depositor  provided  the  following  conditions  are  fulfilled—there is demand by the depositor accompanied by either
a.    An offer to satisfy the warehouseman’s lien
b.   An offer to surrender the receipt, if negotiable with such  indorsements  as  would  be  necessary  for  the negotiation of the receipts
c.    A  readiness  and  willingness  to  sign,  when  the goods  are  delivered,  an  acknowledgement  that
they  have  been  delivered,  if  such  signature  is requested by the warehouseman
 

WHAT SHOULD ACCOMPANY THE DEMAND FOR THE RETURN OF THE GOODS?

1.   An offer to satisfy the warehouseman’s lien
2.   An  offer  to  surrender  the  receipt,  if  negotiable  with  such indorsements as would be necessary for the negotiation of the receipts
3.   A  readiness  and  willingness  to  sign,  when  the  goods  are delivered,   an  acknowledgement  that  they   have  been delivered,   if   such   signature   is   requested   by   the warehouseman
 

A  WAREHOUSEMAN  IS  JUSTIFIED  IN  DELIVERING  THE GOODS TO ONE WHO IS—

1.   Person lawfully entitled to the possession of the goods, or his agent
2.   Person who either himself entitled to delivery by the terms of the non-negotiable receipt issued for the goods, or who has  written  authority  from  the  person  so  entitled  either endorsed upon the receipt or written on another paper
3.   Person in possession  of  a  negotiable receipt  by the  terms of  which  the  goods  are  deliverable  to  him  or  order,  or  to bearer,  or which  has been indorsed to  him or in blank by the person to whom delivery was promised by the terms of the receipt or by his mediate or immediate indorser
 

WAREHOUSEMAN’S LIABILITY FOR MISDELIVERY

> Where  a  warehouseman  delivers the goods to  one  who is not in fact lawfully entitled to the possession of them, the warehouseman  shall  be  liable  for  conversion/estafa  to  all having a right of property or possession in the goods if he delivered the goods otherwise than as authorized
> And though he delivered the goods as authorized he shall be so liable if prior to such delivery he had either—

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

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

WHAT IS CONVERSION?

> Unauthorized  assumption  and  exercise  of  the  right  of ownership  over  goods  belonging  to  another  through  the alteration of their condition or the exclusion of the owner’s right 
 

NEGOTIABLE  RECEIPTS  MUST  BE  CANCELLED  OR  MARKED WHEN   GOODS   DELIVERED   OR   WHEN   PART   OF   IT   IS DELIVERED.      FAILURE   TO   DO   SO   WILL   MAKE   THE WAREHOUSEMAN LIABLE—

> The warehouseman is liable to any one who purchases for value  in  good  faith  such  receipt,  for  failure  to  deliver  the goods to him, whether such purchaser acquired title to the  receipt  before  or  after  the  delivery  of  the  goods  by  the warehouseman
 

EFFECT OF ALTERATION ON LIABILITY OF WAREHOUSEMAN

1.   Alteration immaterial—whether fraudulent or  not, whether authorized  or  not,  the  warehouseman  is  liable  on  the altered receipt according to its original tenor

2.   Alteration   material—if   the   alteration   is   material,   but authorized,  the  warehouseman  is  liable  according  to  the terms of the receipt as altered

3.   Material alteration innocently made—the warehouseman is liable on the altered receipt according to its original receipt

4.   Material  alteration  fraudulently  made—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  purchasers  with  notice except    that    as    regards    to    the    last    two,    the
warehouseman’s liability is limited only to delivery as he is excused from any liability 
NOTA BENE:  it is  clear that even a fraudulent alteration cannot divest   the   title   of   the   owner   of   stored   goods   and   the warehouseman  is,  therefore,  liable  to  return  them  to  the  owner. 
But  a  bona  fide  holder  acquires  no  right  to  the  goods  under  a negotiable  receipt  which  has  been  lost  or  stolen  or  to  which  the endorsement of the depositor has been forged.
 

LOST OR DESTROYED RECEIPTS

> The  court  may  order  the  delivery  of  the  goods  upon satisfactory proof of such loss or destruction and upon the giving of a bond with sufficient sureties to be approved by the court to protect the warehouseman from any liability or expense, which he or any person injured by such delivery
may  incur  by  reason  of  the  original  receipt  remaining outstanding
> The  court may also in its discretion order the payment of the warehouseman’s reasonable costs and counsel fees
> The order of the court shall not relieve the warehouseman from  liability  to  a  person  to  whom  the  negotiable  receipt as been or shall be negotiated for value without notice of the proceedings or of the delivery of the goods
 

LIABILITY OF WAREHOUSEMAN AS TO DUPLICATE—HE WARRANTS

1.   That  the  duplicate  is  an  accurate  copy  of  the  original receipt
2.   Such original receipt is uncancelled at the date of the issue of the duplicate
 

WAREHOUSEMAN CANNOT SET UP TITLE IN HIMSELF

> 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—
o     Directly  or  indirectly  from  a  transfer  made  by  the depositor at the time of the deposit for storage or subsequent thereto
o     From the warehouseman’s lien
 

INTERPLEADER OF ADVERSE CLAIMANTS

> If  more  than  one  person  claims  the  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 known claimants to interplead
 

WAREHOUSEMAN  HAS  REASONABLE  TIME  TO  DETERMINE VALIDITY OF CLAIMS

> If  someone  other  than  the  depositor  or  person  claiming under him has a claim to the title or possession of 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  or  to  the  adverse  claimant,  until  the warehouseman has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead

LIABILITY  OF  WAREHOUSEMAN  FOR  NON-EXISTENCE  OR MISDESCRIPTION OF GOODS

> As a 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
> As against a bona fide holder of  a warehouse receipt, the warehouseman   is   estopped   whether   the   receipt   is negotiable or not, to deny that he has received the goods described in it
 

LIABILITY OF WAREHOUSEMAN FOR LOSS DUE TO LACK OF CARE

> The  warehouseman  is  required  to  exercise  ordinary  or reasonable  care  in  the  custody  of  the  goods,  that  is,  the care  is  reasonably  careful  owner  would  exercise  over similar goods of his own.
> The warehouseman isn’t liable for any loss or injury to the goods,  which  couldn’t  have  been  avoided  by  the  exercise of  such  care.    Of  course,  what  constitutes  ordinary  or reasonable  care  depends  upon  the  circumstances  such  as the character and value of the property and the character
and location of the warehouse.
 

COMMINGLING OF DEPOSITED GOODS

> As a general rule, a warehouseman may not mingle goods belonging to depositors
> In case of fungible goods, the warehouseman may mingle them with the goods of the same kind and grade provided that he authorized by agreement or custom
> Commingling    is    intended    for    the    benefit    of    the warehouseman.    It  would,  indeed  be  strange  if  the warehouseman  could  escape  his  liability  to  the  owner  of the  goods  by  the  simple  process  of  commingling  them without authorization
 

ATTACHMENT OR LEVY OF A NEGOTIABLE RECEIPT

> The  warehouseman  has  the  direct  obligation  to  hold possession  of  the  goods  for  the  original  owner  or  for  the person known the negotiable receipt of title has been duly negotiated. 
> While  in  possession  of  such  warehouseman,  the  goods cannot  be  attached  or  levied  upon  under  an  execution unless—
o     The document is first surrendered
o     Its negotiation is enjoined
o     The document is impounded by the court 
> This  shall  not  apply  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.  
> Neither  shall  it  apply  to  actions  for  recovery  or  manual delivery of goods by the real owner nor to cases where the attachment is made before the issuance of the  negotiable receipt of title
 

CREDITOR’S REMEDIES TO REACH NEGOTIABLE RECEIPTS

> A creditor whose debtor is the owner of negotiable receipt shall  be  entitled  to  such  aid  from  courts  of  appropriate jurisdiction, by injunction and otherwise, in attaching such receipt  or  in  satisfying  the  claim  by  means  thereof  as  is allowed  by  law  or  in  equity  in  regard  to  property  which cannot  be  readily  be  attached  or  levied  upon  by  ordinary legal process
 

WHAT  CLAIMS  ARE  INCLUDED  IN  THE  WAREHOUSEMAN’S LIEN

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

2.   All    lawful    claims    for    money    advanced—Interests, Insurance,  Transportation,  Labor,  Weighing,  Cooperating and other charges and expenses in relation to the goods

3.   All  reasonable  charges   and  expenses   for  notice  and advertisements of sale

4.   Sale  of  goods  where  default  has  been  made  in  satisfying warehouseman’s lien 

AGAINST WHAT PROPERTY THE LIEN MAY BE ENFORCED

1.   Against  all  goods,  whenever  deposited,  belonging  to  the person who is liable to the debtor for the claims in regard to which the lien is asserted
2.   Against  all  goods  belonging  to  others  which  have  been deposited at any time by the person who is liable as debtor for  claims  in  regard  to  which  the  lien  is  asserted  if  such person  had  been  entrusted  with  the  possession  of  the goods that a pledge of the same by him at the time of the deposit to one who took the goods in good faith for value would have been valid
 

HOW WAREHOUSEMAN LOSES HIS LIEN

1.   By surrendering possession thereof
2.   By refusing to  deliver the goods  when a demand is  made with  which he is bound to comply under the provisions of the law
 

LIEN WHERE RECEIPT NEGOTIABLE

> With  the  exception  of  the  charges  for  the  storage  or preservation  of  goods  for  which  a  negotiable  receipt  has been  issued,  the  lien  exists  only  for  the  other  charges expressly  enumerated  in  the  receipt  so  far  as  they  are written although the amount of the said charge isn’t stated
 

OTHER  THINGS  IN  CONNECTION  TO  WAREHOUSEMAN’S LIEN

1.   Warehouseman need not deliver lien is satisfied
2.   Warehouseman’s lien doesn’t preclude other remedies
 

SATISFACTION OF LIEN BY SALE

1.   The  warehouseman  shall  give  a  written  notice  to  the person  on whose  account the goods  are  held, and to  any other  person  known  by  the  warehouseman  to  claim  an interest  in  the  goods.    Such  notice  shall  be  given  by delivery  in  person  or  by  registered  mail  addressed  to  the
last known place of business or abode of the person to be notified.
2.   The notice shall contain—
a.    An  itemized  statement  of  the  claim,  showing  the sum  due  at  the  time  of  the  notice  and  the  dates when it became due
b.   A brief description of the goods
c.    A demand that such amount of the claim as stated shall be paid on or before the day mentioned, not
less than 10 days from the delivery of the notice if it  is  personally  delivered,  or  from  the  time  when
the notice  shall reach  its destination,  according to due course of post, 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
 

ENFORCEMENT OF WAREHOUSEMAN’S LIEN

1.   By refusing to deliver the goods until the lien is satisfied
2.   By  causing  the  extrajudicial  sale  of  the  property  and applying the proceeds to the value of the lien
3.   By filing a  civil action for collection of the  unpaid charges or  by  way  of  counterclaim  in  an  action  to  recover  the property from him
 

EFFECT OF SALE OF GOODS

1.   In  case  of  sale  of  goods,  the  warehouseman  is  not  liable for  nondelivery  even  if  the  receipt  given  for  the  goods when they were deposited be negotiated.
2.   When   the   sale   was   made   without   the   publication requirement  and  before  the  time  specified  by  law,  such sale  is  void  and  the  purchaser  of  the  goods  acquires  no title in them.
 

ACTS FOR WHICH WAREHOUSEMAN IS LIABLE

1.   Failure to stamp duplicate on copies of negotiable receipt
2.   Failure  to  place  non-negotiable  or  not  negotiable  on  the not negotiable receipt
3.   Misdelivery of the goods
4.   Failure  to  effect  cancellation  of  a  negotiable  receipt  upon delivery of the goods 

5.   Issuing  receipt  for  non-existing  goods  or  misdescribed goods
6.   Failure to take care of the goods
7.   Failure to give notice in case of sale of goods to satisfy the lien or because the goods are perishable or hazardous
 

NEGOTIATION OF NEGOTIABLE RECEIPT BY DELIVERY

1.   Where  by  the  terms  of  the  receipt,  the  warehouseman undertakes to deliver the goods to the bearer
2.   Where  by  the  terms  of  the  receipt,  the  warehouseman undertakes to deliver the goods to the order of a specified person, and such  person  or a  subsequent indorsee  of the receipt has indorsed it in blank or to bearer
a.    Where by the terms  of the receipt, the goods  are deliverable to bearer or where a negotiable receipt
has  been  indorsed  in  blank  or  bearer,  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  indorsement
by such indorsee
 

NEGOTIATION OF NEGOTIABLE RECEIPT BY INDORSEMENT

1.   If  indorsed  in  blank  or  to  bearer,  the  document  becomes negotiable by delivery
2.   If  indorsed  to  a   specified   person,  it  may  be   again negotiated by the indorsement of such person in blank, to bearer or to another specified person.  Delivery alone isn’t sufficient. 
 

TRANSFER OF NON-NEGOTIABLE RECEIPT

> A non-negotiable receipt of title cannot be negotiated.
> Nevertheless, it can be transferred or assigned by delivery
> The assignee  or transferee  only acquires the rights of the transferor or assignor
 

ADVANTAGES OF A NEGOTIABLE WAREHOUSE RECEIPT

1.   It 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,  or 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  aren’t  subject  to  seller’s  lien  or stoppage in transitu
 

WHO MAY NEGOTIATE A RECEIPT

1.   By the owner thereof
2.   By  any person to  whom the  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 the possession or  custody  of the receipt  has  been entrusted,  or  if  at the
same time  of such entrusting, the receipt is in such form that it may be negotiated by delivery
 

RIGHTS   OF   PERSON   TO   WHOM   RECEIPT   HAS   BEEN NEGOTIATED

1.   The  title  of  the  person  negotiating  the  receipt  over  the goods covered by the receipt
2.   The title of the person to whose order by the terms of the receipt the goods were to be delivered over such goods
3.   The   direct   obligation   of   the   warehouseman   to   hold possession of the goods for  him,  as if the  warehouseman directly contracted with him
 

RIGHTS   OF   PERSON   TO   WHOM   RECEIPT   HAS   BEEN TRANSFERRED

1.   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 warehouseman to hold the goods for him
 

RIGHTS OF TRANSFEREE OF NEGOTIABLE RECEIPT

1.   The right to the goods as against the transferor 

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

RULE WHERE RECEIPT IS SUBSEQUENTLY INDORSED

> For the purpose of determining whether the transferee is a purchaser  for  value  in  good  faith  without  notice,  the negotiation  shall  take  effect  as  of  the  time  when  the indorsement is actually made not at the time the receipt is delivered
> Reason for the rule: negotiation becomes complete only at the time of indorsement
 

WARRANTIES ON SALE OF RECEIPT

1.   That the receipt is genuine
2.   That he has a legal right to negotiate or transfer it
3.   That  he has knowledge of no fact which  would impair the validity of the worth of the receipt
4.   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 to transfer without a receipt of the goods represented thereby
 

INDORSER, NOT A GUARANTOR

> The  indorsement  of  a  receipt  doesn’t  make  the  indorser liable for  any failure  on the part of the warehouseman  or previous  indorser  of  the  receipt  to  fulfill  their  respective obligations
 

NO WARRANTY IMPLIED  FROM ACCEPTING PAYMENT  OF A DEBT

> A  mortgagee,  pledgee  or  holder  for  security  of  a  receipt who,  in  good  faith,  demands  or  receives  payment  of  the debt  for  which  such  receipt  is  security,  whether  from  a party  to  a  draft  drawn  for  such  debt  or  from  any  other person, shall not, by so doing, be deemed to represent or
to warrant the genuineness of such receipt or the quantity or quality of the goods therein described
> In other words, the holder of a security who in good faith accepts payment of a debt from a person doesn’t warrant thereby  the  genuineness  of  the  receipt  nor  the  quality  or quantity of the goods therein described
 

WHEN  NEGOTIATION  NOT  IMPAIRED  BY  FRAUD,  DURESS, MISTAKE

> The validity of the negotiation of a receipt isn’t impaired by the fact that such negotiation was a 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 the  receipt  to  such  person,  if  the  person  to  whom  the receipt was negotiated, or to a person to whom the receipt
is  subsequently  negotiated  paid  value  therefor,  without notice of the breach of duty, fraud, mistake or duress
 

EFFECT OF SUBSEQUENT NEGOTIATION BY SELLER, ETC.

> The purchaser, mortgagee, or pledgee of goods for which a negotiable  receipt  has  been  issued,  or  of  the  negotiable receipt itself, has the duty 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 subsequent negotiation

> The subsequent purchaser must have taken the receipt in  good faith and for value in order to acquire a better right 
 

INDORSEE’S RIGHT SUPERIOR TO VENDOR’S LIEN

> An  innocent  holder  of  a  negotiable  receipt  has  a  better right to the goods for  which the receipt is given than the vendor who has a vendor’s lien upon such goods
> Warehouseman  isn’t  obliged  to  deliver  or  justified  in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation
 

HOW  DO  YOU  ATTACH  OR  IMPOSE  A  LIEN  OVER  GOODS COVERED BY A WAREHOUSE RECEIPT? 

If it is not negotiable, the court would issue a writ of attachment.  If it is negotiable, the court  should  require  the  surrender  of  the  receipt  and  restrict further negotiations.