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WAREHOUSE RECEIPTS LAW

(2024 EDITION) DUPLICATE, ALTERATION & MISDESCRIPTION:

The Warehouse Receipts Act prescribes the mutual rights and duties of a
warehouseman, who issues warehouse receipts, and his depositor, and covers all
warehouses, whether bonded or not. This is to be distinguished from the General
Bonded Warehouse Law, which on the other hand, regulates and supervises only those
warehouses which put up a bond.
A warehouse is a building where goods are deposited and stored for profit.
Warranties of a warehouseman as to duplicate receipts
When a warehouseman issues duplicate receipts, he warrants that:
(1) The duplicate is an accurate copy of the original receipt.
(2) Such original receipt has not been cancelled at the date of the issue of the
duplicate (Sec. 15)

WAREHOUSE RECEIPT
(also known as quedan)
 A warehouse receipt is a written acknowledgment by a warehouseman
that he has received the goods described therein and holds the same for the
person to whom it is issued or as the latter may order.
 It is a contract between the owner of the goods or the person authorized by
the owner to transfer ownership or possession over the goods, on one
hand, and the warehouseman, on the other hand, for the latter to store the
goods and the former to pay the compensation for that service.
What is the effect of alteration of a receipt on the liability of the warehouseman?
(1) 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
altered receipt according to the original tenor.
(2) If the alteration is MATERIAL but AUTHORIZED, he is liable according to the
terms of the altered receipt.
(3) If the alteration is MATERIAL, UNAUTHORIZED but INNOCENTLY MADE
(that is, without fraudulent intent), he is liable on the altered receipt according to
the original tenor.

(4) If the alteration is MATERIAL AND FRAUDULENTLY MADE, he is liable:

A warehouse receipt need not be in any particular form. However, it must contain
certain essential elements: (a) To the purchaser of the receipt for value and without notice of the
alteration according to the tenor of the original receipt
(1) Location of warehouse (Note: This is for the
purpose of legal action.) (b) To the alterer according to the terms of the original receipt
(2) Date of issue of receipt
(3) Consecutive number of receipt (c) To subsequent purchasers with notice of the alteration according to the
(4) A statement whether the goods received will be terms of the original receipt.
delivered to the bearer, specified person, or to
specified person or his order (to whom delivered)
(5) Rate of storage charges
(6) Description of goods and packages
(7) Signature of warehouseman
(8) Fact of warehouseman’s ownership or interest in What are the effects of misdescription of goods? (Sec. 20)
goods, if any
(9) Statement of amount of advances made and of (1) A warehouseman is under the obligation to deliver the identical property stored
liabilities incurred for which warehouseman claims with him and if he fails to do so, he is liable directly to the owner.
as lien (Sec. 3)
(2) As against a bonafide purchaser of a warehouse receipt, the warehouseman is
estopped from denying that he received the goods described in the receipt.

What is the effect of failure to include any of the essential terms? (3) BUT if the description consists merely or marks or label upon the goods or upon
the packages containing them, the warehouseman is not liable even if the goods
A warehouseman shall be liable to any person injured thereby for all damages caused by are not of the kind as indicated in the marks or labels
the omission. (Sec. 3)

There are certain terms that cannot be inserted in a warehouse receipt:

(1)Those contrary to the provisions of the Act;
(2) Those that would impair a warehouseman’s obligation to exercise that degree of
care in the safekeeping of the goods entrusted to him. Thus, a warehouseman cannot
stipulate that the owner will bear the loss of the goods.
BAR: a warehouse company received for safekeeping 1000 bags of rice from a
merchant. To evidence the transaction, the warehouse company issued a receipt
expressly providing that the goods be delivered to the order of the merchant. A
month later, a creditor obtained judgment against the said merchant for sum of
money. The sheriff proceeded to levy on the rice and directed the warehouse
company to deliver to him the deposited rice.

what advice will you give the warehouse company?

Note that it is the holder of the goods who determines whether a warehouse receipt is
negotiable or non-negotiable.
 Also note that warehouse receipts can only be issued by a warehouseman, or by
his authorized representative. (Sec. 1)
The rice cannot thereafter ,while in possession of the company be attached by
garnishment or otherwise be levied upon under an execution unless the receipt be first
surrendered to the warehouseman or its negotiation enjoined. The warehouse company
cannot be compelled to deliver the actual possession of the rice until the receipt is
surrendered to it or impounded by the court.

Marks to be made on a warehouse receipt
(1) A non-negotiable receipt must be clearly marked as such. Otherwise, the holder
of the receipt, who purchased it for value and who supposed it to be negotiable,
may treat it as negotiable. (sec. 7)
(2) Duplicate receipts must be so marked. Otherwise, the warehouseman is liable for
all damages suffered by a holder believing the same to be the original. (sec. 6)
Assuming a week prior to the levy, the receipt was sold to a rice mill on the basis of
which it filed a claim with the sheriff. Would the rice mill have better rights to the
rice than the creditor?
YES. The rice mill as a holder for value of the receipt has a better right than the
creditor. It is the rice mill that can surrender the receipt which is in its possession and
can comply with the other requirements which will oblige the warehouseman to deliver
the rice, namely,
to sign a receipt for the delivery and
to pay the warehouseman’s liens and fees and other charges.
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WAREHOUSE MAN
A warehouseman is a person lawfully engaged in the business of storing goods for
profit. (Sec. 58)
OBLIGATIONS OF THE WAREHOUSEMAN:
1.HE HAS THE DUTY TO DELIVER THE GOODS UPON DEMAND MADE
BY THE HOLDER OF THE RECEIPT OR BY THE DEPOSITOR.
In the absence of some lawful excuse provided by the Act, a warehouseman is bound to
deliver the goods upon a demand made either by:
(1) the holder of a receipt for the goods, or
(2) the depositor, provided that such demand is accompanied by:
1.an offer to satisfy the warehouseman’s lien;
2.an offer to surrender the receipt if it is negotiable; and
3.a readiness and willingness to sign an acknowledgment, when the goods
are delivered, that they have been delivered if such is requested by the
warehouseman.(Sec. 8)
BAR: Luzon Warehousing received from Pedro 200 cavans of rice for
deposit in its warehouse for which a negotiable receipt was issued. While
the goods were stored in said warehouse, Cicero obtained judgment
against Pedro for recovery of sum of money. The sheriff proceeded to levy
upon the goods on a writ of execution and directed the warehouseman to
deliver the goods. Is the warehouseman under obligation to comply with
sheriff’s orders?
NO. there was a valid negotiable receipt as there was a valid delivery of
200 cavans of rice for deposit. In such case, the warehouseman is not
obliged to deliver the 200 cavans of rice deposited to any person, except
to the one who can comply section 8,namely:
a. Surrendeer receipt of which he is a holder
b. Willing to sign a receipt for the delivery of the goods, and
c. Pays the warehouseman’s liens that is his fees and advances if any
When would a warehouseman be liable for misdelivery?
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 goods as follows:
(a) The person does not fall under Sec. 9 (b) or (c); or
(b) The person falls under Sec. 9 (b) or (c), but prior to the delivery, the
warehouseman either:
1.had 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 (Sec.10)
In these cases, the warehouseman shall be liable for conversion to all
having a right to property or possession of the goods.
BAR: For a cargo of machinery shipped from abroad to a sugar central in Dumaguete,
the Bill of Lading stipulated ―to shipper’s order‖ with notice of arrival to be addressed
to the central. The cargo arrived and was released to the central w/o surrender of the BL
on the basis of the latter’s undertaking to hold the carrier free and harmless from any
liability.
Subsequently,a bank whom the central was indebted,claimed the cargo ad presented the
original BL stating that the central had failed to settle its obligations with the bank. Was
there misdelivery by carrier to central considering the non-surrender of the BL?
NO MISDELIVERY since the cargo was considered considgned to the sugar central per
the ―shipper’s order
Can goods for which a negotiable receipt has been issued be attached or levied?
YES, but only if the receipt is surrendered to the warehouseman first, or the negotiation
of the receipt has been enjoined.
In no case shall the warehouseman be compelled to deliver up the actual possession of
the goods until the receipt is surrendered to him or impounded by the court. (Sec. 25)
A WAREHOUSEMAN IS JUSTIFIED IN DELIVERING THE GOODS TO:
A.the person lawfully entitled to the possession of the goods, or to his agent. These
include:
1.Person to whom a competent court has ordered the delivery of the goods
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 or expense which he may
incur by reason of the original receipt remaining outstanding (Sec.14)
2An attaching creditor
A creditor whose debtor is the owner of a negotiable receipt can resort to the courts to
have such receipt attached. (Sec. 26) It must be noted, however, that the goods covered
by the receipt cannot be attached or levied upon under an execution UNLESS:
a.the negotiable receipt is first surrendered to the warehouseman; or
b.its negotiation is enjoined; or
c.the receipt is impounded by the court (Sec. 25)
3.The purchaser in case of sale of the goods by the warehouseman to enforce his lien
(Sec. 33)
4.The purchaser when perishable or hazardous goods are sold at a private or public
sale (Sec.34)
a.the person who is himself entitled to delivery of the goods by the terms of a non-
negotiable receipt or who has been authorized to take delivery of the goods by the
person entitled to such delivery, which authority is endorsed upon the receipt or written
on another paper;
b.the 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 endorsed to him or in blank
by the person to whom delivery was promised by the terms of the receipt by his
immediate indorsee. (Sec. 9)
If the warehouseman refuses or fails to deliver the goods in compliance with the holder
or depositor’s demand, he has the burden of proving that he had a lawful excuse for
such refusal or failure. (Sec. 8) Such lawful excuses include the following:
 The warehouseman has acquired title or right to the possession of
the goods, either:
(a) through a direct or indirect transfer made by the depositor at the time of
deposit for storage or subsequent thereto; or
(b) from the warehouseman’s lien.
 When several persons claim the goods. In this case, the
warehouseman has 2 options:
(a) He can refuse to deliver the goods to any one of them
until he has had reasonable time to ascertain the
validity of the various claims (Sec. 18);
(b) He can require all claimants to interplead, either as
a defense to an action brought against him for non-
delivery of the goods, or as an original suit,
whichever is appropriate. Note that a
warehouseman can resort to an action for impleader
only when the title to the goods is in issue.
 The goods to be delivered have been lost. This is of course without
prejudice to liabilities which the warehouseman may incur due to
such loss.
 The warehouseman’s lien has not yet been satisfied (Sec. 31);
 The goods have been lawfully sold or disposed of because of their
perishable or hazardous nature (Sec. 36)
2024 notes: he cannot raise the defense that his refusal to deliver the goods to the
depositor or person claiming under him is due to the ground that adverse title to
the goods belongs to a 3rd person. Except in cases where the warehouseman has
either
(1) required parties having conflicting claims to the goods to interplead, or
(2) ascertained the validity of the adverse claims,
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WAREHOUSE LIEN
:

A warehouseman shall have a lien on goods deposited or on the proceeds thereof in
his hands for:
1. All lawful charges for storage and preservation of the goods;
2. All lawful claims for money advanced, interest, insurance,
transportation, labor, weighing, cooperating and other charges and
expenses in relation to such goods;
2.HE HAS TO EXERCISE SUCH CARE IN REGARD THE GOODS AS A
REASONABLE CAREFUL OWNER OF SIMILAR GOODS WOULD
EXERCISE. (SEC. 21)
General rule: A warehouseman is required to exercise such degree of care which a
reasonably 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.
(Sec. 21)

3. All reasonable charges and expenses for notice and advertisement
of sale and for sale of the goods where default has been made in
satisfying the warehouseman’s lien (Sec. 27).
Exception: He shall not be liable for any loss or injury which could not have been
avoided by the exercise of such care. (Sec. 21)
Exception to the Exception: He may limit his liability to an agreed value of the
property received in case of loss. However, he cannot stipulate that he will not be
responsible for any loss caused by his negligence.

A warehouseman’s lien may be enforced against:

1. all goods, whenever deposited, belonging to the depositor who is

liable to the warehouseman as debtor for the claims in regard to
which the lien is asserted, and

2. all goods belonging to other persons which has been deposited at

any time by the depositor, provided that such depositor had the
authority to validly pledge such goods (sec. 28)

3. HE HAS TO KEEP THE GOODS SEPARATE FROM THE GOODS OF

OTHER DEPOSITORS.
Since the warehouseman’s lien is possessory, it is lost once the warehouseman
either:

1.surrenders possession of the goods without requiring payment of the lien, or

Non-Commingling of Goods
2.wrongly refuses to deliver the goods when a demand is made with which he is bound
to comply under the Act. (Sec. 29)
General Rule: A warehouseman may not commingle goods belonging to different
depositors or belonging to the same depositor but for which separate receipts have been
issued (sec. 22). This is to facilitate the identification and redelivery of the goods
deposited.
A warehouseman may enforce his lien as follows:
Exception: A warehouseman may commingle fungible goods of the same kind and
grade provided he is authorized by agreement or custom. (sec. 23) In such a case, the
1.By refusing to deliver the goods until lien is satisfied (sec. 31)
various depositors of the mingled goods shall own the entire mass in common, and each
2.By causing the extrajudicial sale of the property and applying the proceeds to the
depositor shall be entitled to such portion thereof as the amount which he deposited
value of the lien (Secs. 33 & 34); or
bears to the whole mass.
3.By filing a civil action for unpaid charges or by way of counterclaim in an action to
recover property from him (Sec. 35)
Note that 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
Note that the warehouseman’s lien does not preclude other remedies. Whether or not a
circumstances as if the goods had been kept separate. (Sec. 24)
warehouseman has a lien upon the goods, he is entitled to all remedies allowed by a law
to a creditor against a debtor for the collection from the depositor of all charges and
advances which the depositor has expressly or impliedly contracted with the
warehouseman to pay. (Sec. 32)

What happens if there is proper delivery or partial delivery but the warehouseman
fails to cancel the receipt or record such partial delivery on the receipt?

 If goods covered by a negotiable warehouse receipt are delivered by a

warehouseman but he fails to take and cancel the receipt, then he is still
liable to one who purchases the receipt for value and in good faith.

 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 it for value and in good faith.

BAR: to guarantee the payment of a loan from a bank, Raul pledged 500 bales of
tobacco deposited in a warehouse to said bank and endorsed in blank the warehouse
receipt. Before Raul could pay for the loan, the tobacco disappeared from the
warehouse. Who shold bear the loss: the pledgor or the bank?
PLEDGOR bear loss. In the pledge of a warehouse receipt the ownership of the goods
remain with depositor or his transferee.
Any contract or real security among them a pledge does not amount to or result in an
assumption of risk of loss by the creditor. (the warehouse receipts law did not deviate
from this rule)
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NEGOTIATION OF THE WAREHOUSE RECEIPTS

Who may negotiate a negotiable receipt?

What rights are acquired by person to whom a negotiable receipt has been duly
(1) The owner of the receipt; or negotiated?

(2) The person to whom possession of the receipt was entrusted by the owner,
provided that either:
(a) 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
(b) at the time of entrustment of the receipt, it is in such form that it
may be negotiated by delivery. (Sec. 40)
Such person acquires:
(1) title of the person negotiating the receipt over the goods covered by the
receipt;
(2) such title of the person (depositor or owner) to whose order the goods
were to be delivered by the terms of the receipt had or had ability to
convey to a purchaser in good faith for value;
(3) the direct obligation of warehouseman to hold possession of the goods for
him, as if the warehouseman had directly contracted with him. (Sec. 41)

What rights are acquired by a person to whom a negotiable receipt has been merely
transferred, not indorsed?

(1) The right to the goods as against the transferor;

(2) The right to compel the transferor to indorse the receipt, unless the
intention of the parties is that the receipt should be merely transferred.

Negotiation shall take effect as of the time when indorsement is actually made.
How is a receipt deliverable to order negotiated?

1. By indorsement in blank, thereby making it deliverable to bearer; or

2. By special indorsement which would require further indorsements for further
negotiations.
NON- NEGOTIABLE WAREHOUSE RECEIPTS:
In both cases, indorsements must be coupled with delivery.
The transferee acquires title subject to the terms of the deed of transfer. He also
acquires the right to inform the warehouseman of such transfer and thereafter
acquires also the obligation of the warehouseman to hold possession of the goods
for him.
2005 BAR: jojo deposited several cartons of goods with SN warehouse. The warehouse
receipt was issued to order of jojo. He endorsed the warehouse receipt to EJ who paid
the value of the goods deposited. Before EJ could withdraw the goods, Melchor
informed SN warehouse that the goods belong to him and were taken by jojo without
his consent. Melchor wants to get the goods, but EJ also wants to withdraw the same.
2007 BAR: Alex deposited goods for which Billy, a warehouseman issued a negotiable
Who has the better right?
warehouse receipt wherein the goods were deliverable to Alex or order. Alex
negotiated the receipt to Caloy. Thereafter, Dario ,a creditor, secured judgment against
EJ for being covered by a negotiable document of title namely the warehouse receipt
Alex and served notice of levy over the goods on the warehouseman.
issued to the ―order of Jojo‖. When goods deposited with the bailee are covered by a
negotiable document of title, the endorsement and delivery of the document transfers
HELD: The warehouse man should deliver the goods upon demand to Caloy who is a
ownership of the goods to the transferee by operation of law, the transferee obtains the
holder of the receipt in good faith and for value. The goods cannot be levied upon by the
direct obligation of the bailee to hold the goods in his name.
creditor of Alex after it was negotiated to Caloy (Sec 25, NIL)

4blue 95: if warehouse receipt is negotiable, then the rules in Negotiable Instruments
law shall be governed.

4blue 95: if the warehouseman issued non-negotiable warehouse receipt, the answer
above is still the same, because ,in such a case, the warehouseman should deliver the
goods to Dario, if the notice of levy was served on the warehouseman prior to the
notification of the warehouseman by Alex or Caloy of the transfer of the non-negotiable
receipt.
In such a case, the title of Caloy would be defeated by the notice of levy by Dario (Sec.
How is a receipt deliverable to bearer negotiated?
42,Warehouse receipts law)
There is no need to indorse for negotiation. Physical delivery of the instrument will
suffice. However, if the instrument is indorsed specially, the bearer character of the
receipt is destroyed and for further negotiation, there will be need for indorsements.

BAR: On January 2, a non-negotible warehouse receipt was issued in favor of O. On

July 2, O pledged it to L for P1000. On August 2, C brought an action against O and
attached the sugar covered by the receipt, notifying the warehouseman thereof. L claims
that C’s levy did not affect his loan of P1000 because O’s right at the time of levy and
attachment was already subject to the pledge in favor of L. whose rights are superior, L
or C?
What are the warranties made by a person negotiating or transferring a
C’s rights are superior. There is nothing in the problem which would show that L,the
warehouse receipt?
pledgee, ever informed the warehouseman of the existence of such pledge. It is the fact
of such notice which would have given to L the better right to the goods.
1. The receipt is genuine.
As it was C who ws the first to notify the warehouseman of his right to the goods under
2. He has a legal right to negotiate or transfer it.
the levy on attachment, C has the better right to the goods than L.
3. He has no knowledge of any fact which would impair the validity or
worth of the receipt.
4. He has a right to transfer the title to the goods and that the goods are
merchantable. (Sec. 44)
 Note that the indorsement of a receipt does not make the indorser liable
for any failure on the part of the warehouseman or previous indorsers of
4blue95: a non-negotiable receipt may be transferred by its delivery to the
the receipt to fulfill their respective obligations. (Sec. 45)
transferee accompanied by a deed of assignment, donation or other form of
transfer.
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PLEDGE, CHATTEL OF THE WAREHOUSE RECEIPT

 A holder for security of a receipt (mortgagee or pledgee) who in good BAR: A purchased from S 150 cavans of palay on credit. A deposited the palay in
faith accepts payment of the debt from a person does not warrant the W’s warehouse. W issued to A a negotiable warehouse receipt in the name of A.
genuineness of the receipt nor the quality or the quantity of the goods Thereafter, A negotiated the receipt to B who purchased the said receipt for value
therein described. (Sec. 46) and in good faith.

 It is the duty of the purchaser, mortgagee or pledgee of goods for which a
negotiable receipt has been issued to require the negotiation of the receipt
to him. His failure to do so will have the same effect as an express
authorization on his part to the seller, mortgagor or pledgor to make any
subsequent negotiation. (sec. 48) The subsequent purchaser must have the
receipt in good faith and for value.
 Where the negotiation of a negotiable receipt was attended by breach of
duty, fraud, mistake or duress, the person to whom the receipt was
negotiated or a person subsequent thereto who paid value for the receipt
and who had no notice of the breach of duty, fraud, mistake or duress
acquires title to the goods. In short, negotiation is valid despite having
been made in breach of trust. (sec.47)
Who has the better right to the deposits? B has the better right than S. the right of the
unpaid seller S was defeated by the act of A in endorsing the reciept to B.
4blue95: NO unpaid seller’s lien or right of stoppage can defeat the rights of the pledgee
for value.
When can the warehouseman be obliged to deliver the palay to A? the warehouseman
can be obliged to deliver the palay to A if B negotiates back the receipt to A. in that
case, A becomes a holder again of the receipt, and A can comply with sec 8 of the
Warehouse receipts law.

BAR: X sold a quantity of hemp by quedan to Y who took possession of said

Does negotiation of a warehouse receipt defeat the lien of the vendor of the goods
covered thereby?
Yes. Where a negotiable receipt has been issued for goods, no vendor’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. This is regardless of whether or not such
negotiation was prior or subsequent to the notification to the warehouseman who issued
such receipt of the vendor’s claim to a lien or right of stoppage in transitu. The
warehouseman shall not be obliged to deliver or be justified in delivering the goods to
an unpaid unless the receipt is first surrendered for cancellation. (Sec. 49)
quedan. X was not paid by Y for the quedan but it was their agreement that the
price of the hemp would be charged against such quedans. Y delivered the quedans
to A bank to secure his indebtedness. The day after such delivery, Y died. May X
recover the quedans or their corresponding value?
NO, X cannot recover from A bank the quedans or their corresponding values for the
bank is a pledgee for value. X is trying to recover the quedans or their value as an
unpaid seller.

Thus, to protect themselves, creditors of debtors owning warehouse receipts may obtain
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 no longer be a danger that a 3rd
person will be prejudiced. Thus, the goods may be attached or levied upon. The
vendor’s lien or the right of stoppage in transit may also be exercised. (Sec. 26)
May non-negotiable receipts be negotiated?
Obviously not. Even if such receipt are indorsed, the transferee acquires no additional
right. However, non-negotiable receipts may be transferred or assigned by delivery.
BAR: to guarantee the payment of a loan, B pledged to and indorsed in blank and
delivered to A a warehouse receipt covering 2000 cavans of palay which before
maturity of the loan disappeared for unknown reasons from the warehouse where
they had been depositied. For failure to pay the loan upon maturity, A sues B who
sets the defense that the indorsement and delivery of the warehouse receipt
transferred title and ownership of the goods to A who therefore should bear the
loss of the goods. May the defense set up be legally upheld?
DEFENSE of B not tenable. The indorsement in blank was by way of pledge and the
pledgee does not become owner of the thing pledged.

In these cases, who has the better right to the goods?

(1) Judgment creditor v. holder

Goods should be given to the holder who has the capacity to comply with the
requirements of Section 8, namely: indorse and deliver the receipt of which he is the
holder, pay the fees or liens of the warehouseman, and sign a receipt for the delivery of
the goods.

(2) Unpaid seller v. holder

The unpaid seller may get back the goods IF the warehouse receipt is still with the
buyer. However, if the receipt has already been indorsed and delivered to a holder who
paid value therefor in good faith, the latter has a better right over the unpaid seller.

(3) Lessor / Landlord v. holder

Holder can recover goods as he can comply with the requirements of Sec. 8.

(4) Owner (alleged) v. holder

In this case, the warehouseman should not deliver the goods to either of the two as the
title of ownership over the goods is in question. The safe course of action for the
warehouseman to take is to file a complaint for interpleader to compel both claimants to
litigate against each other for the goods. Otherwise, if the warehouseman decides on his
own, he runs the risk of being held liable twice for the goods.
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Q: Alex deposited goods for which Billy, warehouseman, issued a negotiable warehouse
receipt wherein the goods were deliverable to Alex or order. Alex negotiated the receipt
to Caloy. Thereafter, Dario, a creditor secured judgment against Alex and served notice
of levy over the goods on the warehouseman. a. To whom should the warehouseman
deliver goods upon demand? b. Would your answer be the same if the warehouseman
issued a non-negotiable warehouse receipt? (2007 BAR)
A:
a. Billy should deliver the goods to Caloy. Under the Warehouse Receipts Act, the
goods covered by the negotiable receipt cannot be attached or levied upon directly by
the creditor. The creditor must resort to attaching or levying the receipt itself, not the
goods, while in the possession of the debtor, Alex. Since Alex has already negotiated it
to Caloy, Dario cannot anymore attach or levy the goods under the warehouse receipt.
b. A non-negotiable warehouse receipt is transferred thru simple assignment. Since Alex
negotiated it instead of having it assigned, the conveyance of the warehouse receipt to
Caloy is not valid; hence, Alex is still the owner of the said goods. Dario could now
attach or levy the goods.
Q: Jojo deposited several cartons of goods with SN Warehouse Corporation. The
corresponding warehouse receipt was issued to the order of Jojo. He endorsed the
warehouse receipt to EJ who paid the value of goods deposited. Before EJ could
withdraw the goods, Melchor informed SN Warehouse Corporation that the goods
belonged to him and were taken by Jojo without his consent. Melchor wants to get the
goods, but EJ also wants to withdraw the same. a. Who has a better right to the goods?
Why? b. If SN Warehouse Corporation is uncertain as to who is entitled to the property,
what is the proper recourse of the corporation? Explain. (2005 BAR) A:
a. EJ has better right to the goods. The goods are covered by a negotiable warehouse
receipt which was indorsed to EJ for value. The negotiation to EJ was not impaired by
the fact that Jojo took the goods without the consent of Melchor, as EJ had no notice of
such fact. Moreover, EJ is in possession of the warehouse receipt and only he can
surrender it to the warehouseman. (Sec. 8, Warehouse Receipts Law)
b. Under the Sec. 17 of Act 2137, Warehouse Receipt Law, SN Warehouse Corporation
may file an action for interpleader and implead EJ and Melchor to determine who is
entitled to the said goods.
Q: S stored hardware materials in the bonded warehouse of W, a licensed
warehouseman under the General Bonded Warehouse Law (Act 3893 as amended). W
issued the corresponding warehouse receipt in the form he ordinarily uses for such
purpose in the course of his business. All the essential terms required under Section 2 of
the Warehouse Receipts Law (Act 2137 as amended) are embodied in the form. In
addition, the receipt issued to S contains a stipulation that W would not be responsible
for the loss of all or any portion of the hardware materials covered by the receipt even if
such loss is caused by the negligence of W or his representatives or employees. S
endorsed and negotiated the warehouse receipt to B, who demanded delivery of the
goods. W could not deliver because the goods were nowhere to be found in his
warehouse. He claims he is not liable because of the free-from-liability clause stipulated
in the receipt. Do you agree with W’s contention? Explain. (2000 BAR)
A: NO. I do not agree with the contention of W. the stipulation that W would not be
responsible for the loss of all or any portion of the hardware materials covered by the
receipt even if such loss is caused by the negligence of W or his representative or
employees is void. The law requires that a warehouseman should exercise due diligence
in the care and custody of the things deposited in his warehouse.
Q: A Warehouse Company received for safekeeping 1000 bags of rice from a merchant.
To evidence the transaction, the Warehouse Company issued a receipt expressly
providing that the goods be delivered to the order of said merchant. A month after, a
creditor obtained judgment against the said merchant for a sum of money. The sheriff
proceeded to levy on the rice and directed the Warehouse Company to deliver to him
the deposited rice. a. What advice will you give the Warehouse Company? Explain your
answer. b. Assuming that a week prior to the levy, the receipt was sold to a rice mill on
the basis of which it filed a claim with the sheriff. Would the rice mill have better rights
to the rice than the creditor? Explain your answer. (1999 BAR)
A:
a. The 1000 bags of rice were delivered to the Warehouse Company by a merchant, and
a negotiable receipt was issued therefore. The rice cannot thereafter, while in possession
of the Warehouse Company, be attached by garnishment or otherwise, or be levied upon
under an execution unless the receipt be first surrendered to the warehouseman, or its
negotiation enjoined. The Warehouse Company cannot be compelled to deliver the
actual possession of the rice until the receipt is surrendered to it or impounded by the
court.
b. YES. The rice mill, as a holder for value of the receipt, has a better right to the rice
than the creditor. It is rice mill that can surrender the receipt which is in its possession
and can comply with the other requirements which will oblige the warehouseman to
deliver the rice, namely, to sign a receipt for the delivery of the rice, and to pay the
warehouseman’s lien and fees and other charges.
Q: Luzon Warehouse Corporation received from Pedro 200 cavans of rice for deposit in
its warehouse for which a negotiable warehouse receipt was issued. While the goods
were stored in the said warehouse, Cicero obtained a judgment against Pedro for the
recovery of a sum of money. The sheriff proceeded to levy upon the goods on a writ of
execution and directed the warehouseman to deliver the goods. Is the warehouseman
under obligation to comply with the sheriff’s order? (1998 BAR)
A: NO. There was a valid negotiable receipt as there was a valid delivery of 200 cavans
of rice for deposit. In such case, the warehouseman (LWC) is not obliged to deliver the
200 cavans of rice deposited to any person, except to one who can comply with Section
8 of the Warehouse Receipts law, namely: (1) surrender the receipt of which he is a
holder; (2) willing to sign a receipt for the delivery of the goods; and (3) pays the
warehouseman’s liens, that is, his fees and advances, if any. The sheriff cannot comply
with these requisites, especially the first, as he is not the holder of the receipt.
Q: A purchased from S 150 cavans of palay on credit. A deposited the palay in W’s
warehouse. W issued to A a negotiable warehouse receipt in the name of A. thereafter,
A negotiated the receipt to B who purchased the said receipt for value and in good faith.
a. Who has a better right to the deposit, S, the unpaid vendor, or B, the purchaser of the
receipt for value and in good faith? Why? b. When can the warehouseman be obliged to
deliver the palay to A? (1993 BAR)
A:
a. B has a better right than S. The right of the unpaid seller, S, to the goods was defeated
by the act of A in endorsing the receipt to B.
b. The warehouseman can be obliged to deliver the palay to A if B negotiates back the
receipt to A. In that case, A becomes a holder again of the receipt, and A can comply
with Sec. 8 of the Warehouse Receipts Law.
Q: To guarantee the payment of a loan obtained from a bank, Raoul pledged 500 bales
of tobacco deposited in a warehouse to said bank and endorsed in blank the warehouse
receipt. Before Commercial Law 122 Raoul could pay for the loan, the tobacco
disappeared from the warehouse. Who should bear the loss—the pledgor or the bank?
Why? (1992 BAR)
A: The pledgor should bear the loss. In the pledge of a warehouse receipt the ownership
the goods remain with depositor or his transferee. Any contract of real security, among
them a pledge, does not amount to or result in an assumption of risk of loss by the
creditor. The Warehouse Receipts Law did not deviate from this rule.
Q: When is a warehouseman bound to deliver the goods upon a demand made either by
the holder of a receipt for the goods or by the depositor? (1991 BAR)
A: The warehouseman is bound to deliver the goods upon demand made either by the
holder of the receipt for the goods or by the depositor if the demand is accompanied by
(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 thereof,
and (c) readiness and willingness to sign when the goods are delivered if so requested
by the warehouseman.
Q: Mr. Bakal deposited with a warehouseman 2 crates of goods for which he received
two warehouse receipts (one for each crate) – one being a negotiable warehouse receipt
and the other a non- negotiable warehouse receipt. Title to both warehouse receipts were
transferred on December 1, 1985 to Mr. Tigas. The warehouseman was not notified of
the transfer of the receipts. Meanwhile, Mr. Tapang, a judgment creditor of Mr. Bakal,
served a notice of levy over the goods on the warehouseman. a. Between Mr. Tigas and
Mr. Bakal, who would have preference over the goods covered by the negotiable
warehouse receipt? Reasons. b. Who would have preference over the goods covered by
the non-negotiable receipt? Reasons. (1988 BAR)
A:
a. Mr. Tigas would have preference over the goods covered by the negotiable
warehouse receipt (assuming that there was proper negotiation to him). In negotiation,
the transferee’s rights over the goods vests from the very moment of transfer and the
transferee thereupon acquires the direct obligation of the warehouseman to hold the
goods for him.
b. Mr. Tapang, in this case, would have preference over the goods since the transferee
of a nonnegotiable warehouse receipt merely acquires (1) rights no better than those of
the transferor and (2) the direct obligation of the warehouseman only upon notice to him
of the transfer.
Limjoco v. Director of Commerce
Facts:
Mr. & Mrs. L owned a rice mill (―kiskisan‖) and were engaged in the business of milling palay.
Such ―kiskisan‖ was licensed under the General Bonded Warehouse Act. However, when Mr.
L died and Mrs. L took over the management, she did not renew her license, claiming that her
business does not fall within the purview of such Act inasmuch as Mrs. L did not charge
anything for keeping the palay (it was merely a favor done for the customers). She likewise
alleged that her ―camalig‖ was neither adequate nor suitable for storage.
When Mrs. L refused to renew her license despite the ruling of the Director of Commerce that
her rice milling business falls within the Act, the Director filed a petition for declaratory relief
with the CFI.
Ruling:
Sec.2 of the General Bonded Warehouse Act is too clear to permit of any exercise in
construction or semantics. It is enough that the palay be delivered to Mrs. L, even if only for
milling, for the Act to apply.
The alleged inadequacy of the construction for storage insofar as the safety of the palay is
concerned is not a valid reason to remove it from the operation of the statute. Otherwise, the
very fact of non-compliance with the legal requirements in this respect would be its own excuse
from the liabilities imposed.
 7
GENERAL BONDED WAREHOUSE LAW
(ACT NO. 3893, AS AMENDED)
What is the purpose of the law?
To bring the State into what were formerly private transactions between depositors of
commodities and warehousemen.
A warehouse is deemed to mean every building, structure or other protected inclosure in which
commodity is kept in storage. (Sec. 2, Act 3893, as amended by RA 247)
A warehouseman is a person engaged in the business of receiving commodity for storage. The
term ―person‖ includes corporations or partnerships or two or more persons having joint or
common interest. (Sec. 2)
What commodities may be deposited in a warehouse?
All products which may be traded or dealt in openly and legally. (In short, all products which
are not illegal.) (Sec. 2, Act 3893, as amended by RA 247)
What contracts or transactions are included in the phrase “the business of receiving
commodity for storage”?
(1) those wherein the warehouseman is obligated to return the very same
commodity delivered to him or pay its value;
(2) those wherein the commodity delivered is to be milled for and on
account of the owner thereof;
(3) those wherein the commodity delivered is commingled with the
commodity delivered by or belonging to other persons and the
warehouseman is obligated to return the commodity of the same kind or
pay its value. (Sec. 2)
What are the requisites before a warehouseman can do business?
Every warehouseman accepting commodity for storage must:
(1) obtain prior license from Bureau of Commerce (terminology of the law;
perhaps this is now the Department of Trade and Industry?)
(2) file a bond in an amount equivalent to 33 1/3% of the capacity of the
warehouse against which bond depositors may sue directly.
For palay and corn license, a bond with the National Grains Authority and insurance coverage
are required.
What are the duties of a bonded warehouseman?
(1).To insure the commodity received for storage against fire (Sec. 6);
(2)To receive for storage any commodity of the kind customarily stored by him in the
warehouse, so far as his license and the capacity of his warehouse will permit, without making
any discrimination between persons desiring to avail themselves of warehouse facilities (Sec.
8);
(3)To keep a complete record of all commodities received by him, of the receipts issued
therefor, of the withdrawals, of the liquidation, and of all receipts returned to and canceled
by him (Sec. 9).
What are the rights of a person injured by the breach by the warehouseman of any of his
obligations under the law?
Such person is entitled to sue on the warehouseman’s bond in his own name in any court of
competent jurisdiction to recover the damages he may have sustained by such breach.
In case the bond given is not sufficient to respond for the full market value of the commodity
received by such warehouseman, the injured party may go after the warehouseman’s property
or assets. (Sec. 7)
What offenses are punishable under the General Bonded Warehouse Act?
Offenses
Engaging in the business without license
(Sec. 3, 11)
If licensed, receiving a quantity of commodity greater than that specified in one’s
applicationand license (Sec. 12)
Conniving or combining with any warehouseman not licensed under the Act, with the purpose
of evading the provisions of Sec. 3 of the Act (i.e., the licensing requirement) (Sec. 13)
Using the word ―bonded‖ either partly or wholly as trade name or business name of any
entityowning, maintaining or operating a warehouse that is neither:
A.licensed under the Act;
B.established under Chapter 39, Art. XIII Sec. 1302 and 1304 of the Admin Code of 1917 as
amended;as well as naming, designating or advertisingsuch warehouse (Sec. 3, as amended by
RA 247)
Penalty
Imprisonment > 1 month, or Fine < P 5,000.00, or both
Fine of 2x the market value of the commodity received in excess of authorized quantity
Imprisonment < 1 month, or Fine < P 200.00, or both
Imprisonment < 5 years, or
Fine < P 5,000.00, or both
Who are not covered?
Cooperative marketing associations of commodity producers organized under Act 3425
(Cooperative Marketing Law), provided that they do not receive, for storage, commodity from
non-members in a quantity greater than ½ of the total quantity of commodity received from
members, at any time. (Sec. 15)
Gonzales v. Go Tiong
Facts:
GT operated a bonded warehouse and accepted deliveries of palay among which were several
sacks belonging to RG. The issues which GT issued were ordinary receipts, not the warehouse
receipts defined by the Warehouse Receipts Act.
One day, the warehouse burned, together with its contents of palay, which included RG’s sacks.
RG sued on GT’s bond with Luzon Surety to recover his loss. GT and Luzon Surety opposed
this, saying among others that: (1) RG’s claim was covered by the Civil Code and not the
Bonded Warehouse Law since the receipts were ordinary receipts and not the warehouse
receipts prescribed by the Warehouse Receipts Act; (2) The deposits of palay by RG were
gratuitous, and therefore the destruction of the goods by fire extinguished GT’s obligation.
During the trial, it was found that GT had been accepting deposits in excess of the limit
permitted under his license.
Ruling:
GT and Luzon Surety are liable to RG for the destruction of the goods under the Warehouse
Receipts Act. Any deposit made with a bonded warehouseman is necessarily governed by the
General Bonded Warehouse Act. The kind or nature of the receipts issued for the deposits is
not very material, much less decisive. The issuance of warehouse receipts in the provided by
Sec. 1 of the Warehouse Receipts Act is merely permissive and directory, and not obligatory.
[Note: Under the General Bonded Warehouse Act, the term ―receipt‖ means any receipt issued
by a warehouseman for commodity delivered to him. (Sec. 2)]
The defense that the palay was destroyed by fire and thus loss of the thing exempts the obligor
in a contract of deposit from depositing the goods is not availing here. The fact that GT
exceeded the limit of his authorized deposit militates against his defense of non-liability.
The surety cannot avoid liability from the mere failure of GT to issue the prescribed warehouse
receipt. Such defense is not available in an action on the bond.