WAREHOUSE RECEIPT LAW

I. Nature and Function

1. One of these statements is not correct:

a. A warehouse receipt serves as proof of possession of the warehouseman of the goods described in it and as authorization for the possessor of the warehouse receipt to transfer or receive the goods described in it.b. A non-negotiable receipt is one in which it is stated that the goods received will be delivered to the depositor or to any other specified person.c. A negotiable receipt is 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 the receipt.d. A warehouse receipt is not a document of title.

2. One of these statements is not correct:

a. When a negotiable instrument is altered, it becomes null and void. When a negotiable warehouse receipt is altered, it is still valid but may be enforced only in accordance with its original tenor.b. A negotiable instrument which is originally payable to bearer remains so payable even if it is indorsed specially. A negotiable receipt deliverable to bearer if indorsed specially becomes deliverable to order.c. The holder in due course of a negotiable instrument may be able to obtain a title better than that of the indorser. An indorsee of a negotiable receipt acquires only such title as the person who negotiated had over the goods even if he is a holder in due course.d. Both in a negotiable instrument and in a negotiable receipt the indorser warrants that all prior parties had capacity to contract.

I. Duties of Warehouseman

A. Delivery of Goods

1. One of these is not required to bind the warehouseman to deliver the goods:

a. An offer to satisfy his lien.b. An offer to surrender the receipt, if it is negotiable, with indorsements necessary for its negotiation.c. A readiness and willingness to sign upon delivery of the goods, an acknowledgment that they have been received, if the warehouseman requests it.d. An undertaking to hold the warehouseman harmless from claims of third parties.

2. A warehouseman is not justified in delivering the goods to one of the following:

a. The person lawfully entitled to the possession of the goods or his agent.b. A person entitled to the delivery by the terms of the non-negotiable receipt for goods or has written authority from such person.c. A person in possession of a negotiable receipt for goods deliverable to him or his order or to bearer, which has been indorsed to him or in blank by the person to whom delivery was promised or by his indorsee.d. The pledgee of the goods covered by the receipt.

3. One of these statements is not correct:

a. The general rule is that a warehouseman cannot invoke the right or title of a third person as an excuse for not delivering the goods covered by a receipt.b. By way of exception, the warehouseman may withhold delivery until he has had reasonable opportunity to ascertain the validity of the claim of the third party or to file an action for interpleader.c. If the goods were lawfully sold to satisfy the lien of the warehouseman or were lawfully sold or disposed of because of their perishable or hazardous nature, the warehouseman is not liable for not delivering them.d. If the warehouse receipt was fraudulently altered, the warehouseman will be discharged from liability to deliver the goods.

4. One of these statements is not correct:

a. A warehouseman cannot set up title in himself as an excuse for refusing to deliver the goods unless the title is directly or indirectly from a transfer by the depositor or from enforcement of his lien.b. If a warehouseman delivers goods covered by a warehouse receipt and does not take up and cancel it, he will be liable to anyone who purchases the warehouse receipt in good faith and for value.c. If a warehouseman delivers a part of the goods for which he issued a negotiable receipt and did not take up and cancel the receipt or state plainly upon it what goods were delivered, he will be liable to anyone who purchased the receipt in good faith and for value.d. A warehouseman is not liable to the holder of a receipt if the goods do not correspond with the description in it.

B. Safekeeping of the Goods

1. One of these statements is not correct:

a. A warehouseman is liable for any loss or injury to the goods caused by his failure to exercise such care as a reasonably careful owner would exercise.b. In the absence of a stipulation to the contrary, the warehouseman is not liable for any loss or injury to the goods which could not have been avoided by exercise of such care.c. A warehouseman is not liable for loss due to a fortuitous event.d. The person claiming the goods has the burden of proving the loss was due to the fault of the warehouseman.

II. Warehousemans Lien

A. Claims Included and Properties Covered

1. One of these statements is not correct:

a. A warehouseman has a lien on the goods deposited or their proceeds in his hands for all lawful charges for storage and preservation of the goods, for all lawful claims in relation to the goods, for all reasonable charges and expenses for notice and advertisement for sale, and for sale of the goods.b. If the receipt is negotiable, the warehouseman will have no lien on the goods except charges for storage, unless the receipt expressly enumerates other charges for which a lien is claimed.c. A warehouseman has a lien against all goods belonging to the person liable for the claims with respect to which a lien is asserted.d. A warehouseman cannot have a lien against the goods if the depositor was merely entrusted with its possession, even if the warehouseman acted in good faith and for value.

B. Enforcement of Warehousemans Lien

1. One of these statements is not correct:

a. A warehousemans lien may be satisfied by selling the goods.b. The warehouseman must give the person for whose account he is holding the goods or any other person he knows to claim an interest in the goods notice to pay within ten days.c. If the warehouseman is not paid, an advertisement of the sale must be published once a week for three consecutive weeks in a newspaper published in the place of the sale.d. The sale cannot be made less than 15 days before the date of the first publication.

2. One of these statements is not correct:

a. If there is no newspaper published in the place of the sale, the advertisement must be posted at least 10 days before the sale in six conspicuous places.b. A sale held without complying with the publication and before the prescribed time is void.c. In case of deficiency in the proceeds of the sale, the warehouseman cannot sue for the deficiency.d. If the proceeds of the sale exceed the amount due the warehouseman, the excess shall be delivered to the person entitled to the delivery of the goods.

III. Negotiation and Transfer of Warehouse Receipts

A. Negotiation

1. One of these statements is not correct:

a. A negotiable receipt may be negotiated by delivery if by its terms the goods are deliverable to the bearer or by its terms the goods are deliverable to the order of a specified person and he or a subsequent indorsee indorsed the receipt in blank or to bearer.b. If the goods are deliverable to bearer or the negotiable receipt was indorsed in blank or to bearer, even if the holder indorsed it to himself or a specified person, the receipt can be negotiated further by delivery.c. The warrant of a negotiable receipt by the person to whose order the goods are deliverable may be in blank, to bearer, or to a specified person.d. Subsequent negotiations may be made in the same manner.

2. One of these statements is not correct:

a. A negotiable receipt may be negotiated by the owner.b. If by the terms of a negotiable receipt, the goods are deliverable to the order of the person to whose possession the owner of the receipt entrusted it, such person cannot negotiate the receipt.c. A person to whom a negotiable receipt was negotiated acquires such title to the goods as the person negotiating had ability to convey to a buyer in good faith and for value.d. A person to whom a negotiable receipt was negotiated acquires the direct obligation of the warehouseman to hold the goods for him.

3. One of these statements is not correct:

a. The negotiation of a negotiable receipt is not impaired by the fact that it was a breach of duty of the person negotiating it or that the owner of the receipt was induced by fraud, mistake or duress to entrust the receipt to such person if the person to whom it was negotiated took it in good faith and for value.b. If a person who sold goods covered by a negotiable receipt remained in possession of it, the negotiation of the receipt to a person who took it in good faith and for value has the same effect as if the first buyer had authorized the negotiation.c. A sellers lien or right of stoppage in transitu will defeat the rights of a buyer in good faith and for value to whom the receipt was negotiated.d. If a warehouseman who sold sugar covered by a negotiable receipt was not paid by the buyer, the negotiation of the receipt by the buyer is valid.

B. Transfer of Rights

1. One of these statements is not correct:

a. A non-negotiable receipt may not be transferred by delivery.b. The negotiation of a non-negotiable receipt does not give the transferee any additional right.c. A person to whom a non-negotiable receipt was transferred acquires as against the transferor title to the goods subject to their agreement.d. A person to whom a non-negotiable receipt was transferred acquires the right to notify the warehouseman of the transfer to him and to acquire the direct obligation of the warehouseman to hold the goods for him.

2. One of these statements is not correct:

a. Before the notification to the warehouseman, the title of the transferee to the goods maybe defeated by a levy upon them by a creditor of the goods.b. Before the notification to the warehouseman, the title of the transferee to the goods may be defeated by a notification to the warehouseman of a subsequent sale of the goods.c. If a negotiable receipt is transferred for value by delivery and indorsement is necessary for its negotiation, the transferee can compel the transferor to indorse it.d. The effect of the negotiation will retroact to the date of the transfer of the receipt.

TITLE 1V: THE WAREHOUSE RECEIPTS LAWINTRODUCTION

Scope of the law : All warehouses, whether public or private, bonded or not. Civil Code applicable where the receipts are not issued by a warehouse man Purposes of the law:1) Regulate the status, rights, and liabilities of the parties in a warehousing contract2) Protect those who, in good faith and for value, acquire negotiable warehouse receipts by negotiation3) Render the title to, and the right of possession of, property stored in warehouses4) Facilitate the use of warehouse receipts as documents of title5) Place a much greater responsibility on the warehouseman

CHAPTER 1: THE ISSUE OF WAREHOUSE RECEIPTS

Section 1

Warehouseman person lawfully engaged in the business of storing goods for profit Only one authorized to issue warehouse receipts A duly authorized officer/agent of a warehouseman may validly issue a warehouse receipt. Warehouse the building or place where goods are deposited and stored for profit

Section 2

Warehouse receipt a written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued Simple written contract between the owner of the goods and the warehouseman to pay the compensation for that service A bilateral contract (symbolical representation of the property itself) Not a negotiable instrument Not require or specify any particular form Essential terms of the receipt:1) Location of warehouse for the benefit of the holders of warehouse receipts2) Date of issue of receipt not essential; indicates prima facie the date when the contract of deposit is perfected and when the storage charges shall begin to run against the depositor3) Consecutive number of receipt to identify each receipt with the goods for which it was issued No express requirement as to when the consecutive numbering shall begin4) Person to whom goods are deliverable prima facie entitled lawfully to the possession of the goods deposited Does not determine the negotiability of the receipt5) Rate of storage charges the consideration for the contract from the view of the warehouseman Presumption that depositor shall pay the customary/reasonable compensation for the services of the warehouseman (in the absence of express agreement)6) Description of goods or packages for identification so that the identical property delivered to the warehouseman may be delivered back by him upon the return of the warehouse receipt Mere fact that the goods deposited are incorrectly described does not make ineffective the receipt when the identity of the goods is fully established by evidence7) Signature of the warehouseman best evidence of the fact that the warehouseman has received the goods described in the receipt and has bound himself to assume all obligations in connection with it8) Warehousemans ownership of or interest in goods the document should carry the notice of the fact on its face Omission to state ownership of the goods in the receipt issued render the warehouseman criminally liable9) Statement of advances made and liabilities incurred to preserve the lien of the warehouseman over the goods stored or the proceeds of it Effect of omission of any of essential terms:1) Validity of the receipt not affected2) Warehouseman liable for damages to those injured3) Negotiability of receipt not affected4) Contract converted to ordinary deposit Form provided by the law is merely permissive and directory

Section 3

Warehouseman given the power to insert additional terms or conditions in receipts Limitations:a) Contrary to provisions of Act No. 2137b) In any wise impair his obligation to exercise that degree of carec) Not contrary to law, morals, good customs, public order, or public policy Terms that cannot be included in a warehouse receipt:1) Exemption from liability from misdelivery contrary to Section 10 or Sections 33/342) Exemption from liability for negligence

Sections 4-5

Negotiable the law regards the property which they describe as following them and gives to their regular transfer by indorsement the effect of manual delivery of the things specified in them A warehouse receipt is no sense a negotiable instrument!

Sections 6-7

Section 6 refer to negotiable receipts Section 7 refer to non-negotiable receipts Effect of failure to mark negotiable or non-negotiable:1) Negotiable not render the receipt non-negotiable Usually written or printed on the face of a negotiable warehouse receipt2) Non-negotiable render it negotiable Provided : Holder of such unmarked receipt purchased it for value supposing it to be negotiable Law imposes upon the warehouseman the duty to mark the receipts non-negotiable or not negotiable Liberal construction of the law in favor of the bona fide holders of such receipts No application to actions against any party to the transactions other than a warehouseman

CHAPTER 2: OBLIGATIONS AND RIGHTS OF THE WAREHOUSEMEN UPON THEIR RECEIPTS

Section 8

Warehouseman is essentially a depositary with respect to the goods received and stored by him in the warehouse. Principal obligations of warehouseman:1) Take care of the goods entrusted to his safekeeping2) Deliver the goods to the holder of the receipt or the depositor Demand should be made on the warehouseman in order that the duty to deliver the goods will arise If demand is useless, demand is dispensed with. Offer to satisfy the warehousemans lien is required before the warehouseman is bound to deliver or return the goods If offer is vain/useless, formal tender is not required. Warehouseman criminally liable if he delivers goods without obtaining possession of such receipts Right to require production of the receipt as a condition precedent to delivery is subject to waiver Negotiable receipt = demand for the delivery of the goods must be accompanied by an offer to surrender the receipt properly indorsed Not negotiable receipt = any person lawfully entitled to the possession of the goods may be entitled to delivery without the surrender of the receipt Existence of a lawful excuse for such refusal to deliver is an affirmative defense which the warehouseman must prove

Section 9

Person to whom goods must be delivered:1) Person lawfully entitled to possession of goods or his agent Competent court has ordered the delivery of the goods Attaching creditor Purchaser in case of sale of the goods by the warehouseman to enforce his lien Goods are perishable or hazardous2) Person entitled to delivery under a non-negotiable receipt or with written authority3) Person in possession of a negotiable receipt If delivered to one who acquired custody of the goods through the use of falsified delivery permit, warehouseman cannot sue for the value of the goods unless he has been sued by the depositor or consignee.

Section 10

Warehousemans liability for misdelivery:1) Liability similar to a bank paying for a forged check duty rests upon the warehouseman of devising appropriate means by which deception can be avoided2) Liability for conversion Liable if prior to delivery, he has been requested not to make such delivery or he had received notice of the adverse claim or title of a third person 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 owners rights

Sections 11-12

Not applicable to non-negotiable receipts Warehouseman may make delivery without requiring their surrender and cancellation

SECTION 11SECTION 12

Receipt must be cancelledReceipt must be either cancelled or marked

Except as provided in Section 36Except as provided in Section 36

Warehouseman delivers goods for which he had issued a negotiable receipt and fails to take up and cancel the receiptWarehouseman delivers PART of the goods for which he had issued a negotiable receipt and fails EITHER to take up and cancel such receipt, or to place plainly upon it a statement of what goods or packages have been delivered

Liable to anyone who purchases for value in good faith such receipt for failure to deliver the goods to himLiable to anyone who purchases for value in good faith such receipt for failure to deliver ALL the goods specified in the receipt

Warehouseman not liable to purchaser for value in good faith of such receipt from a thief

Section 13

Effects of alteration on liability of warehouseman:1) Alteration immaterial liable on the altered receipt according to its original tenor Tenor of the receipt not changed Whether fraudulent or not Whether authorized or not2) Alteration material liable according to the terms of the receipt as altered Tenor of the receipt is changed Authorized3) Material alteration innocently made liable on the altered receipt according to its original tenor Unauthorized4) Material alteration fraudulently made liable according to the original tenor of the receipt to a purchaser for value without notice Liability is limited only to delivery as he is excused from any liability Even a fraudulent alteration cannot divest the title of the owner of stored goods Warehouseman liable to return them to the owner A bona fide holder acquires no right to the goods under a negotiable instrument:1) lost2) stolen3) indorsement of depositor has been forged

Section 14

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 Competent court may order the delivery of goods only:1) Upon proof of loss or destruction of the receipt2) Upon the giving of a bond with sufficient sureties to be approved by the court Warehouseman is still liable to a holder of the receipt for value without notice

Section 15

When more than one negotiable receipt is issued for the same goods, the word duplicate must be plainly placed by the warehouseman upon the face of every receipt, except the first one issued. Duplicate is an accurate copy of the original receipt Original receipt is uncancelled at the date of the issue of the duplicate Duplicate imposes no other liability upon the warehouseman Except for breach of warranty Warehouseman may not be compelled to deliver the goods by virtue of the duplicate only

Section 16

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:a) Directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent theretob) From the warehousemans lien Based on the doctrine of estoppel

Sections 17-18

If there are several claimants to the goods:1) Determine within reasonable time the validity of the conflicting claims2) Deliver to entitled person the possession of the goods3) Not excused from liability in case he makes a mistake Warehouseman must bring a complaint in interpleader and require the different claimants to litigate among themselves Relieved from liability in delivering the goods to the person whom the court finds to have a better right Warehouseman liable for refusal to deliver to the rightful claimant Where he does not compel interpleader in a case requiring it Warehouseman held guilty of conversion as of the date of original demand for the goods Warehouseman neither interpleads nor investigates After a lapse of reasonable time Reasonable time determined in accordance with the circumstances of the particular case Section 18 not apply to cases where the warehouseman himself makes claim to the goods

Section 19

Warehouseman cannot set up title in himself as an excuse for his failure or refusal to deliver the goods Adverse title of third person not a defense for refusal to deliver Exceptions:1) Section 9 person to whom goods must be delivered2) Section 17 interpleader of adverse claimants3) Section 18 warehouseman has reasonable time to determine validity of claims4) Section 36 effect of sale

Section 20

GENERAL RULE: 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. Warehouseman is estopped to deny that he has received the goods described in it. As against a bona fide purchaser of a warehouseman receipt Whether the receipt is negotiable or not Warehouseman is not liable even if the goods are not of the kind as indicated in the marks or labels

Section 21

Required to exercise ordinary or reasonable care in the custody of the goods Diligence of a good father of a family (Article 1163 of CC) Warehouseman not liable for any loss or injury to the goods which could not have been avoided by the exercise of such care In the absence of any agreement to the contrary What constitutes ordinary or reasonable care depends upon the circumstances Warehouseman cannot stipulate with the depositor that he would not be responsible for any loss Even if caused by his negligence Stipulation is VOID

Sections 22-24

GENERAL RULE: Warehouseman may not mingle goods belonging to depositors EXCEPTION: Warehouseman may mingle fungible goods with the goods of the same kind and grade Provided, he is authorized by agreement or custom Different owner become co-owners of the whole mass Intended for the benefit of the holders of the receipt

Section 25

Direct obligation to hold possession of the goods:1) For the original owner 2) For the person to whom the negotiable receipt of title has been duly negotiated Goods cannot be attached or levied upon under an execution unless:1) Document be first surrendered2) Negotiation is enjoined3) Document is impounded by the court Warehouseman cannot be compelled to deliver up the possession of the goods until the receipt is surrendered to him or impounded by the court Section 25 do not apply:1) Depositor is not the owner of the goods (thief)2) Depositor has no right to convey title to the goods binding upon the owner3) Actions for recovery or manual delivery of goods by the real owner4) Attachment is made before the issuance of the negotiable receipt of title Rights acquired by attaching creditors cannot be defeated by the issuance of a negotiable receipt of title thereafter

Section 26

What is attached by the creditor is the negotiable receipt in the debtors possession Expressly gives the court full power to aid by injunction and otherwise a creditor seeking to get a negotiable receipt covering such goods

Section 27

Warehousemans lien over the goods deposited with him is his security for the payment of the charges, money advanced, and other expenses. Lien exists for the benefit of the warehouseman Section 30 prescribes the extent of lien when the receipt is negotiable

Section 28

Goods subject to lien:1) Goods belonging to depositor or his principal2) Goods stored in fraud of true owners rights Warehouseman may enforce his lien:1) Against the goods of the depositor who is liable to the warehouseman as debtor whenever such goods are deposited2) Against goods of other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge To give the warehouseman a lien for charges against the goods of persons who are primarily liable for the charges incurred Create the relation of debtor and creditor

Section 29

Loss and waiver of lien upon goods:1) By surrendering possession of goods By voluntarily surrendering the possession of it without requiring payment of lien Presumption that lien has been waived or abandoned where warehouseman permits a depositor to remove the goods Involuntary parting with possession of goods ordinarily does not result in loss of his lien by a warehouseman. Claim a lien on other goods of the same depositor for unpaid charges on the goods surrendered if the goods were delivered to him under different bailments2) By wrongfully refusing to deliver goods Where the holder of the receipt offers to comply with the requirements In case the warehouse receipt has been pledged as security = depositor-pledgor as owner continues to be liable The fact that the receipt was delivered and endorsed in blank to the pledgee does not alter the situation. Warehousemans lien concomitantly lost as to what the law deems a valid demand Valid demand by the lawful holder of a warehouse receipt for the delivery of goods Absence of a lawful excuse provided by the law Valid reasons for refusing to deliver goods:1) Holder of the receipt does not satisfy the conditions prescribed in Section 82) Warehouseman has legal title in himself on the goods3) Warehouseman has legally set up the title or right of third person as lawful defense for nondelivery of the goods3.1) Requested by or on behalf of the person lawfully entitled to a right of property of or possession in the goods not to make such delivery = require all known claimants to interplead3.2) Had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods = excused from liability3.3) Goods have already been lawfully sold to third person to satisfy the warehousemans lien, or have been lawfully sold or disposed of because of their perishable or hazardous nature4) Warehouseman having a lien valid against the person demanding the goods refuses to deliver the goods to him unless the lien is satisfied5) Failure was not due to any fault on the part of the warehouseman Good were stolen or destroyed by fire, flood, etc. without any negligence on his part Goods taken by the mistake of a third person without the knowledge or implied assent of the warehouseman Other justifiable ground for non-delivery

Section 30

Lien exists only for the other charges expressly enumerated in the receipt Written within the terms of Section 26 Although amount not stated Exception: Charges for storage and preservation of goods Warehouseman shares pro rata with the other creditors of the depositor the balance of the proceeds of the sale for the satisfaction of said claims Claims not specified in the receipt After deducting the charges for storage

Sections 31-36

Remedies for enforcement of warehousemans lien:1) Refusing to deliver the goods until the lien is satisfied2) Causing the extrajudicial sale of the property and applying the proceeds to the value of the lien3) Filing a civil action for collection of the unpaid charges Or by way of counterclaim in an action to recover the property from him Or other remedies allowed by law for the enforcement of a lien against personal property Or to a creditor against his debtor Warehouseman entitled to all the remedies allowed by the law to a creditor against his debtor for the collection from the depositor of all the charges which the depositor has bound himself to pay. Effect of sale:1) Warehouseman not liable for nondelivery Even if receipt given for the goods when they were deposited be negotiated2) Sale without publication required and before time specified by the law = VOID Purchases of the goods acquires no title Acts for which warehouseman is liable:1) Failure to stamp duplicate on copies of a negotiable receipt2) Failure to place non-negotiable or not negotiable on a non-negotiable receipt3) Misdelivery of goods4) Failure to effect cancellation of a negotiable receipt upon delivery of the goods5) Issuing receipt for non-existing goods or misdescribed goods6) Failure to take care of the goods7) Failure to give notice for sale of goods to satisfy his lien for perishable or hazardous goods

WAREHOUSE RECEIPTS LAW1. 1. Warehouse a building or place where goods are deposited and stored for profit.1. 2. Warehouseman person lawfully engaged in the business of storing goods for profit. Only a warehouseman may issue warehouse receipts.1. 3. Warehouse Receipt written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued.1. 4. Non-negotiable Receipt receipt deliverable to a specified person.1. 5. Negotiable Receipt receipt deliverable to order or to bearer.1. 6. Essential Terms which MUST be embodied in a Warehouse Receipt:1. a. location of the warehouse2. b. date of the issue of the receipt3. c. consecutive number of the receipt4. d. statement whether the goods received will be delivered to bearer, or a specified person, or his order5. e. rate of storage charges6. f. description of the goods or packages containing them for identification purposes7. g. signature of the warehouseman8. h. statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien1. 7. Effect of omission of any of the essential terms:1. a. The validity of the warehouse receipt is not affected.2. b. The warehouseman shall be held liable for damages to those injured by his omission.3. c. The negotiability of the warehouse receipt is not affected.4. d. The issuance of a warehouse receipt in the form provided by the law is merely permissive and directory and not mandatory in the sense that if the requirements are not observed, then the goods delivered for storage become ordinary deposits.1. 8. 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 him1. 9. Marks to be made on a warehouse receipt:1. 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.2. 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.1. 10. Warranties of a warehouseman as to duplicate receipts:1. a. The duplicate is an accurate copy of the original receipt.2. b. Such original receipt is uncancelled at the date of the issue of the duplicate.1. 11. Effects of alteration on the liability of the warehouseman:1. 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 altered receipt according to its original tenor.2. b. If the alteration is MATERIAL but AUTHORIZED, the warehouseman is liable according to the terms of the altered receipt.3. c. If the alteration is MATERIAL, UNAUTHORIZED but INNOCENTLY MADE, the warehouseman is liable on the altered receipt according to its original tenor.4. 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 the terms of the original receipt1. 12. Effects of misdescription of goods:1. 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.2. 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.3. 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.1. 13. Principal Obligations of a Warehouseman:1. 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.1. 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 the goods have been delivered if such is requested by the warehouseman.1. 14. Persons to whom goods must be delivered:1. 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 or expense 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.1. b. an attaching creditor Goods, 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 courtc. to the purchaser in case of sale of the goods by the warehouseman to enforce his lien1. d. to the purchaser where perishable or hazardous goods are sold at private or public sale1. B. If goods are covered by a non-negotiable receipt:1. a. a person entitled to the delivery by the terms of the receipt, or2. b. one who has written authority from letter a1. C. If goods are covered by a negotiable receipt, a person in possession of the receipt, the terms of which the goods are deliverable:1. a. to him or order2. b. to bearer3. c. indorsed to him4. d. indorsed in blank by the person whom delivery was promised1. 15. When is there Misdelivery?When the warehouseman delivers the goods to a person who is not in fact lawfully entitled to the possession of the goods because:1. a. the person does not fall under letter B or C above; or2. b. the person falls under letter B or C but prior to delivery, the warehouseman had either:(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 goods1. 16. Effects of Misdelivery:The warehouseman shall be liable for conversion to all having a right to property or possession of the goods.1. 17. 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?1. 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.2. 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.1. 18. Lawful excuses for refusal to deliver goods:1. 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 lien1. b. If someone other than the depositor or person claiming under the depositor has a claim 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 legal proceedings to compel all claimants to interplead.1. 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 to such loss.1. 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.1. 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.1. 19. 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.1. 20. Rules as regards Co-mingling of Deposited Goods: General Rule: A warehouseman may not co-mingle goods belonging to different depositors 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.1. 21. Effect of Co-mingling of Goods:1. a. The different owners become co-owners of the whole mass.2. b. 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.1. 22. 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.1. 23. Warehousemans Lien Extent of Warehousemans Lien:A warehouseman shall have a lien on goods deposited or on the proceeds thereof in his hands for:1. a. all lawful charges for storage and preservation of the goods2. b. all lawful claims for money advances, interest, insurance, transportation, labor, weighing, cooperating and other charges and expenses in relation to such goods3. c. all reasonable charges and expenses for notice and advertisements of sale and for sale of the goods where default has been made in satisfying the warehouse lien Goods Subject to lien:1. a. goods belonging to the depositor who is liable to the warehouseman as debtor whenever such goods are deposited and2. 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?1. a. by refusing to deliver the goods until the lien is satisfied2. b. by causing the extrajudicial sale of the property and applying the proceeds to the value of the lien3. c. by filing a civil action for unpaid charges or by way of counterclaim in an action to recover the property from him How is a lien lost?1. a. when the warehouseman voluntarily surrenders possession of the goods without requiring payment of his lien; or2. b. when the warehouseman wrongfully refuses to deliver the goods when a demand is made with which he is bound to comply1. 24. Negotiation and Transfer of Receipts How do we negotiate a receipt deliverable to order?1. a. by indorsing it in blank thereby making it deliverable to bearer or2. b. by special indorsement which 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?1. a. the owner of the receipt, or2. b. 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:1. a. the title of the person negotiating the receipt over the goods covered by the receipt2. b. the title of the person (depositor or owner) to whose order by the terms of the receipt the goods were to be delivered3. 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:1. a. the title to the goods as against the transferor2. b. the right to notify the warehouseman of the transfer thereof and3. c. the right thereafter to acquire the obligation of the warehouseman to hold the goods for him Distinction between a non negotiable receipt from a negotiable receipt with regard to attachment or execution upon goods: Non-negotiable ReceiptNegotiable Receipt

Prior to notification of the warehouseman by the transferor or transferee, the warehouseman is not bound to the transferee whose right may be defeated by a levy of an attachment or execution upon the goods by the creditor of the transferor or by a notification to such warehouseman of the subsequent sale of the goods.The goods cannot be attached or levied under an execution unless the receipt be first surrendered to the warehouseman or its negotiation enjoined.

Rights of a person to whom a negotiable receipt has been transferred, not indorsed:1. a. the right to the goods as against the transferor2. 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:1. a. the receipt is genuine2. b. he has a legal right to negotiate or transfer it3. c. he has knowledge that would impair the validity or worth of the receipt and4. d. 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 accepts payment 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 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 owners agent within the actual or apparent scope of his authority. In sum, negotiation is valid despite having been made in breach of trust. Distinctions between a negotiable instrument and a negotiable warehouse receipt:Negotiable InstrumentNegotiable Warehouse Receipt

When a negotiable instrument is altered deliberately, it becomes null and void.When a warehouse receipt is altered, it is still valid 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, whether specially 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 be negotiated further by indorsement and delivery.

A holder in due course may be able to obtain a title better than that which the party who negotiated the instrument to him had.An indorsee even if a holder in due course obtains only such title as the person negotiating has over the goods.

The indorsement of a negotiable instrument has a double effect. It is at the same time a conveyance of the instrument and a contract the indorser has with the indorsee that on certain conditions, the indorser will pay the instrument if the party primarily liable fails to do so.The indorsement of a warehouse receipt amounts 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.

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. LAUREANO ATENDIDO, defendant-appellant.

Nature: An appeal from a decision of CFI Nueva Ecija ordering Atendido to pay PNB the sum of P3,000, with interest thereon at the rate of 6% per annum from June 26, 1940, and the costs of action.

Facts: June 26, 1940 - Atendido obtained from PNB a loan of P3,000 payable in 120 days with interest at 6% per annum from the date of maturity. To guarantee the payment of the obligation, Atendido pledged to PNB 2,000 cavanes of palay deposited in a warehouse in Bulacan. Atendido endorsed the corresponding warehouse receipt in favor of PNB.

Before the maturity of the loan, the 2,000 cavanes of palay disappeared for unknown reasons in the warehouse. When the loan matured Atendido failed to pay. The present action was instituted.

Atendido claims that the warehouse receipt covering the palay which was given as security having been endorsed in blank in favor of PNB, and the palay having been lost or disappeared, he thereby became relieved of liability. He also claims that he is entitled to an indemnity which represents the difference between the value of the palay lost and the amount of his obligation. CFI ruled in favor of PNB. Atendido appealed

Issue: Whether the surrender of the warehouse receipt covering the 2,000 cavanes of palay given as a security, endorsed in blank, to PNB, has the effect of transferring their title or ownership to PNB.

SC Held: CFI decision affirmed.

The surrendering of the warehouse receipt was not that of a final transfer but merely as a guarantee to the fulfillment of the original obligation of P3,000.00.

The 2,000 cavanes of palay covered by the warehouse receipt were given to PNB only as a guarantee to secure the fulfillment by Atendido of his obligation. This appears in the contract between them wherein it is expressly stated that said 2,000 cavanes of palay were given as a collateral security.

The delivery of said palay being merely by way of security, it follows that by the very nature of the transaction its ownership remains with Atendido (the pledgor) subject only to foreclosure in case of non-fulfillment of the obligation.

If the obligation is not paid upon maturity the most that PNB (the pledgee) can do is to sell the property and apply the proceeds to the payment of the obligation and to return the balance, if any, to the pledgor (Article 1872, Old Civil Code).

According to the SC, this is the essence of this contract, for, according to law, a pledgee cannot become the owner of, nor appropriate to himself, the thing given in pledge (Article 1859, Old Civil Code).

If by the contract of pledge the pledgor continues to be the owner of the thing pledged during the pendency of the obligation, in case of loss of the property, the loss should be borne by the pledgor (owner).

The fact that the warehouse receipt covering the palay was delivered, endorsed in blank, to PNB does not alter the situation, the purpose of such endorsement being merely to transfer the juridical possession of the property to the pledgee and to forestall any possible disposition thereof on the part of the pledgor.

RCBC vs ALFA

Facts:Alfa on separate instances was granted by RCBC 4 letters of credit to facilitate the purchase of raw materials for their garments business. Alfa executed 4 trust receipts and made comprehensive surety agreements wherein the signatory officers of Alfa agreed in joint/several capacity to pay RCBC in case the company defaulted. RCBC filed a case versus Alfa for a sum of money. The CA awarded only P3M (minimum amount) to RCBC instead of P18M as stipulated in their contract.

Issue:W/N the CA can deviate from the provisions of the contract between the parties?

Ruling: No. Contracting parties may establish agreements terms, deemed advisable provided they are not contrary to law/public policy. A contract is a law between the parties. In this case its valid because it was not excessive under the Usury Law.

*Atty. Aguinaldo assigned this case because he just wanted to show us how to compute for the interest in long term deals. He even made a diagram on the board. Di ko na ilalagay un sa digest because I assume that my industrious & responsible classmates took down notes... = p

RODZSSEN SUPPLY V. FAR EAST

Facts: On January 15, 1979, defendant Rodzssen Supply, Inc. opened with plaintiff Far East Bank and Trust Co. a 30-day domestic letter of credit, in the amount of P190,000.00 in favor of Ekman and Company, Inc. (Ekman) for the purchase from the latter of five units of hydraulic loaders, to expire on February 15, 1979. The three loaders were delivered to defendant for which plaintiff paid Ekman and which defendant paid plaintiff before expiry date of LC. The remaining two loaders were delivered to defendant but the latter refused to pay. Ekman pressed payment to plaintiff. Plaintiff paid Ekman for the two loaders and later demanded from defendant such amount as it paid Ekman. Defendant refused payment contending that there was a breach of contract by plaintiff who in bad faith paid Ekman, knowing that the two units of hydraulic loaders had been delivered to defendant after the expiry date of subject LC.

Issue: WON petitioner is liable to respondent.

Ruling: The SC agrees with the CA that petitioner should pay respondent bank the amount the latter expended for the equipment belatedly delivered by Ekman and voluntarily received and kept by petitioner. Equitable considerations behoove us to allow recovery by respondent. True, it erred in paying Ekman, but petitioner itself was not without fault in the transaction. It must be noted that the latter had voluntarily received and kept the loaders since October 1979. When both parties to a transaction are mutually negligent in the performance of their obligations, the fault of one cancels the negligence of the other and, as in this case, their rights and obligations may be determined equitably under the law proscribing unjust enrichment.

PNB vs. Se, et al.G.R. No. 119231 | 18 April 1996

ISSUE:WON the warehouseman can enforce his warehouseman's lien before delivering the sugar stocks as ordered by the Court of Appeals or need he file a separate action first to enforce payment of storage fees

HELDYES. It is not disputed, therefore, that, under the subject Warehouse Receipts provision, storage fees are chargeable. Petitioner anchors its claim against private respondents on the five (5) Warehouse Receipts issued by the latter to third-party defendants Rosa Ng Sy of RNS Merchandising and Teresita Ng of St. Therese Merchandising, which found their way to petitioner after they were negotiated to them by Luis T. Ramos and Cresencia K. Zoleta for a loan of P39.1 Million. Accordingly, petitioner PNB is legally bound to stand by the express terms and conditions on the face of the Warehouse Receipts as to the payment of storage fees. Even in the absence of such a provision, law and equity dictate the payment of the warehouseman's lien pursuant to Sections 27 and 31 of the Warehouse Receipts Law (R.A. 2137).After being declared not the owner, but the warehouseman, the decision having been affirmed by us on December 1, 1993, private respondents cannot legally be deprived of their right to enforce their claim for warehouseman's lien, for reasonable storage fees and preservation expenses. Pursuant to Section 31, the goods under storage may not be delivered until said lien is satisfied. Considering that petitioner does not deny the existence, validity and genuineness of the Warehouse Receipts on which it anchors its claim for payment against private respondents, it cannot disclaim liability for the payment of the storage fees stipulated therein.

Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents as warehouseman while claiming to be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. The unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the provisions of the Warehouse Receipts Law (R.A. 2137) carried with it the admission of the existence and validity of the terms, conditions and stipulations written on the face of the Warehouse Receipts, including the unqualified recognition of the payment of warehouseman's lien for storage fees and preservation expenses. Petitioner may not now retrieve the sugar stocks without paying the lien due private respondents as warehouseman.

While the PNB is entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only upon payment of the storage fees. Imperative is the right of the warehouseman to demand payment of his lien at this juncture, because, in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods by surrendering possession thereof. In other words, the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien, because a warehouseman's lien is possessory in nature.