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SCL II.

Warehouse Receipts | 1
Warehouse Receipts (WR)
a written acknowledgement by a warehouseman that he has received and held certain goods therein described in store for the person to whom it is issued. Nature: o o o o o o o o o o A simple written contract between the owner of the goods and the warehouseman A document of title A bilateral contract A symbolical representation of the property itself Not a negotiable instrument under the NIL To regulate the status, rights and liabilities of the parties in a warehousing contract To protect those who, in good faith and for value, acquire negotiable warehouse receipts by negotiation To render the title to, and right of possession of, property stored in warehouses more easily convertible To facilitate the use of warehouse receipts as documents of title In order to accomplish these, to place a much greater responsibility on the warehouseman 3. Terms that cannot be included: 1. 2. those contrary to the provision of the WR Law those which may impair the obligation of the warehouseman to exercise that degree of care in the safekeeping of the goods entrusted to him those contrary to LMGPP (Art. 1306, CC) Effect of omission of any of the essential terms: 1. 2. 3. 4. warehouseman shall be liable for damages to any person injured thereby validity of receipt is not affected negotiability of receipt not affected contract is converted to ordinary deposit

Purpose:

To whom delivered:
1. persons lawfully entitled to possession of goods or his agent a. persons to whom a competent court has ordered the delivery of the goods i. 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. ii. where more than one person claims title or possession of the goods the warehouseman may require all claimants to interplead. The court will then order delivery to the person having a better right. b. Attaching creditor Note: 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. ii. iii. c. the negotiable receipt is first surrendered to the warehouseman, or its negotiation is enjoined, or the receipt is impounded by the court

Form and contents of WR: no particular form required but must contain the
following (Sec. 2) 1. 2. 3. 4. 5. 6. 7. 8. 9. location of the warehouse date of issue of the receipt consecutive number of the receipt statement whether the goods received will be delivered to bearer, or a specified person, or his order rate of storage charges description of the goods or packages containing them for identification purposes signature of the warehouseman if receipt is issued for goods of which the warehouseman is owner (solely or jointly or in common with others), the fact of such ownership statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien

purchaser, in case of sale of the goods by the warehouseman to enforce his lien, or

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2. 3. where perishable or hazardous goods are sold at public/private auction 2. creditor of the transferor by a notification to the warehouseman by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor Negotiation defeats the lien of the 1. 2. negotiable goods received are deliverable to bearer or to order of a specified person (Sec. 5) non-negotiable goods received are deliverable to depositor or any specified person (Sec. 4) Negotiable WR vs. Non-negotiable WR Can the goods represented by the WR be subject to attachment or Negotiable WRs Nature goods received are deliverable to bearer or to order of a specified person (Sec. 5) Manner of acquisition Rights of person whom it is negotiated (holder) or transferee/ass ignee: Negotiation see discussion below Other matter 1. title to the goods of the person negotiating the receipt 2. title of the person to whose order the goods were to be delivered 3. direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him Note: prior to notification of the warehouseman by the transferor or transferee , Nos. 2 and 3 may be defeated by: 1. by a levy of an attachment or execution upon the goods by the Effect of alteration of the 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. Negotiable Instrument Negotiable WR 3. 2. 1. title of the goods, as against the transferor, subject to the terms of the agreement with the transferor right to notify the warehouseman of the transfer acquire the direct obligation of the warehouseman to hold the goods for him (Sec. 42) Negotiable Instrument vs. Negotiable WR that should be plainly placed upon its face GR: If more than one is issued, the word DUPLICATE except for the first one issued The word NON-NEGOTIABLE or NOT NEGOTIABLE otherwise, a holder believing it to be negotiable may treat it as such (Sec. 7) Transfer or assignment (by delivery) Non-negotiable WRs goods received are deliverable to depositor or any specified person (Sec. 4) levy by execution? 2. 3. GR: NO E: unless in proper circumstances 1. the receipt be first surrendered to the warehouseman; or its negotiation enjoined; or, receipt is impounded by the court (Sec. 25) Note: 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 YES seller of the goods (Sec. 49)

persons entitled to delivery under a non-negotiable receipt or with written authority persons in possession of a negotiable receipt

Kinds of WRs:

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instrument/re ceipt Effect of negotiation if instrument/re ceipt is originally payable to bearer c. Right of a holder in due course 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. Effect of indorsement 1. 2. 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 merely amounts 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. 5. 6. 7. 8. 9. 4. to not commingle the goods deposited E: goods that are fungible and of the same kind and grade (giving rise to co-ownership over the commingled mass) To insure the goods in proper circumstances To mark a non-negotiable WR as such To mark as such the duplicates of a negotiable WR To give proper notice in case of sale of the goods as provided in the law To take up and cancel the WR when the goods are delivered An indorsee even if a holder in due course obtains only such title as the person negotiating has over the goods. 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. 3. Note: he may limit his liability to an agreed value of the property received in case of loss but cannot stipulate that he will not be liable for loss due to his negligence to deliver the goods to the person lawfully entitled GR: upon demand made by the holder of the receipt or the depositor, if such demand is accompanied by: (Sec. 8) a. b. offer to satisfy warehousemans lien offer to surrender the receipt (if negotiable) with such endorsement as would be necessary for the negotiation of the receipt readiness and willingness to sign an acknowledgement when the goods are delivered, if such signature is requested by warehouseman E: demand may be dispensed with if warehouseman has rendered it beyond his power to deliver the goods (Art. 1169[3], NCC)

Lawful excuses in case of his refusal to deliver: (CRIS-BAG-FULL)

Duties of a Warehouseman
Warehouseman person lawfully engaged in the business of storing goods for profit Principal obligations:

1. 2.

Holder of WR does not satisfy the conditions under Sec. 8 Warehouseman has legal title in himself on the goods, such title being derived directly or indirectly from the transfer made by depositor at the time or subsequent to the deposit for storage, or from the warehousemans lien (Sec. 16)

3. 1. 2. to issue a WR in the required form for goods received GR: to take care of the goods deposited ordinary and reasonable diligence or diligence of a good father of a family E: hes not liable for any loss or injury which could not have been avoided even if ordinary care is exercised by him 5. 4.

If warehouseman has been requested by person lawfully entitled to a right of property or possession in the goods not to make delivery to any person (Sec. 10) If he had information that the delivery to be made was to one not lawfully entitled to the possession of the goods (Sec. 10) Where the goods have been lawfully sold to 3rd persons to satisfy the warehousemans lien or because of their disposal due to their perishable or hazardous nature (Sec. 36)

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6. 7. 8. 9. In case of adverse claimants (Sec. 17 and 18) In the valid exercise of the warehousemans lien (Sec. 31) Delivery to a claimant with a better right ( ) Q: What happens if there is proper delivery or partial delivery but the warehouseman fails to cancel the receipt or record on the receipt of such partial delivery? A: 1. 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. 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. Conversion an 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 right When is a warehouseman liable for conversion? 1. 2. When delivery is otherwise than as authorized by Sec. 9 (b and c) (Sec. 10) Even if delivered to persons authorized, he is still liable if prior to delivery: He has been requested not to make the delivery He has received notice of adverse claim Attachment or levy of the goods by a creditor where the document is surrendered or its negotiation is enjoined or the document is impounded (Sec. 25) 10. Where the document of title is attached by the creditor (Sec. 26) 11. Failure was not due to any fault of the warehouseman fortuitous event (Sec. 21) the warehouseman was unable to sell them (Sec. 34) 12. Where the goods have been disposed of because of their perishable or hazardous nature and The warehouseman shall be liable for conversion to all having a right to property or possession of the goods.

Altered Receipts
Kind of Alteration Immaterial (tenor of WR is not changed) WON fraudulent/authorized Material and authorized Material, unauthorized but Liable according to its terms as ALTERED Liable according to its ORIGINAL tenor Effect (liability of warehouseman) Liable on the altered receipt according to its ORIGINAL tenor

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: o o the person does not fall under Nos. 2 or 3 (to whom delivered); or the person falls under Nos. 2 or 3 but prior to delivery, the warehouseman had either: been requested by the person lawfully entitled to the delivery not to make such delivery, or had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods Effects of Misdelivery:

innocently made Material, fraudulent

To the purchaser of the receipt for value and without notice of the alteration: tenor of ALTERED receipt To the alterer: ORIGINAL tenor (delivery only) To subsequent purchasers with notice of alteration: ORIGINAL TENOR (delivery only)

Q: Why is the warehouseman still liable to the owner who fraudulently altered the WR? A: A fraudulent alteration cannot divest the tile of the owner of the stored goods but liability of warehouseman is only for the return of the goods to the owner (delivery)

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Liabilities
CIVIL Warehouseman or his agent For damages suffered by reason of failure to comply with legal duties 4. 5. 6. 3. issuance of receipts for goods not received (Sec. 50) issuance of receipts containing false statements (Sec. 51) issuance of duplicate negotiable WR not marked as such (Sec. 52) issuance of negotiable WR for goods of which he is an owner without stating such fact of ownership (Sec. 53) 7. delivery of goods without obtaining negotiable WR (Sec. 54) 3rd Person Negotiation of WR issued for mortgaged goods with intent to deceive (Sec. 55) CRIMINAL

Extent: 1. 2. 3. all lawful charges for the storage and preservation of the goods; all lawful claims for money advanced; and, all reasonable charges and expenses for notice, advertisement and sale for the sale of the goods Note: In case of negotiable WR, the charges that are present at the time of the issuance of the receipt must be stated in the receipt with the amounts thereof specified; otherwise, the warehouseman shall have no lien thereon except pnly for charges for storage of those goods subsequent to the date of the receipt (Sec. 30)

Scope (Property subject to lien): 1. 2. goods of the depositor who is liable to the warehouseman as debtor whenever such goods are deposited goods of other persons stored by the depositor who is liable to the warehouseman as debtor with authority to make a valid pledge

Loss of the lien: 1. by surrendering possession thereof; or, voluntary; or involuntary lawfully obliged to surrender 2.

Other acts for which warehouseman is liable:


1. 2. 3. 4. 5. 6. failure to place non-negotiable or not negotiable on a non-negotiable receipt (Sec. 7) misdelivery of the goods (Sec. 10) failure to effect cancellation of negotiable receipt upon delivery of the goods (Sec. 11) issuing of receipt for non-existing or misdescribed goods (Sec. 20) - estoppel failure to take care of the goods (Sec. 21) failure to give notice in case of sale of goods to satisfy lien (Sec. 33) or because the goods are perishable or hazardous (Sec. 34)

when refusing to deliver the goods when a demand is made with which he is bound to comply (Sec. 29)

A warehouseman who has released his lien by the surrender of the goods may not thereafter 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 bailments (separate receipts)

The loss of the warehousemans lien does not necessarily mean the extinguishment of the depositors obligation to pay the warehousing fees and charges which subsists to be a personal liability

Warehousemans Lien

Involuntary parting of the goods ordinarily does not result to loss of lien

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Note: a bearer document of title is not always a bearer document in the sense that a Enforcement: 1. 2. By refusing to deliver the goods until his lien is satisfied (Sec. 31); or By causing the extrajudicial sale of the property and applying the proceeds to the value of the lien (Secs. 33 and 34) no to pactum commissorium 2. special indorsement has the effect of converting the bearer instrument into an order instrument indorsement and delivery (Sec. 37) if WR is indorsed to specified person, it becomes an order receipt and negotiation can only be effected by the indorsement of such person in blank, to bearer to another specified person Effects of sale of goods by warehouseman: 1. 2. He is not liable for non-delivery even if receipt were negotiated (Sec. 36) Void and purchaser acquires no title in them if sale was made without publication and before time required by law o o o o delivery alone is not sufficient transferee acquires title against the transferor no direct obligation of warehouseman transferee can compel transferor to complete the negotiation by indorsing the instrument (Sec. 34) negotiation takes effect on date of indorsement only if indorsement is necessary but the WR was only transferred for value by delivery:

Adverse Claimants
What warehouseman can do: (Secs. 17 and 18) 1. Refuse to deliver the goods to anyone of them until he has reasonable time to ascertain the validity of the various claims 2. He is not excused from liability if he makes a mistake Bring a complaint in INTERPLEADER (Rule 62) and require the different claimants to litigate among themselves Because it shall be the court who will determine to whom the goods shall be delivered, warehouseman shall be exempt from any liability in case of misdelivery Who may negotiate: 1. 2. owner thereof; or any person to whom possession or custody of the receipt has been entrusted by the owner (if by the terms of the receipt, the goods are deliverable to the order of the person to whom the possession or custody of the receipt has been entrusted or in such form as it may be negotiated by delivery (Sec. 40) here, even a thief of the receipt or one who defrauds another can negotiate the receipt (but it should be in such a form that he did not forge any signature)

Negotiation and Transfer of WR


Negotiable WRs
How 1. by delivery (Sec. 37) when the goods are deliverable to a specified person or order and the latter or subsequent indorsee indorses it in blank or to bearer

Effects of negotiation: that of manual delivery (to constitute the transferee as the owner of the goods) o negotiation carries with it both the title to and possession of the property

Creditors remedies in case of attachment/execution:

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1. 2. seek attachment of receipt; or compel debtor to deliver the receipt by injunction or otherwise (Sec. 26)

however, these remedies cannot be applied if: 1. 2. the depositor is not the owner of the goods (thief) or one who has nor right to convey title to the goods binding upon the owner action for recovery or manual delivery of goods by real owner 3. attachment was made prior to issuance of receipt

Lost or Destroyed Negotiable WR court of competent jurisdiction may order the delivery of the goods only: 1. 2. upon proof of loss or destruction of WR; and, upon the giving of a bond with sufficient sureties to be approved by the court

Note: warehouseman is still iable to holder of receipt for value without notice of proceedings of the delivery of the goods since the warehouseman can secure himself on the bond given (Sec. 14)

Warranties on sale of WR:


1. 2. 3. 4. that the receipt is genuine that he has legal right or negotiate or transfer it that he has no knowledge of any defect that may impair the validity or worth of the recipt that he has a right to transfer title to the goods and that the goods are merchantable or fit for particular purpose whenever such warranties would have been implied , if the contract of the parties have been to transfer without a receipt of the goods represented thereby (Sec. 44)

the indorser does not guarantee that the warehouseman will comply with his duties (Sec. 45) a holder for security of a receipt who in good faith accepts payment of debt from a person does not warrant the genuineness nor the quality or quantity of the goods described therein (Sec. 46)

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