B. Warehouse Receipts Law

1. Nature and Functions of a Warehouse Receipt1

a. Purpose of the law:

1. to prescribe the rights and duties of a warehouseman;

2. to regulate the relationship between a warehouseman, and:

a. the depositor of the goods; or

b. holder of a warehouse receipt for the goods; or

c. the person lawfully entitled to the possession of the goods; or

d. other persons.

b. To whom delivered:

1. To the person lawfully entitled to the goods

2. To the person named in a non-negotiable receipt or to his assignee

3. To the lawful holder of a negotiable receipt

c. Kinds:

1. Negotiable warehouse receipts - a warehouse receipt wherein it is

expressly stated that the goods are deliverable to bearer or to the order of a

person specified therein.2

2. Non-negotiable warehouse receipts - a warehouse receipt in which

it is stated that the goods received will be delivered to the depositor or to

any specified person. The receipt should be stamped on its face "non-

1 A warehouse receipt is a written acknowledgment by the 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. A warehouseman is a person lawfully engaged in the business of storing goods for profit.2 A warehouse receipt stating that the goods are deliverable to bearer is a negotiable warehouse receipt. If the words "non-negotiable" are inserted in the receipt, the insertion is void, and the receipt remains negotiable.

negotiable." A holder of a non-negotiable receipt not stamped "non-

negotiable" believing it to be negotiable may treat the receipt as negotiable.3

d. Distinction between a Negotiable Instrument and a

Negotiable Warehouse Receipt

Negotiable instrument Warehouse receipt4

Subject is money Subject is merchandise

The instrument itself is the object of value

The goods are the objects of value

Intermediate parties become secondarily liable

Intermediate parties are not liable for the warehouseman's failure to deliver the goods.

e. Rights of a holder of a negotiable warehouse receipt as against a transferee of a non-negotiable warehouse receipt

Rights of a holder of a negotiable warehouse receipt

Rights of a transferee of a non-negotiable warehouse receipt

1. Such title to the goods as the person negotiating the receipt to him has had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt has had ability to convey to a purchaser in good faith for

1. Such person acquires thereby as against the transferor the title of the goods subject to the terms of any agreement with the transferor.

3 A non-negotiable warehouse receipt, if not stamped with the words "non-negotiable," may make a warehouseman liable for damages suffered by a holder of such receipt who purchases it for value supposing it to be negotiable. The said holder may treat, as his option, such receipt as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been negotiable.4 even if negotiable, is not a negotiable instrument within the meaning of the Negotiable Instruments Law

value;

2. The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman had contracted directly with him.

2. If the receipt is non-negotiable, such person also acquires the right to notify the warehouseman of the transfer to him of such receipt and thereby to acquire the direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt.

3. Prior to the notification of the warehouseman by the transfer or transferee of a non-negotiable receipt, the title of the transferee to the goods and the right to acquire the obligation of the warehouseman may be defeated by the levy of an attachment or execution upon the goods by a creditor of the transferor or 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.5

2. Duties of a Warehouseman

1. To deliver the goods upon demand made by the holder of the

receipt or by the depositor.

2. To exercise such care in regard to the goods as a reasonably careful

owner of similar goods would exercise.

5 Sec. 42

3. To keep the goods separate from the goods of other depositors,

except in the case of fungible goods.

3. Warehouseman’s Lien

All lawful charges for storage and preservation of the goods, all lawful

claims for money advanced, interest, insurance, transportation, labor,

weighing, coopering, and other charges and expenses in relation to such

goods, also all reasonable charges and expenses for notices and

advertisements of sale, and for the sale of the goods where default has been

made in satisfying the warehouseman’s lien.

A warehouseman cannot provide in the warehouse receipt that the risk

of loss of the goods by fire or theft shall be for the depositor’s account as

that would be contrary to his obligation to keep the goods safe.

3. Terms or Information that should be contained in a receipt

issued by the Warehouseman for the commodity he receives for

storage

General Rule: The law does not prescribe any particular form but the

receipt must at least contain the following:

1. Location of the warehouse

2. Date of Issue

3. Receipt number

4. Language to indicate if the receipt were negotiable or non-

negotiable

5. Rate of storage charges

6. Description of goods or packages containing them

7. Signature of the warehouseman or his agent

8. Language indicating if the warehouseman is an owner solely or

jointly with others, of the goods deposited and

9. Statement of advances made by the warehouseman for which he

claims a lien

3. Rules a Warehouseman must remember

a. On additional terms in the receipt

General Rule: A warehouseman could add or insert any other

terms to his receipt.

Provided that:

1. such additional terms are not contrary to the provisions of the

Act

2. they do not impair the degree of care in the safekeeping of the

goods entrusted to him required under the Act.

b. As to the attachment, garnishment, or levy of goods in

possession of a warehouseman

General Rule: Goods in the possession of a warehouseman for

which a negotiable receipt has been issued may be attached by

garnishment or be levied upon under an execution provided, the

receipt covering the goods is first surrendered to the

warehouseman or its negotiation enjoined.

Exceptions:

1. Where the person who made the deposit is not the owner of

the goods or is not a person whose act in conveying title to them

to a purchaser in good faith for value would bind the owner.

2. In an action filed by the owner of the goods for their

recovery or delivery to him.

c. As to comingling of goods

General Rule: Warehouseman must keep the goods of the

depositor separate from the goods of other depositors, or from

the goods of the same depositor from a separate receipt (Ratio:

to permit the inspection and redelivery of the goods deposited at

all times)

Exceptions:

1. If the goods are fungible, i.e., any unit of the goods is, from

its nature or by mercantile custom, treated as the equivalent of

any other unit

2. The commingling is authorized by agreement or by custom

5. Kinds of delivery of a Warehouseman

1. Justified delivery – A warehouseman is justified in delivering the

goods to any of the following:

a. The person lawfully entitled to the possession of the goods

b. The person who is himself entitled to delivery of the goods:

i. by the terms of a non-negotiable receipt or

ii. 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

c. The person in possession of a negotiable receipt by the terms of

which the goods are deliverable:

i. to him or order, or

ii. to bearer, or

iii. which has been endorsed to him or in blank by the person to

whom delivery was promised by the terms of the receipt of

immediate endorsee.

2. Misdelivery or Conversion – A warehouseman would be liable for

misdelivery or conversion if he delivers the goods to:

a. the one who is not in fact lawfully entitled to the possession of goods

b. a person holding a non-negotiable receipt or a negotiable receipt if

prior to such delivery he had been requested 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 goods.