The Warehouse Receipts Law.docx

THE WAREHOUSE RECEIPTS LAW WHO MAY ISSUE WAREHOUSE RECEIPT? > A warehouseman is a person lawfully engaged in the business of storing goods for profit. > Only a warehouseman may issue warehouse receipts WHAT SHOULD BE DONE TO PUT THE RECEIPT WITHIN THE PURVIEW OF WAREHOUSE RECEIPTS LAW? > The warehouse receipt should be issued by the warehouseman FORM OF RECEIPTS; ESSENTIAL TERMS 1. The location of the warehouse where the goods are stored 2. The date of issue of the receipt 3. Consecutive number of the receipt 4. A statement whether the goods received will be delivered to the bearer, to a specified person or to a specified person or his order 5. The rate of storage charges 6. A description of the goods or of the packages containing them 7. The signature of the warehouseman which may be made by his authorized agent 8. If the receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership 9. A statement of the amount of advances made and of liabilities incurred for which the warehouseman claims as lien. If the precise amount for such advances made or of such liabilities incurred is, at the same time of the issue of the receipt, unknown to the warehouseman or to his agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient EFFECT OF OMISSION OF THE ESSENTIAL CONTENTS > A warehouseman shall be liable to any person injured thereby all damages caused by the omission from a negotiable receipt of any of the terms herein required > Validity of the receipt not affected > Negotiability of the receipt not affected TERMS THAT CANNOT BE INCLUDED IN THE WAREHOUSE RECEIPT

1. Those contrary to any provision of the law 2. In any wise impair the warehouseman’s obligation to exercise that degree of care in the safekeeping of the goods entrusted to him which a reasonably careful man would exercise with regard to similar goods of his own NON-NEGOTIABLE WAREHOUSE RECEIPT > Receipt in which it is stated that the goods received will be delivered to the depositor or to any specified person NEGOTIABLE WAREHOUSE RECEIPT > Receipt in which it is stated that the goods received will be delivered to the bearer or to the order of any person named in such receipt > No provision shall be inserted in a negotiable receipt that it is non-negotiable. Such provision if inserted shall be void. DUPLICATE RECEIPTS MUST BE MARKED > When more than one is issued for the same goods, the word “duplicate” shall be plainly placed upon the face of every such receipt, except the first one issued > A warehouseman shall be held liable for damages for failure to do so to anyone who purchased the subsequent receipt for value supposing it to be original, even though the purchaser be after the delivery of the goods by the warehouseman to the holder of the original receipt OBLIGATIONS AND RIGHTS OF WAREHOUSEMAN UPON THEIR RECEIPTS PRINCIPAL OBLIGATIONS OF THE WAREHOUSEMAN 1. To take care of the goods entrusted to his safekeeping 2. To deliver them to the holder of the receipt or the depositor provided the following conditions are fulfilled—there is demand by the depositor accompanied by either a. An offer to satisfy the warehouseman’s lien b. An offer to surrender the receipt, if negotiable with such indorsements as would be necessary for the negotiation of the receipts c. A readiness and willingness to sign, when the goods are delivered, an acknowledgement that

they have been delivered, if such signature is requested by the warehouseman

another through the alteration of their condition or the exclusion of the owner’s right

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

NEGOTIABLE RECEIPTS MUST BE CANCELLED OR MARKED WHEN GOODS DELIVERED OR WHEN PART OF IT IS DELIVERED. FAILURE TO DO SO WILL MAKE THE WAREHOUSEMAN LIABLE— > The warehouseman is liable to any one who purchases for value in good faith such receipt, for failure to deliver the goods to him, whether such purchaser acquired title to the receipt before or after the delivery of the goods by the warehouseman

A WAREHOUSEMAN IS JUSTIFIED IN DELIVERING THE GOODS TO ONE WHO IS— 1. Person lawfully entitled to the possession of the goods, or his agent 2. Person who either himself entitled to delivery by the terms of the non-negotiable receipt issued for the goods, or who has written authority from the person so entitled either endorsed upon the receipt or written on another paper 3. Person in possession of a negotiable receipt by the terms of which the goods are deliverable to him or order, or to bearer, or which has been indorsed to him or in blank by the person to whom delivery was promised by the terms of the receipt or by his mediate or immediate indorser WAREHOUSEMAN’S LIABILITY FOR MISDELIVERY > Where a warehouseman delivers the goods to one who is not in fact lawfully entitled to the possession of them, the warehouseman shall be liable for conversion/estafa to all having a right of property or possession in the goods if he delivered the goods otherwise than as authorized > And though he delivered the goods as authorized he shall be so liable if prior to such delivery he had either— o Been requested, by or on behalf of the person lawfully entitled to a right of property or possession in the goods, not to make such delivery o Had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods WHAT IS CONVERSION? > Unauthorized assumption and exercise of the right of ownership over goods belonging to

EFFECT OF ALTERATION ON LIABILITY OF WAREHOUSEMAN 1. Alteration immaterial—whether fraudulent or not, whether authorized or not, the warehouseman is liable on the altered receipt according to its original tenor 2. Alteration material—if the alteration is material, but authorized, the warehouseman is liable according to the terms of the receipt as altered 3. Material alteration innocently made—the warehouseman is liable on the altered receipt according to its original receipt 4. Material alteration fraudulently made— warehouseman is liable according to the original tenor of the receipt to a purchaser of the receipt for value without notice, and even to the alterer and subsequent purchasers with notice except that as regards to the last two, the warehouseman’s liability is limited only to delivery as he is excused from any liability NOTA BENE: it is clear that even a fraudulent alteration cannot divest the title of the owner of stored goods and the warehouseman is, therefore, liable to return them to the owner. But a bona fide holder acquires no right to the goods under a negotiable receipt which has been lost or stolen or to which the endorsement of the depositor has been forged. LOST OR DESTROYED RECEIPTS > The court may order the delivery of the goods upon satisfactory proof of such loss or destruction and upon the giving of a bond with sufficient sureties to be approved by the court to protect the warehouseman from any liability or expense, which he or any person injured by such delivery

may incur by reason of the original receipt remaining outstanding > The court may also in its discretion order the payment of the warehouseman’s reasonable costs and counsel fees > The order of the court shall not relieve the warehouseman from liability to a person to whom the negotiable receipt as been or shall be negotiated for value without notice of the proceedings or of the delivery of the goods LIABILITY OF WAREHOUSEMAN AS TO DUPLICATE—HE WARRANTS 1. That the duplicate is an accurate copy of the original receipt 2. Such original receipt is uncancelled at the date of the issue of the duplicate WAREHOUSEMAN CANNOT SET UP TITLE IN HIMSELF > The warehouseman cannot refuse to deliver the goods on the ground that he has acquired title or right to the possession of the same unless such title or right is derived— o Directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto o From the warehouseman’s lien INTERPLEADER OF ADVERSE CLAIMANTS > If more than one person claims the title or possession of the goods, the warehouseman may, either as a defense to an action brought against him for non-delivery of the goods, or as an original suit, whichever is appropriate, require all known claimants to interplead WAREHOUSEMAN HAS REASONABLE TIME TO DETERMINE VALIDITY OF CLAIMS > If someone other than the depositor or person claiming under him has a claim to the title or possession of goods, and the warehouseman has information of such claim, the warehouseman shall be excused from liability for refusing to deliver the goods, either to the depositor or person claiming under him or to the adverse claimant, until the warehouseman has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead LIABILITY OF WAREHOUSEMAN FOR NONEXISTENCE OR MISDESCRIPTION OF GOODS

> As a general rule, the warehouseman is under obligation to deliver the identical property stored with him and if he fails to do so, he is liable directly to the owner > As against a bona fide holder of a warehouse receipt, the warehouseman is estopped whether the receipt is negotiable or not, to deny that he has received the goods described in it LIABILITY OF WAREHOUSEMAN FOR LOSS DUE TO LACK OF CARE > The warehouseman is required to exercise ordinary or reasonable care in the custody of the goods, that is, the care is reasonably careful owner would exercise over similar goods of his own. > The warehouseman isn’t liable for any loss or injury to the goods, which couldn’t have been avoided by the exercise of such care. Of course, what constitutes ordinary or reasonable care depends upon the circumstances such as the character and value of the property and the character and location of the warehouse. COMMINGLING OF DEPOSITED GOODS > As a general rule, a warehouseman may not mingle goods belonging to depositors > In case of fungible goods, the warehouseman may mingle them with the goods of the same kind and grade provided that he authorized by agreement or custom > Commingling is intended for the benefit of the warehouseman. It would, indeed be strange if the warehouseman could escape his liability to the owner of the goods by the simple process of commingling them without authorization ATTACHMENT OR LEVY OF A NEGOTIABLE RECEIPT > The warehouseman has the direct obligation to hold possession of the goods for the original owner or for the person known the negotiable receipt of title has been duly negotiated. > While in possession of such warehouseman, the goods cannot be attached or levied upon under an execution unless— o The document is first surrendered o Its negotiation is enjoined o The document is impounded by the court > This shall not apply if the person depositing is not the owner of the goods or one who has no right to convey title to the goods binding upon the owner. > Neither shall it apply to actions for recovery or manual delivery of goods by the real owner nor

to cases where the attachment is made before the issuance of the negotiable receipt of title CREDITOR’S REMEDIES TO REACH NEGOTIABLE RECEIPTS > A creditor whose debtor is the owner of negotiable receipt shall be entitled to such aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching such receipt or in satisfying the claim by means thereof as is allowed by law or in equity in regard to property which cannot be readily be attached or levied upon by ordinary legal process WHAT CLAIMS ARE INCLUDED IN THE WAREHOUSEMAN’S LIEN 1. All lawful charges for storage and preservation of the goods 2. All lawful claims for money advanced— Interests, Insurance, Transportation, Labor, Weighing, Cooperating and other charges and expenses in relation to the goods 3. All reasonable charges and expenses for notice and advertisements of sale 4. Sale of goods where default has been made in satisfying warehouseman’s lien AGAINST WHAT PROPERTY THE LIEN MAY BE ENFORCED 1. Against all goods, whenever deposited, belonging to the person who is liable to the debtor for the claims in regard to which the lien is asserted 2. Against all goods belonging to others which have been deposited at any time by the person who is liable as debtor for claims in regard to which the lien is asserted if such person had been entrusted with the possession of the goods that a pledge of the same by him at the time of the deposit to one who took the goods in good faith for value would have been valid HOW WAREHOUSEMAN LOSES HIS LIEN 1. By surrendering possession thereof 2. By refusing to deliver the goods when a demand is made with which he is bound to comply under the provisions of the law LIEN WHERE RECEIPT NEGOTIABLE > With the exception of the charges for the storage or preservation of goods for which a negotiable receipt has been issued, the lien

exists only for the other charges expressly enumerated in the receipt so far as they are written although the amount of the said charge isn’t stated OTHER THINGS IN CONNECTION TO WAREHOUSEMAN’S LIEN 1. Warehouseman need not deliver lien is satisfied 2. Warehouseman’s lien doesn’t preclude other remedies SATISFACTION OF LIEN BY SALE 1. The warehouseman shall give a written notice to the person on whose account the goods are held, and to any other person known by the warehouseman to claim an interest in the goods. Such notice shall be given by delivery in person or by registered mail addressed to the last known place of business or abode of the person to be notified. 2. The notice shall contain— a. An itemized statement of the claim, showing the sum due at the time of the notice and the dates when it became due b. A brief description of the goods c. A demand that such amount of the claim as stated shall be paid on or before the day mentioned, not less than 10 days from the delivery of the notice if it is personally delivered, or from the time when the notice shall reach its destination, according to due course of post, if the notice is sent by mail d. A statement that unless the claim is paid within the time specified, the goods will be advertised for sale and sold by auction at a specified time and place ENFORCEMENT OF WAREHOUSEMAN’S LIEN 1. By refusing to deliver the goods until the lien is satisfied 2. By causing the extrajudicial sale of the property and applying the proceeds to the value of the lien 3. By filing a civil action for collection of the unpaid charges or by way of counterclaim in an action to recover the property from him EFFECT OF SALE OF GOODS 1. In case of sale of goods, the warehouseman is not liable for nondelivery even if the receipt given for the goods when they were deposited be negotiated. 2. When the sale was made without the publication requirement and before the time

specified by law, such sale is void and the purchaser of the goods acquires no title in them. ACTS FOR WHICH WAREHOUSEMAN IS LIABLE 1. Failure to stamp duplicate on copies of negotiable receipt 2. Failure to place non-negotiable or not negotiable on the not negotiable receipt 3. Misdelivery of the goods 4. Failure to effect cancellation of a negotiable receipt upon delivery of the goods 5. Issuing receipt for non-existing goods or misdescribed goods 6. Failure to take care of the goods 7. Failure to give notice in case of sale of goods to satisfy the lien or because the goods are perishable or hazardous

> Nevertheless, it can be transferred or assigned by delivery > The assignee or transferee only acquires the rights of the transferor or assignor

2. The right to compel the transferor to indorse the receipt ADVANTAGES OF A NEGOTIABLE WAREHOUSE RECEIPT 1. It protects a purchaser for value and in good faith 2. The goods covered by the receipt cannot be garnished or levied upon under execution unless it is surrendered, or impounded, or its negotiation enjoined 3. In case of negotiation, the holder acquires the direct obligation of the warehouseman to hold possession of the goods for him without notice to such warehouseman 4. The goods it covers aren’t subject to seller’s lien or stoppage in transitu

NEGOTIATION AND TRANSFER OF RECEIPTS NEGOTIATION OF NEGOTIABLE RECEIPT BY DELIVERY 1. Where by the terms of the receipt, the warehouseman undertakes to deliver the goods to the bearer 2. Where by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the receipt has indorsed it in blank or to bearer a. Where by the terms of the receipt, the goods are deliverable to bearer or where a negotiable receipt has been indorsed in blank or bearer, any holder may indorse the same to himself or to any other specified person, and in such case the receipt shall thereafter be negotiated only by the indorsement by such indorsee NEGOTIATION OF NEGOTIABLE RECEIPT BY INDORSEMENT 1. If indorsed in blank or to bearer, the document becomes negotiable by delivery 2. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Delivery alone isn’t sufficient. TRANSFER OF NON-NEGOTIABLE RECEIPT > A non-negotiable receipt of title cannot be negotiated.

RIGHTS OF TRANSFEREE OF NEGOTIABLE RECEIPT 1. The right to the goods as against the transferor

WHO MAY NEGOTIATE A RECEIPT 1. By the owner thereof 2. By any person to whom the possession or custody of the receipt has been entrusted by the owner, if by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if at the same time of such entrusting, the receipt is in such form that it may be negotiated by delivery RIGHTS OF PERSON TO WHOM RECEIPT HAS BEEN NEGOTIATED 1. The title of the person negotiating the receipt over the goods covered by the receipt 2. The title of the person to whose order by the terms of the receipt the goods were to be delivered over such goods 3. The direct obligation of the warehouseman to hold possession of the goods for him, as if the warehouseman directly contracted with him RIGHTS OF PERSON TO WHOM RECEIPT HAS BEEN TRANSFERRED 1. Title to the goods as against the transferor 2. The right to notify the warehouseman of the transfer thereof 3. The right thereafter to acquire the obligation of the warehouseman to hold the goods for him

RULE WHERE RECEIPT IS SUBSEQUENTLY INDORSED > For the purpose of determining whether the transferee is a purchaser for value in good faith without notice, the negotiation shall take effect as of the time when the indorsement is actually made not at the time the receipt is delivered > Reason for the rule: negotiation becomes complete only at the time of indorsement WARRANTIES ON SALE OF RECEIPT 1. That the receipt is genuine 2. That he has a legal right to negotiate or transfer it 3. That he has knowledge of no fact which would impair the validity of the worth of the receipt 4. That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied, if the contract of the parties had been to transfer without a receipt of the goods represented thereby INDORSER, NOT A GUARANTOR > The indorsement of a receipt doesn’t make the indorser liable for any failure on the part of the warehouseman or previous indorser of the receipt to fulfill their respective obligations NO WARRANTY IMPLIED FROM ACCEPTING PAYMENT OF A DEBT > A mortgagee, pledgee or holder for security of a receipt who, in good faith, demands or receives payment of the debt for which such receipt is security, whether from a party to a draft drawn for such debt or from any other person, shall not, by so doing, be deemed to represent or to warrant the genuineness of such receipt or the quantity or quality of the goods therein described > In other words, the holder of a security who in good faith accepts payment of a debt from a person doesn’t warrant thereby the genuineness of the receipt nor the quality or quantity of the goods therein described

WHEN NEGOTIATION NOT IMPAIRED BY FRAUD, DURESS, MISTAKE > The validity of the negotiation of a receipt isn’t impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the receipt was induced by fraud, mistake or duress to entrust the possession or custody of the receipt to such person, if the person to whom the receipt was negotiated, or to a person to whom the receipt is subsequently negotiated paid value therefor, without notice of the breach of duty, fraud, mistake or duress EFFECT OF SUBSEQUENT NEGOTIATION BY SELLER, ETC. > The purchaser, mortgagee, or pledgee of goods for which a negotiable receipt has been issued, or of the negotiable receipt itself, has the duty to require the negotiation of the receipt to him otherwise, his failure will have the same effect as an express authorization on his part to the seller, mortgagor, or pledgor in possession of such receipt to make subsequent negotiation > The subsequent purchaser must have taken the receipt in good faith and for value in order to acquire a better right INDORSEE’S RIGHT SUPERIOR TO VENDOR’S LIEN > An innocent holder of a negotiable receipt has a better right to the goods for which the receipt is given than the vendor who has a vendor’s lien upon such goods > Warehouseman isn’t obliged to deliver or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation HOW DO YOU ATTACH OR IMPOSE A LIEN OVER GOODS COVERED BY A WAREHOUSE RECEIPT? If it is not negotiable, the court would issue a writ of attachment. If it is negotiable, the court should require the surrender of the receipt and restrict further negotiations.