FAJUTAGANA, CRISTINE JOY

III. Deposit
A. General Concept, Kinds

Article 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning the same. If
the safekeeping of the thing delivered is not the principal purpose of the contract, there is
no deposit but some other contract.
Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not
perfected until the delivery of the thing.
Article 1964. A deposit may be constituted judicially or extrajudicially.
Article 1967. An extrajudicial deposit is either voluntary or necessary.

B. Voluntary Deposit
1. Concept and Characteristics
Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not
perfected until the delivery of the thing.
Article 1968. A voluntary deposit is that wherein the delivery is made by the will of the
depositor. A deposit may also be made by two or more persons each of whom believes
himself entitled to the thing deposited with a third person, who shall deliver it in a proper
case to the one to whom it belongs.
Article 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected
until the delivery of the object of the obligation.
Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the
contrary, or unless the depositary is engaged in the business of storing goods.

2. Essential Requisites - Consent, Object, Cause, Delivery

Article 1970. If a person having capacity to contract accepts a deposit made by one who
is incapacitated, the former shall be subject to all the obligations of a depositary, and may
be compelled to return the thing by the guardian, or administrator, of the person who
made the deposit, or by the latter himself if he should acquire capacity.
Article 1971. If the deposit has been made by a capacitated person with another who is
not, the depositor shall only have an action to recover the thing deposited while it is still
in the possession of the depositary, or to compel the latter to pay him the amount by which
he may have enriched or benefited himself with the thing or its price. However, if a third
person who acquired the thing acted in bad faith, the depositor may bring an action
against him for its recovery.
Article 1986. If the depositor should lose his capacity to contract after having made the
deposit, the thing cannot be returned except to the persons who may have the
administration of his property and rights.
Article 1966. Only movable things may be the object of a deposit.
Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the
contrary, or unless the depositary is engaged in the business of storing goods.
Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not
perfected until the delivery of the thing.
Article 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected
until the delivery of the object of the obligation.
Article 1968. A voluntary deposit is that wherein the delivery is made by the will of the
depositor. A deposit may also be made by two or more persons each of whom believes
himself entitled to the thing deposited with a third person, who shall deliver it in a proper
case to the one to whom it belongs.

3. Parties

4. Form
Article 1969. A contract of deposit may be entered into orally or in writing.

5. Obligations of Depositary
a. Obligation to keep the thing safely
Article 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning the same. If
the safekeeping of the thing delivered is not the principal purpose of the contract, there is
no deposit but some other contract.
Article 1972. The depositary is obliged to keep the thing safely and to return it, when
required, to the depositor, or to his heirs and successors, or to the person who may have
been designated in the contract. His responsibility, with regard to the safekeeping and the
loss of the thing, shall be governed by the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into account in determining the degree
of care that the depositary must observe.
Article 1173. The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows bad
faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
Article 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit
the thing with a third person. If deposit with a third person is allowed, the depositary is
liable for the loss if he deposited the thing with a person who is manifestly careless or
unfit. The depositary is responsible for the negligence of his employees.
Article 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit
the thing with a third person. If deposit with a third person is allowed, the depositary is
liable for the loss if he deposited the thing with a person who is manifestly careless or
unfit. The depositary is responsible for the negligence of his employees.
Article 1974. The depositary may change the way of the deposit if under the
circumstances he may reasonably presume that the depositor would consent to the
change if he knew of the facts of the situation. However, before the depositary may make
such change, he shall notify the depositor thereof and wait for his decision, unless delay
would cause danger.
Article 1975. The depositary holding certificates, bonds, securities or instruments which
earn interest shall be bound to collect the latter when it becomes due, and to take such
steps as may be necessary in order that the securities may preserve their value and the
rights corresponding to them according to law.
The above provision shall not apply to contracts for the rent of safety deposit boxes.
Article 1976. Unless there is a stipulation to the contrary, the depositary may commingle
grain or other articles of the same kind and quality, in which case the various depositors
shall own or have a proportionate interest in the mass.
Article 1977. The depositary cannot make use of the thing deposited without the express
permission of the depositor.
Otherwise, he shall be liable for damages.
However, when the preservation of the thing deposited requires its use, it must be used
but only for that purpose.
Article 1978. When the depositary has permission to use the thing deposited, the contract
loses the concept of a deposit and becomes a loan or commodatum, except where
safekeeping is still the principal purpose of the contract.
The permission shall not be presumed, and its existence must be proved.
Article 1981. When the thing deposited is delivered closed and sealed, the depositary
must return it in the same condition, and he shall be liable for damages should the seal
or lock be broken through his fault.
Fault on the part of the depositary is presumed, unless there is proof to the contrary.
As regards the value of the thing deposited, the statement of the depositor shall be
accepted, when the forcible opening is imputable to the depositary, should there be no
proof to the contrary. However, the courts may pass upon the credibility of the depositor
with respect to the value claimed by him.
When the seal or lock is broken, with or without the depositary's fault, he shall keep the
secret of the deposit.
Article 1982. When it becomes necessary to open a locked box or receptacle, the
depositary is presumed authorized to do so, if the key has been delivered to him; or when
the instructions of the depositor as regards the deposit cannot be executed without
opening the box or receptacle.

6. Obligations of Depositor
a. Obligation to Reimburse and to Pay Fees
Article 1992. If the deposit is gratuitous, the depositor is obliged to reimburse the
depositary for the expenses he may have incurred for the preservation of the thing
deposited.
Article 1993. The depositor shall reimburse the depositary for any loss arising from the
character of the thing deposited, unless at the time of the constitution of the deposit the
former was not aware of, or was not expected to know the dangerous character of the
thing, or unless he notified the depositary of the same, or the latter was aware of it without
advice from the depositor.
Article 1994. The depositary may retain the thing in pledge until the full payment of what
may be due him by reason of the deposit.
Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the
contrary, or unless the depositary is engaged in the business of storing goods.

7. Risk of Loss and Deterioration

Article 1972. The depositary is obliged to keep the thing safely and to return it, when
required, to the depositor, or to his heirs and successors, or to the person who may have
been designated in the contract. His responsibility, with regard to the safekeeping and the
loss of the thing, shall be governed by the provisions of Title I of this Book.
If the deposit is gratuitous, this fact shall be taken into account in determining the degree
of care that the depositary must observe.
Article 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit
the thing with a third person. If deposit with a third person is allowed, the depositary is
liable for the loss if he deposited the thing with a person who is manifestly careless or
unfit. The depositary is responsible for the negligence of his employees.
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
Article 1977. The depositary cannot make use of the thing deposited without the express
permission of the depositor.
Otherwise, he shall be liable for damages.
However, when the preservation of the thing deposited requires its use, it must be used
but only for that purpose.
Article 1979. The depositary is liable for the loss of the thing through a fortuitous event:
(1) If it is so stipulated;
(2) If he uses the thing without the depositor's permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself may have been authorized to use
the same.
Article 1981. When the thing deposited is delivered closed and sealed, the depositary
must return it in the same condition, and he shall be liable for damages should the seal
or lock be broken through his fault.
Fault on the part of the depositary is presumed, unless there is proof to the contrary.
As regards the value of the thing deposited, the statement of the depositor shall be
accepted, when the forcible opening is imputable to the depositary, should there be no
proof to the contrary. However, the courts may pass upon the credibility of the depositor
with respect to the value claimed by him.
When the seal or lock is broken, with or without the depositary's fault, he shall keep the
secret of the deposit.
Article 1990. If the depositary by force majeure or government order loses the thing and
receives money or another thing in its place, he shall deliver the sum or other thing to the
depositor.
Article 1993. The depositor shall reimburse the depositary for any loss arising from the
character of the thing deposited, unless at the time of the constitution of the deposit the
former was not aware of, or was not expected to know the dangerous character of the
thing, or unless he notified the depositary of the same, or the latter was aware of it without
advice from the depositor.

8. Extinguishment

Article 1988. The thing deposited must be returned to the depositor upon demand, even
though a specified period or time for such return may have been fixed.
This provision shall not apply when the thing is judicially attached while in the depositary's
possession, or should he have been notified of the opposition of a third person to the
return or the removal of the thing deposited. In these cases, the depositary must
immediately inform the depositor of the attachment or opposition.
Article 1989. Unless the deposit is for a valuable consideration, the depositary who may
have justifiable reasons for not keeping the thing deposited may, even before the time
designated, return it to the depositor; and if the latter should refuse to receive it, the
depositary may secure its consignation from the court.
Article 1995. A deposit its extinguished:
(1) Upon the loss or destruction of the thing deposited;
(2) In case of a gratuitous deposit, upon the death of either the depositor or the depositary.
(n)
Article 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment
of a resolutory condition, and prescription, are governed elsewhere in this Code.
Article 1287. Compensation shall not be proper when one of the debts arises from a
depositum or from the obligations of a depositary or of a bailee in commodatum.
Neither can compensation be set up against a creditor who has a claim for support due
by gratuitous title, without prejudice to the provisions of paragraph 2 of article 301.

C. Necessary Deposit - Concept and Types

Article 1996. A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage,
shipwreck, or other similar events.
Article 1997. The deposit referred to in No. 1 of the preceding article shall be governed
by the provisions of the law establishing it, and in case of its deficiency, by the rules on
voluntary deposit.
The deposit mentioned in No. 2 of the preceding article shall be regulated by the
provisions concerning voluntary deposit and by article 2168.

b. On Occasion of a Calamity
Article 1996. A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage,
shipwreck, or other similar events.
Article 1997. The deposit referred to in No. 1 of the preceding article shall be governed
by the provisions of the law establishing it, and in case of its deficiency, by the rules on
voluntary deposit.
The deposit mentioned in No. 2 of the preceding article shall be regulated by the
provisions concerning voluntary deposit and by article 2168.
Article 2168. When during a fire, flood, storm, or other calamity, property is saved from
destruction by another person without the knowledge of the owner, the latter is bound to
pay the former just compensation.

c. Deposit of Passengers with Common Carriers

Article 1754. The provisions of articles 1733 to 1753 shall apply to the passenger's
baggage which is not in his personal custody or in that of his employee. As to other
baggage, the rules in articles 1998 and 2000 to 2003 concerning the responsibility of
hotel-keepers shall be applicable.
 d. Deposit of Travellers with Hotels and Inns
Article 1998. The deposit of effects made by travellers in hotels or inns shall also be
regarded as necessary. The keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to their employees, of the effects
brought by the guests and that, on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to the care and vigilance of their
effects.
Article 1999. The hotel-keeper is liable for the vehicles, animals and articles which have
been introduced or placed in the annexes of the hotel.
Article 2000. The responsibility referred to in the two preceding articles shall include the
loss of, or injury to the personal property of the guests caused by the servants or
employees of the keepers of hotels or inns as well as strangers; but not that which may
proceed from any force majeure. The fact that travellers are constrained to rely on the
vigilance of the keeper of the hotels or inns shall be considered in determining the degree
of care required of him.
Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force
majeure, unless it is done with the use of arms or through an irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts
of the guest, his family, servants or visitors, or if the loss arises from the character of the
things brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices
to the effect that he is not liable for the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the responsibility of the former as set
forth in articles 1998 to 2001 is suppressed or diminished shall be void.
Article 2004. The hotel-keeper has a right to retain the things brought into the hotel by the
guest, as a security for credits on account of lodging, and supplies usually furnished to
hotel guests.

D. Judicial Deposit - Concept, Object, Obligations and Extinguishment

Article 1964. A deposit may be constituted judicially or extrajudicially.

Article 2005. A judicial deposit or sequestration takes place when an attachment or
seizure of property in litigation is ordered.
Article 2006. Movable as well as immovable property may be the object of sequestration.
Article 2007. The depositary of property or objects sequestrated cannot be relieved of his
responsibility until the controversy which gave rise thereto has come to an end, unless
the court so orders.
Article 2008. The depositary of property sequestrated is bound to comply, with respect to
the same, with all the obligations of a good father of a family. (1788)
Article 2009. As to matters not provided for in this Code, judicial sequestration shall be
governed by the Rules of Court.
E. Warehouse Receipts Law

ACT NO. 2137 - THE WAREHOUSE RECEIPTS LAW

I — THE ISSUE OF WAREHOUSE RECEIPTS

Section 1. Persons who may issue receipts. — Warehouse receipts may be issued by
any warehouseman.

Sec. 2. Form of receipts; essential terms. — Warehouse receipts need not be in any
particular form but every such receipt must embody within its written or printed terms:

(a) The location of the warehouse where the goods are stored,

(b) The date of the issue of the receipt,

(c) The consecutive number of the receipt,

(d) A statement whether the goods received will be delivered to the bearer, to a
specified person or to a specified person or his order,

(e) The rate of storage charges,

(f) A description of the goods or of the packages containing them,

(g) The signature of the warehouseman which may be made by his authorized agent,

(h) 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, and

(i) A statement of the amount of advances made and of liabilities incurred for which the
warehouseman claims a lien. If the precise amount of such advances made or of such
liabilities incurred is, at the time of the issue of, 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.

A warehouseman shall be liable to any person injured thereby for all damages caused
by the omission from a negotiable receipt of any of the terms herein required.

Sec. 3. Form of receipts. — What terms may be inserted. — A warehouseman may

insert in a receipt issued by him any other terms and conditions provided that such
terms and conditions shall not:

(a) Be contrary to the provisions of this Act.

(b) In any wise impair his obligation to exercise that degree of care in the safe-keeping
of the goods entrusted to him which is reasonably careful man would exercise in regard
to similar goods of his own.

Sec. 4. Definition of non-negotiable receipt. — A receipt in which it is stated that the

goods received will be delivered to the depositor or to any other specified person, is a
non-negotiable receipt.

Sec. 5. Definition of negotiable receipt. — 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 such
receipt is a negotiable receipt.
No provision shall be inserted in a negotiable receipt that it is non-negotiable. Such
provision, if inserted shall be void.

Sec. 6. Duplicate receipts must be so marked. — When more than one negotiable
receipt 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
liable for all damages caused by his failure so to do to any one who purchased the
subsequent receipt for value supposing it to be an original, even though the purchase
be after the delivery of the goods by the warehouseman to the holder of the original
receipt.

Sec. 7. Failure to mark "non-negotiable." — A non-negotiable receipt shall have plainly

placed upon its face by the warehouseman issuing it "non-negotiable," or "not
negotiable." In case of the warehouseman's failure so to do, a holder of the receipt
who purchased it for value supposing it to be negotiable, may, at his option, treat such
receipt as imposing upon the warehouseman the same liabilities he would have
incurred had the receipt been negotiable.

This section shall not apply, however, to letters, memoranda, or written

acknowledgment of an informal character.

II — OBLIGATIONS AND RIGHTS OF WAREHOUSEMEN UPON THEIR RECEIPTS

Sec. 8. Obligation of warehousemen to deliver. — A warehouseman, in the absence of

some lawful excuse provided by this Act, is bound to deliver the goods upon a demand
made either by the holder of a receipt for the goods or by the depositor; if such demand
is accompanied with:

(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 receipt; and

(c) A readiness and willingness to sign, when the goods are delivered, an
acknowledgment that they have been delivered, if such signature is requested by the
warehouseman.

In case the warehouseman refuses or fails to deliver the goods in compliance with a
demand by the holder or depositor so accompanied, the burden shall be upon the
warehouseman to establish the existence of a lawful excuse for such refusal.

Sec. 9. Justification of warehouseman in delivering. — A warehouseman is justified in

delivering the goods, subject to the provisions of the three following sections, to one
who is:

(a) The person lawfully entitled to the possession of the goods, or his agent;

(b) A person who is either himself entitled to delivery by the terms of a non-negotiable
receipt issued for the goods, or who has written authority from the person so entitled
either indorsed upon the receipt or written upon another paper; or

(c) A 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.

Sec. 10. 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 as for conversion to all having a right of property or
possession in the goods if he delivered the goods otherwise than as authorized by
subdivisions (b) and (c) of the preceding section, and though he delivered the goods
as authorized by said subdivisions, he shall be so liable, if prior to such delivery he had
either:

(a) 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 deliver; or

(b) Had information that the delivery about to be made was to one not lawfully entit led
to the possession of the goods.

Sec. 11. Negotiable receipt must be cancelled when goods delivered. — Except as
provided in section thirty-six, where a warehouseman delivers goods for which he had
issued a negotiable receipt, the negotiation of which would transfer the right to the
possession of the goods, and fails to take up and cancel the receipt, he shall be 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.

Sec. 12. Negotiable receipts must be cancelled or marked when part of goods
delivered. — Except as provided in section thirty-six, where a warehouseman 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, he shall be liable to any one who purchases for value
in good faith such receipt, for failure to deliver all the goods specified in the receipt,
whether such purchaser acquired title to the receipt before or after the delivery of any
portion of the goods by the warehouseman.

Sec. 13. Altered receipts. — The alteration of a receipt shall not excuse the
warehouseman who issued it from any liability if such alteration was:

(a) Immaterial,

(b) Authorized, or

(c) Made without fraudulent intent.

If the alteration was authorized, the warehouseman shall be liable according to the
terms of the receipt as altered. If the alteration was unauthorized but made without
fraudulent intent, the warehouseman shall be liable according to the terms of the receipt
as they were before alteration.

Material and fraudulent alteration of a receipt shall not excuse the warehouseman who
issued it from liability to deliver according to the terms of the receipt as originally issued,
the goods for which it was issued but shall excuse him from any other liability to the
person who made the alteration and to any person who took with notice of the
alteration. Any purchaser of the receipt for value without notice of the alteration shall
acquire the same rights against the warehouseman which such purchaser would have
acquired if the receipt had not been altered at the time of purchase.

Sec. 14. Lost or destroyed receipts. — Where a negotiable receipt has been lost or
destroyed, a court of competent jurisdiction 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 delivery of the goods under an order of the court as provided in this section, shall
not relieve the warehouseman from liability to a person to whom the negotiable receipt
has been or shall be negotiated for value without notice of the proceedings or of the
delivery of the goods.
Sec. 15. Effect of duplicate receipts. — A receipt upon the face of which the word
"duplicate" is plainly placed is a representation and warranty by the warehouseman
that such receipt is an accurate copy of an original receipt properly issued and
uncanceled at the date of the issue of the duplicate, but shall impose upon him no other
liability.

Sec. 16. Warehouseman cannot set up title in himself . — No title or right to the
possession of the goods, on the part of the warehouseman, unless such title or right is
derived directly or indirectly from a transfer made by the depositor at the time of or
subsequent to the deposit for storage, or from the warehouseman's lien, shall excuse
the warehouseman from liability for refusing to deliver the goods according to the terms
of the receipt.

Sec. 17. 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.

Sec. 18. 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 claimants to interplead.

Sec. 19. Adverse title is no defense except as above provided. — Except as provided
in the two preceding sections and in sections nine and thirty-six, no right or title of a
third person shall be a defense to an action brought by the depositor or person claiming
under him against the warehouseman for failure to deliver the goods according to the
terms of the receipt.

Sec. 20. Liability for non-existence or misdescription of goods. — A warehouseman

shall be liable to the holder of a receipt for damages caused by the non-existence of
the goods or by the failure of the goods to correspond with the description thereof in
the receipt at the time of its issue. If, however, the goods are described in a receipt
merely by a statement of marks or labels upon them or upon packages containing them
or by a statement that the goods are said to be goods of a certain kind or that the
packages containing the goods are said to contain goods of a certain kind or by words
of like purport, such statements, if true, shall not make liable the warehouseman issuing
the receipt, although the goods are not of the kind which the marks or labels upon them
indicate or of the kind they were said to be by the depositor.

Sec. 21. Liability for care of goods. — A warehouseman shall be liable for any loss or
injury to the goods caused by his failure to exercise such care in regard to them as
reasonably careful owner of similar goods would exercise, but he shall not be liable, in
the absence of an agreement to the contrary, for any loss or injury to the goods which
could not have been avoided by the exercise of such care.

Sec. 22. Goods must be kept separate. — Except as provided in the following section,
a warehouseman shall keep the goods so far separate from goods of other depositors
and from other goods of the same depositor for which a separate receipt has been
issued, as to permit at all times the identification and redelivery of the goods deposited.

Sec. 23. Fungible goods may be commingled if warehouseman authorized. — If

authorized by agreement or by custom, a warehouseman may mingle fungible goods
with other goods of the same kind and grade. In such case, the various depositors of
the mingled goods shall own the entire mass in common and each depositor shall be
entitled to such portion thereof as the amount deposited by him bears to the whole.

Sec. 24. Liability of warehouseman to depositors of commingled goods. — 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.

Sec. 25. Attachment or levy upon goods for which a negotiable receipt has been issued.
— If goods are delivered to a warehouseman by the owner or by a person whose act
in conveying the title to them to a purchaser in good faith for value would bind the
owner, and a negotiable receipt is issued for them, they can not thereafter, while in the
possession of the warehouseman, be attached by garnishment or otherwise, or be
levied upon under an execution unless the receipt be first surrendered to the
warehouseman or its negotiation enjoined. The warehouseman shall in no case be
compelled to deliver up the actual possession of the goods until the receipt is
surrendered to him or impounded by the court.

Sec. 26. Creditor's remedies to reach negotiable receipts. — A creditor whose debtor
is the owner of a 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 at law or in equity in these islands
in regard to property which can not readily be attached or levied upon by ordinary legal
process.

Sec. 27. What claims are included in the warehouseman's lien. — Subject to the
provisions of section thirty, a warehouseman shall have a lien on goods deposited or
on the proceeds thereof in his hands, for all lawful charges for storage and preservation
of the goods; also for all lawful claims for money advanced, interest, insurance,
transportation, labor, weighing, coopering and other charges and expenses in relation
to such goods, also for all reasonable charges and expenses for notice, and
advertisements of sale, and for sale of the goods where default had been made in
satisfying the warehouseman's lien.

Sec. 28. Against what property the lien may be enforced. — Subject to the provisions
of section thirty, a warehouseman's lien may be enforced:

(a) Against all goods, whenever deposited, belonging to the person who is liable as
debtor for the claims in regard to which the lien is asserted, and

(b) Against all goods belonging to others which have been deposited at any time by the
person who is liable as debtor for the claims in regard to which the lien is asserted if
such person had been so entrusted with the possession of 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.

Sec. 29. How the lien may be lost. — A warehouseman loses his lien upon goods:

(a) By surrendering possession thereof, or

(b) By refusing to deliver the goods when a demand is made with which he is bound to
comply under the provisions of this Act.

Sec. 30. Negotiable receipt must state charges for which the lien is claimed. — If a
negotiable receipt is issued for goods, the warehouseman shall have no lien thereon
except for charges for storage of goods subsequent to the date of the receipt unless
the receipt expressly enumerated other charges for which a lien is claimed. In such
case, there shall be a lien for the charges enumerated so far as they are within the
terms of section twenty-seven although the amount of the charges so enumerated is
not stated in the receipt.

Sec. 31. Warehouseman need not deliver until lien is satisfied. — A warehouseman
having a lien valid against the person demanding the goods may refuse to deliver the
goods to him until the lien is satisfied.

Sec. 32. Warehouseman's lien does not preclude other remedies. — Whether a
warehouseman has or has not a lien upon the goods, he is entitled to all remedies
allowed by law to a creditor against a debtor for the collection from the depositor of all
charges and advances which the depositor has expressly or impliedly contracted with
the warehouseman to pay.

Sec. 33. Satisfaction of lien by sale. — A warehouseman's lien for a claim which has
become due may be satisfied as follows:

(a) An itemized statement of the warehouseman's claim, showing the sum due at the
time of the notice and the date or dates when it becomes due,

(b) A brief description of the goods against which the lien exists,

(c) A demand that the amount of the claim as stated in the notice of such further claim
as shall accrue, shall be paid on or before a day mentioned, not less than ten 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 the 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.

In accordance with the terms of a notice so given, a sale of the goods by auction may
be had to satisfy any valid claim of the warehouseman for which he has a lien on the
goods. The sale shall be had in the place where the lien was acquired, or, if such place
is manifestly unsuitable for the purpose of the claim specified in the notice to the
depositor has elapsed, and advertisement of the sale, describing the goods to be sold,
and stating the name of the owner or person on whose account the goods are held,
and the time and place of the sale, shall be published once a week for two consecutive
weeks in a newspaper published in the place where such sale is to be held. The sale
shall not be held less than fifteen days from the time of the first publication. If there is
no newspaper published in such place, the advertisement shall be posted at least ten
days before such sale in not less than six conspicuous places therein.

From the proceeds of such sale, the warehouseman shall satisfy his lien including the
reasonable charges of notice, advertisement and sale. The balance, if any, of such
proceeds shall be held by the warehouseman and delivered on demand to the person
to whom he would have been bound to deliver or justified in delivering goods.

At any time before the goods are so sold, any person claiming a right of property or
possession therein may pay the warehouseman the amount necessary to satisfy his
lien and to pay the reasonable expenses and liabilities incurred in serving notices and
advertising and preparing for the sale up to the time of such payment. The
warehouseman shall deliver the goods to the person making payment if he is a person
entitled, under the provision of this Act, to the possession of the goods on payment of
charges thereon. Otherwise, the warehouseman shall retain the possession of the
goods according to the terms of the original contract of deposit.

Sec. 34. Perishable and hazardous goods. — If goods are of a perishable nature, or by
keeping will deteriorate greatly in value, or, by their order, leakage, inflammability, or
explosive nature, will be liable to injure other property , the warehouseman may give
such notice to the owner or to the person in whose names the goods are stored, as is
reasonable and possible under the circumstances, to satisfy the lien upon such goods
and to remove them from the warehouse and in the event of the failure of such person
to satisfy the lien and to receive the goods within the time so specified, the
warehouseman may sell the goods at public or private sale without advertising. If the
warehouseman, after a reasonable effort, is unable to sell such goods, he may dispose
of them in any lawful manner and shall incur no liability by reason thereof.

The proceeds of any sale made under the terms of this section shall be disposed of in
the same way as the proceeds of sales made under the terms of the preceding section.
Sec. 35. Other methods of enforcing lien. — The remedy for enforcing a lien herein
provided does not preclude any other remedies allowed by law for the enforcement of
a lien against personal property nor bar the right to recover so much of the
warehouseman's claim as shall not be paid by the proceeds of the sale of the property.

Sec. 36. Effect of sale. — After goods have been lawfully sold to satisfy a
warehouseman's lien, or have been lawfully sold or disposed of because of their
perishable or hazardous nature, the warehouseman shall not thereafter be liable for
failure to deliver the goods to the depositor or owner of the goods or to a holder of the
receipt given for the goods when they were deposited, even if such receipt be
negotiable.

III — NEGOTIATION AND TRANSFER OF RECEIPTS

Sec. 37. Negotiation of negotiable receipt of delivery. — A negotiable receipt may be

negotiated by delivery:

(a) Where, by terms of the receipt, the warehouseman undertakes to deliver the goods
to the bearer, or

(b) 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.

Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or
where a negotiable receipt has been indorsed in blank or to bearer, any holder ma y
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 of such indorsee.

Sec. 38. Negotiation of negotiable receipt by indorsement. — A negotiable receipt may

be negotiated by the indorsement of the person to whose order the goods are, by the
terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a
specified person. 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.
Subsequent negotiation may be made in like manner.

Sec. 39. Transfer of receipt. — A receipt which is not in such form that it can be
negotiated by delivery may be transferred by the holder by delivery to a purchaser or
donee.

A non-negotiable receipt can not be negotiated, and the indorsement of such a receipt
gives the transferee no additional right.

Sec. 40. Who may negotiate a receipt. — A negotiable receipt may be negotiated:

(a) By the owner thereof, or

(b) 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 time of such entrusting, the receipt is in such form that
it may be negotiated by delivery.

Sec. 41. Rights of person to whom a receipt has been negotiated. — A person to whom
a negotiable receipt has been duly negotiated acquires thereby:

(a) Such title to the goods as the person negotiating the receipt to him had or 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 had or had ability to convey to a purchaser in good faith for value, and
(b) 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 and contracted
directly with him.

Sec. 42. Rights of person to whom receipt has been transferred. — A person to whom
a receipt has been transferred but not negotiated acquires thereby, as against the
transferor, the title of the goods subject to the terms of any agreement with the
transferor.

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.

Prior to the notification of the warehouseman by the transferor 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.

Sec. 43. Transfer of negotiable receipt without indorsement. — Where a negotiable

receipt is transferred for value by delivery and the indorsement of the transferor is
essential for negotiation, the transferee acquires a right against the transferor to
compel him to indorse the receipt unless a contrary intention appears. The negotiation
shall take effect as of the time when the indorsement is actually made.

Sec. 44. Warranties of a sale of receipt. — A person who, for value, negotiates or
transfers a receipt by indorsement or delivery, including one who assigns for value a
claim secured by a receipt, unless a contrary intention appears, warrants:

(a) That the receipt is genuine,

(b) That he has a legal right to negotiate or transfer it,

(c) That he has knowledge of no fact which would impair the validity or worth of the
receipt, and

(d) 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.

Sec. 45. Indorser not a guarantor. — The indorsement of a receipt shall not make the
indorser liable for any failure on the part of the warehouseman or previous indorsers of
the receipt to fulfill their respective obligations.

Sec. 46. 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.

Sec. 47. When negotiation not impaired by fraud, mistake or duress. — The validity of
the negotiation of a receipt is not 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 or to entrust the
possession or custody of the receipt to such person, if the person to whom the receipt
was negotiated or a person to whom the receipt was subsequently negotiated paid
value therefor, without notice of the breach of duty, or fraud, mistake or duress.
Sec. 48. Subsequent negotiation. — Where a person having sold, mortgaged, or
pledged goods which are in warehouse and for which a negotiable receipt has been
issued, or having sold, mortgaged, or pledged the negotiable receipt representing such
goods, continues in possession of the negotiable receipt, the subsequent negotiation
thereof by the person under any sale or other disposition thereof to any person
receiving the same in good faith, for value and without notice of the previous sale,
mortgage or pledge, shall have the same effect as if the first purchaser of the goods or
receipt had expressly authorized the subsequent negotiation.

Sec. 49. Negotiation defeats vendor's lien. — Where a negotiable receipt has been
issued for goods, no seller's lien or right of stoppage in transitu shall defeat the rights
of any purchaser for value in good faith to whom such receipt has been negotiated,
whether such negotiation be prior or subsequent to the notification to the
warehouseman who issued such receipt of the seller's claim to a lien or right of
stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified in
delivering the goods to an unpaid seller unless the receipt is first surrendered for
cancellation.

IV — CRIMINAL OFFENSES

Sec. 50. Issue of receipt for goods not received. — A warehouseman, or an officer,
agent, or servant of a warehouseman who issues or aids in issuing a receipt knowing
that the goods for which such receipt is issued have not been actually received by such
warehouseman, or are not under his actual control at the time of issuing such receipt,
shall be guilty of a crime, and, upon conviction, shall be punished for each offense by
imprisonment not exceeding five years, or by a fine not exceeding ten thousand pesos,
or both.

Sec. 51. Issue of receipt containing false statement. — A warehouseman, or any officer,
agent or servant of a warehouseman who fraudulently issues or aids in fraudulently
issuing a receipt for goods knowing that it contains any false statement, shall be guilty
of a crime, and upon conviction, shall be punished for each offense by imprisonment
not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Sec. 52. Issue of duplicate receipt not so marked. — A warehouse, or any officer, agent,
or servant of a warehouseman who issues or aids in issuing a duplicate or additional
negotiable receipt for goods knowing that a former negotiable receipt for the same
goods or any part of them is outstanding and uncanceled, without plainly placing upon
the face thereof the word "duplicate" except in the case of a lost or destroyed receipt
after proceedings are provided for in section fourteen, shall be guilty of a crime, and,
upon conviction, shall be punished for each offense by imprisonment not exceeding
five years, or by a fine not exceeding ten thousand pesos, or by both.

Sec. 53. Issue for warehouseman's goods or receipts which do not state that fact. —
Where they are deposited with or held by a warehouseman goods of which he is owner,
either solely or jointly or in common with others, such warehouseman, or any of his
officers, agents, or servants who, knowing this ownership, issues or aids in issuing a
negotiable receipt for such goods which does not state such ownership, shall be guilty
of a crime, and, upon conviction, shall be punished for each offense by imprisonment
not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Sec. 54. Delivery of goods without obtaining negotiable receipt. — A warehouseman,

or any officer, agent, or servant of a warehouseman, who delivers goods out of the
possession of such warehouseman, knowing that a negotiable receipt the negotiation
of which would transfer the right to the possession of such goods is outstanding and
uncanceled, without obtaining the possession of such receipt at or before the time of
such delivery, shall, except in the cases provided for in sections fourteen and thirty-six,
be found guilty of a crime, and, upon conviction, shall be punished for each offense by
imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos,
or by both.
Sec. 55. Negotiation of receipt for mortgaged goods. — Any person who deposits
goods to which he has no title, or upon which there is a lien or mortgage, and who
takes for such goods a negotiable receipt which he afterwards negotiates for value with
intent to deceive and without disclosing his want of title or the existence of the lien or
mortgage, shall be guilty of a crime, and, upon conviction, shall be punished for each
offense by imprisonment not exceeding one year, or by a fine not exceeding two
thousand pesos, or by both.

V — INTERPRETATION

Sec. 56. Case not provided for in Act. — Any case not provided for in this Act shall be
governed by the provisions of existing legislation, or in default thereof, by the rule of
the law merchant.

Sec. 57. Name of Act. — This Act may be cited as the Warehouse Receipts Act.

Sec. 58. Definitions. — (a) In this Act, unless the content or subject matter otherwise
requires:

"Action" includes counterclaim, set-off, and suits in equity as provided by law in these
islands.

"Delivery" means voluntary transfer of possession from one person to another.

"Fungible goods" means goods of which any unit is, from its nature by mercantile
custom, treated as the equivalent of any other unit.

"Goods" means chattels or merchandise in storage or which has been or is about to be

stored.

"Holder" of a receipt means a person who has both actual possession of such receipt
and a right of property therein.

"Order" means an order by indorsement on the receipt.

"Owner" does not include mortgagee.

"Person" includes a corporation or partnership or two or more persons having a joint or

common interest.

To "purchase" includes to take as mortgagee or as pledgee.

"Receipt" means a warehouse receipt.

"Value" is any consideration sufficient to support a simple contract. An antecedent or

pre-existing obligation, whether for money or not, constitutes value where a receipt is
taken either in satisfaction thereof or as security therefor.

"Warehouseman" means a person lawfully engaged in the business of storing goods

for profit.

(b) A thing is done "in good faith" within the meaning of this Act when it is in fact done
honestly, whether it be done negligently or not.

Sec. 59. Application of Act. — The provisions of this Act do not apply to receipts made
and delivered prior to the taking effect hereof.

Sec. 60. Repeals. — All acts and laws and parts thereof inconsistent with this Act are
hereby repealed.

Sec. 61. Time when Act takes effect. — This Act shall take effect ninety days after its
publication in the Official Gazette of the Philippines shall have been completed.