Code Fo Comer Ce

7/29/2019 Code Fo Comer Ce

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1.CODE OF COMMERCEa.Merchants andCommercial Transactions(Articles 1-63)1. Definition of MerchantsMerchant-is the middleman between theconsumer and manufacturer; a merchant mustdo business in his own name

1.1. Natural personsThose, who having legal capacity to engage incommerce, habitually devote themselvesthereto (Art 1)Legal capacity to engage incommerce: having completed the age of18 years1Having free disposition of theirproperty (Art 4)

Legal presumption of habituallyengaging in commerce exists from themoment the person who intends to engagetherein announces through circulars,newspapers, handbills, posters exhibited tothe public, or in any manner whatsoever, anestablishment which has for its object somecommercial operation. (Art 3) A merchant need not devote hisfull time to commerce1.2. Foreign entities Foreigners and companiescreated abroad may engage in commerce

subject to the laws of their country withrespect to their capacity to contract, Foreign corporations andpartnerships can engage business here,provided they get a license from the SEC.For insurance companies, they need acertificate of authority from the InsuranceCommission. Banks need a license from theMonetary Board.Code of Commerce governs:regards the creation

of their establishments in Philippineterritory,their mercantileoperations, and1 The Code of Commerce sets it at 21 years, but RA 6809 loweredthe majority age to 18 years

the jurisdiction of the


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courts of the Philippines.

But if theres a special treaty, thetreaty governs.2. Applicable Laws(whether or not executed by merchants)

a.Code of Commerceb.If no provision, commercial customsc.In the absence of these two, Civil Code Customs take precedence overcivil law because of the progressive characterof commerce. For centuries, negotiableinstruments are governed mostly by customsrather than law. But civil law can alsosupplement the Code of Commerce the Codedoes not contain provisions onextinguishments of obligations or damages.3. Absolute Disqualificationfrom TradeThe following cannot engage in commerce nor hold

office or have any direct, administrative, orfinancial intervention in commercial or industrialcompanies:

a.Persons sentenced to the penalty of civilinterdiction, while they have not servedtheir sentence or have not beenamnestied or pardonedb.Persons who have been declaredbankrupt, while they have not obtainedtheir discharge, or been authorized by

virtue of an agreement accepted at ageneral meeting of creditors and approvedby judicial authority, to continue at thehead of their establishments; thedischarge being considered in such casesis limited to that expressed in theagreementc.Persons who, on account of laws orspecial provisions, may not engage incommerce4. Relative Disqualificationfrom Trade

The following cannot engage in the commerce,either in person or by proxy, nor can they hold anyoffice or have any direct, administrative orfinancial intervention in commercial or industrialcompanies, within the limits of the districts,provinces or towns in which they discharge their

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures]


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[Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]

duties:[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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a.Justices of the Supreme Court, judges2and officials of the department of publicprosecutors in active service. Thisprovision shall not be applicable to themunicipal mayors, judges or prosecutingattorneys, nor to those who by chanceare temporarily discharging thefunctions of judges or prosecutingattorneys.b.Administrative, economic or militaryheads of districts, provinces or postsc.Employees engaged in the collectionand administration of funds of theState, appointed by the Government.Persons who by contract administer andcollect temporarily or theirrepresentatives are exempted.d.Stock and commercial brokers ofwhatever class they may be.

e.Those who by virtue of laws orspecial provisions, may not engagein commerce in a determinateterritory.f.Members of Congress (87 Consti)g.President, Vice President, Cabinetmembers and their deputies orassistants (87 Consti)h.Members of Constitutional

Commission (87 Consti)i.President, Vice President, Members ofthe Cabinet, Congress, Supreme Courtand the Constitutional Commission,Ombudsman with respect to any loan,guaranty, or other form of financialaccommodation for any businesspurpose by any government-owned orcontrolled bank to them (Art XI, Sec. 16,87 Consti)Absolute Relative IncapacityIncapacity

Extends throughout Extends only to thethe Philippines territory where theofficer is exercisinghis functionsEffect of act is null Effect is to subjectand void the violator todisciplinary action orpunishment

5. Acts of Commerce


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(Commercial Transactions)2 Judges are no longer disqualified, as per Macariola vs. Asuncion(114 SCRA 77, 1982). Since the relative disqualification of judges ispolitical in nature, this was deemed abrogated by change insovereignty from Spain to the United States.

a.Those acts contained in the Code ofCommerceb.all others of analogous character The Code of Commerce does notattempt anywhere to define what commercialtransactions are. It only specifies 2 generalclasses. An act need not be performed bya merchant in order that it may be consideredan act of commerce (Cia Agricola de Ultramarvs. Reyes, 4 Phil 2)6. Commercial Contracts6.1. Enforceability of Contractsi.Commercial contracts shall be valid,whatever the form and language,

provided their existence is shown byany means established by the civil law.EXCEPT when the contract exceedsP300 (the equivalent of 1,500 pesetas),it cannot be proved by the testimony ofa witness alone. There must be someother evidence.6.2. Efficacy of Contractsi.General Rule: Commercial contractsare consensual, so a writteninstrument is not necessary.Exception: in the ff cases in Art 52

Contracts stated in the Code3 orin special laws4 which must bereduced to writing or requireforms or formalities necessary fortheir efficacyContracts executed in a foreigncountry in which the law requirescertain instruments, forms orformalities for their validity,although Philippine law does notrequire them.

ii.if these contracts do not satisfy thecircumstances respectively required, itshall not give rise to obligations orcauses of action6.3. Perfection of Contractsi.Contracts entered into bycorrespondence shall be perfectedfrom the moment an answer is made


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accepting the offer or the conditionsby which the latter may be modified.(Art 54)3 The Code requires specific forms for charter parties and loans onbottomry and respondentia (Arts 267, 578, 652 and 720).4 Negotiable Instruments Law requires negotiable instruments to be inwriting. Insurance Code requires payment of premium for a fireinsurance contract to exist.

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


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ii. Note that receipt of the acceptance bythe offeror is immaterial,Theory ofmanifestation: in commercialtransactions, since time is of theessence the contract is perfected ii.from the moment the acceptanceis sent, even if it has not yet beenreceived by the offeror. Theofferor can no longer withdraw theoffer or change the terms of hisoffer.Theory of cognition:in civil law, when a contract isentered into by correspondence, itwill be perfected only upon receiptby the offeror of the unconditionalacceptance of the offeree.

iii.Compare with Art 1319, Civil Code:

Perfection is only from the time theofferor has actual knowledge ofacceptance.iv.BUT different rule when a broker oragent intervenes: perfection is whenthe contracting parties shall haveaccepted his offer. (Art 55)6.4. Indemnificationi.If the penalty for indemnification isfixed, the injured party may demandthrough legal means the fulfillment

of the contract or the penaltystipulated. Recourse to oneextinguishes the other unless thecontrary is stipulated. (Art 56)6.5. Interpretationi. Interpretation and compliance in goodfaith and full enforceability of theirprovisions in their plain, usual andproper meanings (Art 57)ii. In case of conflicts between copies ofthe contract, and an agentintervened in the negotiation, thatwhich appears in the agents book

shall prevail (Art 58)iii.In case of doubt, and the rulescannot resolve the conflict, issuesshall be decided in favor of thedebtor (Art 59)6.6. Miscellaneous provisionsi.Days of grace, courtesy or otherswhich under any name whatsoever


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defer the fulfillment of commercialobligations, shall not be recognized,except those in which the partiesmay have previously fixed incontract or which are based on adefinite provision of law. (Art 61).Ratio: Time is of the essence incommercial contracts, so days ofgrace are prohibited.Exception: 30-day grace period inthe Insurance Code to pay premiumsDebtor is in delay when:

If day of performanceis fixed by the parties or by law,debtor is in default on the dayfollowing the day fixed (art 63)

If no period is fixed, 10days from execution of contractand on 11th day, debtor in delaywithout need of demand (Art 62)

Potestative period(when debtor desires), debtor isin delay from demand

iii. Art. 50. Commercial contracts. Theyare governed by:a) Code of Commerceb) Special law if its theappropriate law like the InsuranceCodec) Civil Code to be applied in asuppletory manner to other

special laws.

(This is not the same as in Art. 2. If whatis involved is an act of commerce, applyArt. 2. But if it is a commercial contract,apply Art. 50.)

7. Commercial Registrya. A bookwhere entries are made of merchants and ofdocuments affecting their commercialtransactions, orb. An office

established for the purpose of copying andrecording verbatim certain classes ofdocuments of commercial nature7.1. Nature of registration:by individualmerchants optionalby corporation compulsory, as it is the fact of registration


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which creates the corporationpartnerships with acapital of P3000 or more or where thecontributions consists of real estateproperties compulsory, per Art. 1772, CivilCodePhilippine vessels.with morethan 3 tons gross compulsory

.with grosstonnage of 3 tons or less optional (Bar



[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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produce is caused by a fortuitous event.If both books are kept inaccordance with law and they conflict,the court will decide on the basis of therules of preponderance of evidence bytaking into consideration the totality ofthe evidence presented by both sides.

8. Cuentas en ParticipacionA partnership the existence of which wasonly known to those who had an interestin the same, being no mutual agreementsbetween the partners and without acorporate name indicating to the public insome way that there were other peoplebesides the one who ostensibly managedand conducted the business, is exactly theaccidental partnership of cuentas enparticipacion defined in article 239 of theCode of Commerce.Those who contract with the person under

whose name the business of suchpartnership of cuentas en participacion isconducted, shall have only a right ofaction against such person and notagainst the other persons interested, andthe latter, on the other hand, shall haveno right of action against the third personwho contracted with the manager unlesssuch manager formally transfers his rightto them. (Art 242 of the code OfCommerce.) (Bourns vs Carman, 1906)Joint Account PartnershipNo firm name Has a firm name

No common fund Has common fundNo juridical personality Has juridical personalityOnly ostensible partnerliable to 3rd personsAll general partnersliable to 3rd personsOnly ostensible partnermanagesAll general partnersmanageLiquidation done byostensible partnerLiquidation entrusted to

any partner/s

b.Letters of Credit(Articles 567-572)1. DefinitionAn engagement by a bank or other personmade at the request of a customer that theissuer (bank) will honor a draft or other


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demands for payment or other complaints withthe conditions specified in the credit.(Prudential Bank vs. IAC, 1992).An instrument issued by a bank in behalf of acustomer authorizing a beneficiary to draw adraft or drafts which will be honored onpresentation to the bank if drawn in[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


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accordance with the terms and conditions contract of sale betweenspecified in the letter of credit. buyer and seller Art. 567, Code of Commerce: those issuedby one merchant to another or for thecontract of the issuing bankLoCpurpose of attending to a commercialtransaction.

2. PurposeTo satisfy the seemingly irreconcilableinterests of a seller, who refuses to part withhis goods before he is paid, and a buyer,who wants to have control of the goodsbefore paying. (Bank of America vs. CA,1993)The primary purpose of the LoC is tosubstitute for and support the agreement of

the buyer/importer to pay money under acontract or other arrangement. It creates inthe seller/exporter a secure expectation ofpayment.3. NatureThe buyer may be required to contract a bankto issue a letter of credit in favor of the sellerso that the issuing bank can authorize theseller to draw drafts and engage to pay themupon their presentment simultaneously withthe tender of documents required by the letterof credit. The seller gets paid only if he

delivers the documents of title over the goods,while the buyer gets the goods only afterreimbursing the bank.Basic principle: bank deals with documentsonly. As such, they are not qualified to dealwith goods. They will act on the basis ofdocuments only.3 distinct and separate contracts in the LoC:One links the partyapplying for the LoC (buyer) and the

party for whose benefit the LoC is issued(seller).Between the accountparty (buyer) and the issuing bank.Under this contract, (sometimes calledthe "Application and Agreement" or the"Reimbursement Agreement"), theaccount party applies to the issuing bankfor a specified LoC and agrees to


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reimburse the bank for amounts paid bythat bankBetween the issuingbank and the beneficiary (seller), inorder to support the contract. It is theLoC proper in which the bank promisesto pay the seller pursuant to the termsand conditions stated therein

Independent contracts involved in a LoC:4. How it works:Issuing bank issues LoC in favor of sellerSeller ships goods to the buyer and deliversdocuments of title and draft to the issuing (ornegotiating) bank to recover paymentBuyer procures LoC and obliges himself toreimburse the issuing bank upon receipt of thedocuments of titleIssuing bank opens a LoCwith a correspondent bankabroad (bank-to-banktransaction

5. Perfection of the LoCFrom the time the correspondent bank makespayment to persons in whose favor the LoChas been opened (Belman Inc. vs. CentralBank, 1958)[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law]

[Ces_Sicangco/Rowena_Romero.tax_law]


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Take note: The opening of a LoC is only amode of payment, which is not an essentialrequisite of a contract (Johannes Schuback &Sons vs. CA, 1993). A contract can still beperfected, even without the perfection of aLoC.6. Rules on LoCBank of America vs. CA (1993)

If there is no provision in the Code ofCommerce, follow Uniform Customs andPractice or generally observed usages andcustomsRule of Strict Conformity/Compliance:Documents tendered must strictly conformto the terms of the LoC. The tender ofdocuments by the beneficiary (seller) mustinclude all documents required by the letter.A correspondent bank which departs fromwhat has been stipulated under the letter of

credit, as when it accepts a faulty tender,acts on its own risks and it may notthereafter be able to recover from the buyeror the issuing bank, as the case may be, themoney thus paid to the beneficiaryFeati Bank vs CA (1991)

An advising or notifying bank does not incurany obligation by the notification. Its onlyobligation is to check the apparentauthenticity of the LoC

Negotiating bank has a right of recourseagainst the issuer bank. Until the negotiatingbank is reimbursed, drawer of the draft isstill contingently liable.Relationship between the seller and thenegotiating bank is like that between drawerand purchaser of drafts, ie. the involvedbank deals only with documents and not onthe goods described in the documents.7. Obligations of Parties inLetter of Credit

Independence Principle: Negotiating bankhas no duty to verify if what is described inthe LoC or shipping documents actuallytallies with that loaded aboard a ship. Banksdo not deal with the property to be exportedor shipped to the importer, but deal onlywith documents. International customnegates any duty on the part of a bank toverify whether what has been described inletters of credits or drafts or shipping


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documents actually tallies with what wasloaded aboard ship

BPI vs De Reny Fabrics (1970)

LoC is a primary obligation of the bank. It isseparate from the underlying contract it maysupport, and is not merely an accessorycontract.8. Parties8.1. Buyer-procures the LoC and obliges himself toreimburse the issuing bank upon receipt of thedocuments title

8.2. Issuing bank-undertakes to pay the seller upon receiptof the draft and proper documents of titles and tosurrender the documents to the buyer uponreimbursement

8.3. Seller-who, in compliance with the contract of

sale, ships the goods to the buyer and delivers thedocuments of title and draft to the issuing bank torecover payment.

8.4. Other parties may include:Advising (notifying) bank-may be utilized to convey to theseller the existence of the credit

Confirming bank-will lend credence to the LoC

issued by a lesser known issuingbank. The confirming bank isdirectly liable to pay the seller-beneficiary

Paying bank-undertakes to encash the draftsdrawn by the exporter/seller

Instead of going to theplace of the issuing bank to claim

payment, the buyer may approachanother bank (termed the negotiatingbank) to have the draft discounted(Charles Lee vs CA, 2002)

9. Letter of Credit-TrustReceipt TransactionBank extends loan to borrower. Loan iscovered by a LoC, and the security for the


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loan is a trust receipt.[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures]


10. Kinds of LoC[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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10.1. Commercial LoC10.2. Travellers LoCNote: No protest is required in case ofdishonor. LoCs are issued to definite personsand not to order, thus non-negotiable.

10.3. Other kinds: (SundiangReviewer)Confirmed LoC -whenever thebeneficiary stipulates that theobligation of the opening bankshall also be made theobligation of another bank tohimself

Irrevocable LoC -a definiteundertaking on the part of theissuing bank and constitutes theengagement of that bank to thebeneficiary and bona fideholders of drafts drawn and/or

documents presentedthereunder, that the provisionsfor payment, acceptance ornegotiation contained in thecredit will be duly fulfilled,provided that all terms andconditions of the credit arecomplied with.

-Issuing bank cannotrevoke without consent ofbeneficiary and applicant(Without such consent, it cannot

be cancelled even by a courtorder)Revolving LoC -onethat provides for renewed creditto become available as soon asthe opening bank has advisedthat the negotiating or payingthat the drafts already drawn bythe beneficiary have beenreimburse to the opening bankby the buyer

Back-to-Back LoC -acredit with identicaldocumentary requirements andcovering the same merchandiseas another LoC, except for adifference in the price of themerchandise as shown by theinvoice and the draft. Thesecond letter can be negotiatedonly after the first is negotiated.


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Standby LoC -asecurity arrangement for theperformance of certainobligations. It can be drawnagainst only if another business

transaction is not performed. Itmay be issued in lieu of aperformance bond.

-an absolute undertaking topay the money advanced or theamount for which credit is givenon the faith of the instrument.They are primary obligations andnot accessory contracts. But whilethey are a security arrangement,they are not converted therebyinto contracts of guaranty. (IBAAvs IAC, 1988)

11. Sight Drafts No presentment required before

acceptance.12. Margin FeeTax on sale of foreign exchange. Since thecontract of sale is consensual, it falls dueas soon as the local bank opens the LoC(Pacific Oxygen Company vs. CentralBank, 1968).1.I.Bulk Sales Law(Act 3952, as amended)

1. PurposeTo regulate the sale, transfer, mortgageor assignment of goods, wares,merchandise, provisions or materials inbulk, and prescribing penalties for theviolation of the provisions thereof.To prevent the defrauding of creditors bythe secret sale or disposal or mortgage inbulk of all or substantially all of amerchants stock of goods bulk until thecreditor of the seller shall have been paid

in full.The law is penal in nature. Thus, itsprovisions must be strictly construedagainst the government and liberally infavor of the accused.The general scheme of the law is todeclare such bulk sales fraudulent andvoid as to creditors of the vendor, or


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presumptively so, unless specifiedformalities are observed, such as thedemanding and the giving of a list of[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


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creditors, the giving of actual orconstructive notice to such creditors, bythe record or otherwise, and the makingof an inventory. (Comments and Caseson Sales De Leon, 2005 ed.)

Justification: police power of the state(Liwanag vs Mengraj)2. Types of Sales in Bulk Not in the ordinary course of trade orbusinessAny sale, transfer, mortgage or assignmentof a stock of goods, wares, merchandise,provisions, or materials (Sec 2)

In the course of trade or businessSale, transfer, mortgage or assignment ofall, or substantially all, of the business ortrade conducted or of all, or substantiallyall, of the fixtures and equipment used in

and about the business (Sec 2)Exempt Transactions:Sale or mortgageis made in the ordinary course ofbusinessWhenaccompanied with a written waiver by allthe seller/mortgagors creditors (Sec. 2)Sale by virtue of

a judicial order (Sec. 8)Sale by assigneein insolvency or those beyond the reachof creditorsSale of propertiesexempt from attachment or execution(Rule 39, Sec. 13, Rules of Court)Creditors contemplated:Creditor at the

time of the sale/mortgageNeed not bejudgment creditorsClaim need notbe due Fraudulent conveyance under the Bulk Sales Law asagainst transfer in fraud of creditors under


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the CC:The former is nulland void while the latter (under Arts.1381-1389) is rescissible and is validuntil set aside by a competent court

When the law isduly complied with, the creditors maynot object to the transaction, but it maybe rescinded if it is shown that it was, in

fact, made in fraud of creditors (Pandectof Commercial Law and Jurisprudence JusticeVitug, 1997 ed.)

The law covers all transactions,whether done in good faith or not, or whetherthe seller is in a state of insolvency or not, aslong as the transaction falls within thedescription of what is a bulk sale. Neitherthe motive nor the intention of the seller, northe resulting consequence thereof to his

estate, constitutes an element of what is abulk sale; nor is the proof thereof relevant indetermining whether the said transaction fallswithin the coverage of the law.Albercht vs Cudikee (79 Pac. 628)

The common use of the term stock when appliedto goods in a mercantile house refers to that whichare kept for sale.

Boise Credit Mens Assoc. vs Ellis (133 Pac. 6)

Merchandise must be construed to mean such

things as are usually bought and sold in trade bymerchants. (Peoples Savings Bank vs BenAllsburg, 131 N.W. 101) It means something thatis sold everyday, and is constantly going out of thestore and being replaced by other goods.

Brown vs Quigley (130 N.W. 690)

The term (fixtures) refers to such articles ofmerchandise usually possessed and annexed tothe premises occupied by merchants to enablethem better to store, handle, and display theirwares although removable without material injury

to the premises at or before the end of tenancy.

Comments ad Cases on Sales De Leon, 2000 ed.

Lands and buildings are not goods, merchandiseand fixtures therefore not covered by the BSL.

Philippine Law on Sales Villanueva, 1998 ed.


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The qualification in the normal course ofbusiness applies only to the first type ofbulk sale defined by law.Fraud and insolvency is not an element ofwhat constitutes Bulk Sales.The law covers all transactions, whetherdone in good faith or bad faith.3. Duties of Persons Selling inBulk[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures]


3.1. Statement of Creditors[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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Vendor must, before receiving from thevendee, mortgagee, or agent any part of thepurchase price, or any promissory note,memorandum, or other evidence thereforedeliver a written statement of creditors withthe following information:

i. names and addresses of allcreditors to whom said vendoror mortgagor may be indebtedii. amount of indebtedness due orowing, or to become due orowing to each of said creditors(Sec 3)

The sworn statement shall be registered inthe Bureau of Commerce. For theregistration of each such sworn statement afee of five pesos shall be charged. (Sec 9)

If the vendor/mortgagor receives any part ofthe purchase price, or any promissory note,or other evidence of indebtedness without

having first delivered the sworn statementand without applying the purchase ormortgage money of the said property to thepro rata payment of the bona fide claims ofthe creditors of the vendor or mortgagor, heshall be deemed to have violated this Act,and any such sale, transfer or mortgageshall be fraudulent and void. (Sec 4)

If the vendor / mortgagor shall knowingly orwillfully make, deliver or cause to be madeor delivered, a statement which shall notinclude the names of all such creditors, w/

the correct amount due and to become dueto each of them, or shall contain any false oruntrue statement, shall be deemed to haveviolated the provisions of this Act. (Sec 6)

The vendor, mortgagor, transferor orassignor must apply the purchase money tothe pro-rata payment of bona fide claims ofthe creditors as shown in the verifiedstatement.

3.2. Inventory and NotificationVendor / mortgagor must, at least ten days

before the sale, transfer or execution of amortgage

i.make a full detailed inventoryii.preserve the same showing thequantity and, so far as ispossible with the exercise ofreasonable diligence, the cost


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price to the vendor, transferor,mortgagor or assignor of eacharticle to be included in the sale,transfer or mortgage

iii.notify every creditor whose nameand address is set forth in theverified statement personally orby registered mail, of the price,terms conditions of the sale,transfer, mortgage, orassignment.3.3. Transfer for ConsiderationIt shall be unlawful for vendor to transfer titlewithout consideration or for a nominalconsideration only. (Sec 7)

4. Consequences of NoncomplianceAny person violating any provision of this Act shall,be punished by imprisonment not less than sixmonths, nor more than five years, or fined in sumnot exceeding five thousand pesos, or both. (Sec11)

4.1. Incomplete or false or untruesworn written statement is a violation4.2. Effects of false statements in theschedule of creditorsWithout knowledge ofthe buyer: if the statement is fairupon its face he will be protectedWith knowledge orimputed knowledge of buyer: thevendee accepts it at his peril. The sale

is valid between the vendor and thevendee but void as the against thecreditorsWith names ofcertain creditors without notice: thesale is void as to such creditors,whether that omission was fraudulentor notWith respect to aninnocent purchaser for value from theoriginal purchaser: purchaser shall be

protected

4.3. Effects of violation of law ontransferAs between theparties: valid contractAs betweenpersons other than the creditors: valid


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As to affectedcreditors of the seller/mortgagor: void



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Criminal liability,if expressly provided

1.IIWarehouseReceipts Law(Act 2137)

1. Purpose and CoverageTo regulate the status, rights and liabilitiesof the parties in a warehousing contractTo protect those who, in good faith and forvalue, acquire negotiable warehouse receiptsby negotiationTo render the title to, and the right ofpossession of, property stored in warehousesmore easily convertibleTo facilitate the use of warehouse receipts as

documents of titleIn order to accomplish these, to place amuch greater responsibility on thewarehousemanCovers negotiable warehouse receipts, whichcan only be issued by a warehouseman inthe business of receiving commodities ondeposit for storage. In all other cases wherereceipts are not issued by a warehouseman,Art. 1507-1520 of the Civil Code applies

For public and private warehousesBills of lading and quedans are governed byArt 1507-1520 and 1636 of the Civil Code(Ratio: Sugar centrals that issue quedansare not warehousemen)But note: a warehouse receipt is also cited inArt 1636 as a document of titleAll other negotiable receipts are covered bythe law on negotiable instruments2. Definitions

2.1. WarehousemanPerson lawfully engaged in thebusiness of storing goods for profit (Sec.58a)Duly authorized officer/agent ofa warehouseman may validly issue awarehouse receipt (National Bank vsProducers Warehouse Association, 42


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Phil 609)

2.2. WarehouseBuilding or placewhere goods are deposited and stored forprofit

2.3. Warehouse receiptWrittenacknowledgment by a warehouseman thathe has received and holds certain goodstherein described in store for the personto whom it is issuedSimple writtencontract between the owner of the goodsand the warehouseman to pay thecompensation for that serviceBilateralcontract; imports that goods are in thehouse of the warehouseman and is a

symbolical representation of the property

itself.Not a negotiableinstrument although it is negotiable asprovided by the act.

3. Nature/Characteristics ofWarehouse Receipts3.1. Function of Warehouse ReceiptNegotiation carries with it transfer of title overthe commodity covered by the receipt (thus, it

has the same function as a negotiable bill oflading)

Except: Where a negotiable warehousereceipt is indorsed and delivered to acreditor as a collateral for a loan

If commodity covered by receiptthrough a fortuitous event, the debbear lossistorlostwill

Martinez vs PNB (1953)

Where a warehouse receipt or quedan istransferred or endorsed to a creditor only tosecure the payment of a loan or debt, thetransferee or endorsee does not automaticallybecome the owner of the goods covered by thewarehouse receipt or quedan but he merelyretains the right to keep, and with the consent ofthe owner to sell, them so as to satisfy the


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on account of the real owner, mortgagor orpledgor.

3.2. Form of Warehouse ReceiptSec 2. Warehouse receipts need not be inany particular form but every such receiptmust embody within its written or printedterms:

i.The location of thewarehouse where the goodsare storedii.The date of the issue of thereceiptiii.The consecutive number ofthe receiptiv.A statement whether thegoods received will bedelivered to the bearer, to a

specified person, or to aspecified person in his orderv.The rate of storage chargesvi.A description of the goods orof the packages containing themvii.The signature of thewarehouseman or hisauthorized agentviii.If the receipt is issued for goods

of which the warehouseman isowner, either solely or incommon with others, the factof such ownership, andix.A statement of the amount ofadvances made and ofliabilities incurred for whichthe warehouseman claims alien. If the precise amount ofsuch advances made or of suchliabilities incurred is, at the timeof the issue of, unknown to the

warehouseman or to his agentwho issues it, a statement ofthe fact that advances havebeen made or liabilities incurredand the purpose thereof issufficient. The date of issue appearing in thereceipt indicates prima facie the date whenthe contract of deposit is perfected and whenthe storage charges shall begin to run


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against the depositor. The mere fact that the goods depositedThus, its endorsement and delivery shallconstitute a sufficient transfer of the title ofthe goods (American Foreign Banking Corp. vsHerridge, 49 Phil 975).

3.3. Effect of Non-compliance:Sec. 2. A warehouseman shall beliable to any person injured thereby for alldamages caused by the omission from anegotiable receipt of any of the termsherein required.If any of these requisites in Sec 2are absent, it becomes a deposit only

3.4. Effect of omission of any of theessential terms:Validity ofreceipt is not affected

Warehousemanis liable for damagesNegotiability ofreceipt is not affectedThe issuance ofa warehouse receipt in the form

provided by the law is merelypermissive and directory and notmandatory in the sense that if therequirements are not observed, then the

goods delivered for storage becomeordinary deposits

3.5. Terms that cannot be includedThose contraryto the provisions of the WarehouseReceipts LawThose which

may impair his obligation to exercisethat degree of care in the safekeeping

of the goods entrusted to him which areasonably careful man would exercise inregard to similar goods of his own

Those contraryto law, morals, public customs, publicorder or public policy


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Thoseexempting the warehouseman fromliability for misdelivery

Thoseexempting the warehouseman fromliability for negligence

3.6. Kinds of Warehouse Receiptsare incorrectly described does not makeineffective the receipt when the identity ofthe goods is fully established by evidence.[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


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findNon-Negotiable NegotiableIf goods are soldby assignment,assignee mustadvisewarehouseman.Until he does, hisrights may bedefeated by asubsequentattaching creditor,or a subsequentlevy on execution,or a vendors lienor stoppage intransitu that couldbe enforcedagainst theassignorAs long as the goodscovered by a negotiablewarehouse receipt, these

goods may not beattached etc.Rights of thetransferee:1. Title of thegoods, as againstthe transferor(merely steps intothe shoes)2. Right to notifythe warehousemanof the transfer andacquire the direct

obligation of thewarehouseman tohold the goods forhimRights of the person towhom it is negotiated(holder):1. Title to the goods ofthe person negotiatingthe receipt and title of theperson to whose order thegoods were to bedelivered

2. Direct obligation of thewarehouseman to holdpossession of the goodsfor him, as if thewarehouseman directlycontracted with himNegotiation defeats thelien of the seller of thegoods (sec. 9)Goods represented


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2. Direct obligation of thewarehouseman to holdpossession of the goodsfor him, as if thewarehouseman directlycontracted with himNegotiation defeats thelien of the seller of thegoods (sec. 9)Goods representedcan be subject toattachment or levyby execution (Sec.42)Goods represented cannotbe subject to attachmentor levy by execution,unless in propercircumstances (Sec. 25)[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]situation in which said petitionersthemselves.



i. Non-negotiableSec. 4. A receipt in which it is statedthat the goods received will be deliveredto the depositor or to any other specifiedperson

Sec. 7. A non-negotiable receipt shallhave plainly placed upon its face by thewarehouseman issuing it nonnegotiableor not negotiable. In caseof the warehousemans failure so to do,a holder of the receipt who purchased itfor value supposing it to be negotiable,may, at his option, treat such receipt asimposing upon the warehouseman thesame liabilities he would have incurredhad the receipt been negotiable.This section shall not apply to letters,

memoranda, or writtenacknowledgement of an informalcharacter.

It is transferred by itsdelivery to the transferee accompaniedby a deed of assignment, donation orother form of transfer Effect of failureto mark negotiable: does not render it


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non-negotiable if it contains words ofnegotiabilityii. NegotiableSec. 5. A receipt in which it is statedthat the goods received will be deliveredto the bearer or to the order of anyperson named in such receiptNo provision shall be inserted in anegotiable receipt that it is nonnegotiable.Such provision shall be void.

It is negotiated either bydelivery or indorsement When negotiable receipt notrequired to be surrenderedEstrada vs CAR (1961)

(No surrender needed if ordered by court) TheSC ordered the manager of Moncada BondedWarehouse to release shares in palay without thenecessity of producing and surrendering theoriginal of the warehouse receipts issued. The SCstated our order must be carried out in themeantime that this cases have not been finally

decided in order to ameliorate the precarious

Duplicate ReceiptsSec. 6. When more than one negotiablereceipt is issued for the same goods, theword duplicate shall be plainly placedupon the face of every such receipt,except the first one issued. Awarehouseman shall be liable for alldamages caused by his failure to do so toany one who purchased the subsequentreceipt for value supposing it to be anoriginal, even though the purchase be

after the delivery of the goods by thewarehouseman to the holder of theoriginal receipt.

Negotiable vs Non-negotiablereceipts


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Deliver to X this isnon-negotiable. To sell the goods,the warehouse receipt must beassigned

Deliver to X or order thisis negotiable. The goods can besold by special endorsement anddelivery

Deliver to X orbearer-this is negotiable because itis deliverable to bearer. The goodscan be sold by delivery.

Lost/destroyed receiptsSec. 14. Lost / destroyed receiptsWhere a negotiable receipt has been lost/ destroyed, a court may order the

delivery of the goods uponsatisfactory proof ofloss/ destructiongiving of a bond withsufficient sureties to beapproved by the court to protectthe warehouseman from anyliability or expense, which he orany person injured by suchdelivery may incur by reason ofthe original receipt remaining

outstanding

A court may also order payment ofwarehousemans reasonable costs andcounsel fees.

The delivery of goods shall not relievethe warehouseman from liability to aperson to whom the negotiable receipthas been/shall be negotiated for valuewithout notice of theproceedings/delivery of goods.

4. Assignment and NegotiationSec 41. A person to whom a negotiable receipthas been duly negotiated acquires thereby:

a. Suchtitle to the goods as the personnegotiating the receipt to him had orhad ability to convey to a purchaser ingood faith for value, and also such titleto the goods as the depositor or person


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to whose order the goods were to bedelivered by the terms of the receipt hador had ability to convey to a purchaserin good faith for value, andb. Thedirect obligation of the warehouseman tohold possession of the goods for himaccording to the terms of the receipt asfully as if the warehouseman andcontracted directly with him.Note: Negotiable Warehouse Receipt is different froma Negotiable Instrument

Note: Negotiation takes effect as of the time whenthe indorsement is actually made.

NegotiableInstrumentsNegotiableWarehouseReceiptsAllow negotiationIf deliberatelyaltered, it becomes

null and voidIf altered, it is stillvalid, but can beenforced only accdgto its original tenorSubject is money Subject ismerchandiseObject of value isthe instrument itselfObject of value isthe goods depositedLiability ofintermediate parties

is secondary (NIL)Liability ofintermediate partiesis none (for failureto deliver goods)If originally payableto bearer, it willalways remain soeven if it isendorsed speciallyor in blankIf originally payableto bearer but is

endorsed specially,it will becomedeliverable to orderand can only benegotiated byindorsement anddeliveryHolder in duecourse may obtain atitle better than that


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which the partynegotiating to himhadEndorsee, even if aholder in duecourse, obtains onlysuch title as theperson negotiatinghad over the goods

Who may negotiate awarehouse receipt:its ownerany person to whomthe possession or custody of thereceipt has been entrusted by theowner, if, by the terms of the receipt,the goods are deliverable to theperson to whom the possession orcustody of receipt has been entrusted

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jac

ob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


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or in such a form that it may benegotiated by delivery (Sec. 40)

Warranties:that receipt isgenuine

legal right tonegotiateno knowledge of

defects that may impair receiptright of transferto title over goods and that thegoods are merchantable

The indorser does notguarantee that the warehouseman

will comply with his duties (Sec. 45) Creditor receiving thewarehouse receipt which is given as acollateral makes no warranty (Sec. 46)5. Rights and Duties of aWarehouseman5.1. RightsDegree of Care

Sec 3. A warehouseman may insert in areceipt issued by him any other terms andconditions provided that such terms and

conditions shall not:

xxx

a)in any wise impair his obligation toexercise that degree of care which areasonably careful man would exercisein regard to similar goods of his own

General Rule: Warehouseman isrequired to exercise such degree of carewhich a reasonable careful owner would

exercise over similar goods of his own.He shall be liable for any loss or injury tothe goods caused by his failure toexercise such care.

Exception: He shall not be liable for anyloss or injury which could not have beenavoided by the exercise of such care.

Exception to the exception: He may


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limit his liability to an agreed value ofthe property received in case of loss. Hecannot stipulate that he will not beresponsible for any loss caused by hisnegligence.

To be paid

In case of nonpayment,to exercise his lien on the goodsdeposited

To refuse delivery inproper legal circumstances

5.2. DutiesIssue a warehousereceipt in the required form for goodsreceived

Obligation to Deliver

Goods

Sec 8. A warehouseman, in the absence ofsome lawful excuse provided by this Act, isbound to deliver the goods upon a demandmade either by the holder of a receipt for thegoods or by the depositor; if such demand isaccompanied with:

1. an offer to satisfy the warehouse

mans lien2. an offer to surrender the receipt,if negotiable, with such indorsementsas would be necessary for thenegotiation of the receipt; and3. a readiness and willingness tosign, when the goods are delivered,an acknowledgement that they havebeen delivered, if such signature isrequested by the warehouseman.The burden shall be upon the warehousemanto establish the existence of a lawful excusefor such refusal.

General Rule: a demand should be madeon the warehouseman in order that theduty to deliver the goods will arise

Exception: when the warehouseman hasrendered it beyond his power to deliverthe goods, demand may be dispensedwith [Art. 1169(3), Civil Code]


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indorsed to him or in blank by the had reasonable time to ascertain theperson to whom delivery was validity of the various claims; he is notpromised by the terms of the receipt excused from liability in case he makes aor by his mediate or immediate mistake (Comments and Cases on Creditindorser. Transactions De Leon, 2002 ed.)

Sec. 10. When a warehouseman delivers thegoods to one who is not in fact lawfullyentitled to the possession of them, thewarehouseman shall be liable as forconversion to all having a right of propertyor possession in the goods if he delivered thegoods otherwise than as authorized by (b)and (c) of Sec 9

Though he delivered the goods as authorizedby said subdivisions he shall be so liable, ifprior to such delivery he had either:

1.been requested, by or on behalf ofthe person lawfully entitled, not tomake such delivery or

2.had information that the deliveryabout to be made was to one notlawfully entitledConversion

-an unauthorized assumption andexercise of the right of ownership over goodsbelonging to another through the alterationof their condition or the exclusion of theowners right (Bouviers Law Dictionary)

Sec. 17. If more than one person claims the

title/possession of the goods, thewarehouseman may, either as a defense toan action or as an original suit, require allknown claimants to interplead.

Sec. 18. If:

1.someone other than the depositor orperson claiming under him has aclaim to the title or possession ofgoods AND2.

the warehouseman has informationof such claimthe warehouseman shall be excused fromliability for refusing to deliver the goods untilhe has had:

2.reasonable time to ascertain thevalidity of the adverse claim OR3.


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bring legal proceedings to compelclaimants to interpleadSec. 18 not applicable to cases wherethe warehouseman himself makes aclaim to the goods (67 C.J. 536)In case there are adverse claimants, thewarehouseman can refuse to deliver thegoods to anyone of them until he hasOriginal action or counterclaim forinterpleader, whichever is appropriate. Insuch case, the warehouseman will berelieved from liability in delivering thegoods to the person found by the court tohave a better right (Comments and Caseson Credit Transactions De Leon, 2002ed.)Other instances when the warehousemanmay refuse to deliver:when the holder of the receipt

does not satisfy the conditionsprescribed in Sec. 8

when the warehouseman haslegal title in himself on the goods,such title or right being deriveddirectly or indirectly from thetransfer made by the depositor atthe time or subsequent to thedeposit for storage, or from thewarehousemans lien (Sec. 16)

General rule: The warehouseman cannotrefuse to deliver on the ground that he ownsthe goods (bailee cannot assert title to thegoods entrusted to him).Exceptions: In the 2 cases mentioned above

Where the goods havealready been lawfully sold to thirdpersons to satisfy thewarehousemans lien or disposed ofbecause of their perishable nature(Sec. 36)

In the valid exercise ofthe warehousemans lien (Sec. 31)The warehouseman willnot be required to deliver the goodsif such had been lost. But this iswithout prejudice to liabilities whichmay be incurred by him due to suchloss.


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On commingling ofGoods

General Rule :Sec. 22 A warehouseman shall keep the goods sofar separate from

1.the goods of other depositors and2.from other goods of the samedepositor for which a separatereceipt has been issuedas to permit at all times the identification andredelivery of the goods deposited.

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gerv

asio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


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delivery on receipt, or else he is liable

Exception:Sec. 23.

1.If authorized by agreement or customand2. Goods are fungiblethe warehouseman may mingle with other goodsof the same kind and grade.The various depositors shall own the entire massand each shall be entitled to such portion as theamount deposited by him bears to the whole.

.The warehouseman shall beseverally liable to each depositor forthe care and redelivery of his shareof such mass to the same extentand under the same circumstancesas if the goods had been keptseparate.

To insure the goods in propercircumstances

.Where the law provides.Where it was aninducement for the depositor toenter into the contract

.

Established practice.Where the warehouse

receipt contains arepresentation to that effect

To mark anon-negotiable warehouse receipt

as such

To mark assuch the duplicates of a negotiablewarehouse receipt

To give theproper notice in case of sale of thegoods as provided in the law


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To take upand cancel the warehouse receipt

when the goods are delivered

Other Duties.Ifwarehouseman fails to cancelreceipt when he delivers goods, heis liable if receipt should turn upagain (Sec 11).Warehouseman should record partial

on entire receipt (Sec 12).Ifalteration is authorized,warehouseman is liable as altered. Ifnot authorized, warehouseman is

liable as originally issued (Sec 13)

Effects of alteration:Alteration immaterial(tenor of receipt notchanged)(WON fraudulent;WON authorized)warehouseman isliable on the alteredreceipt accdg to itsoriginal tenorAlteration material

but authorizedWarehouseman isliable accdg to itsterms as alteredMaterial alterationinnocently madeLiable accdg to itsoriginal tenorMaterial alteration Liable accdg to thefraudulently made original tenor to apurchaser of receiptfor value withoutnotice and even to

the alterer andsubsequentpurchasers withnotice (except thatliability is limitedonly to delivery as heis excused from anyliability)

A fraudulent alteration cannot


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divest the title of the owner of thestored goods and the warehousemanis liable to return them to the owner A bona fide holder acquires noright to the goods under a lost orstolen negotiable receipt or to whichthe indorsemant of the depositor hasbeen forged.Warehouseman is liable forissuing receipt for non-existing goods ormisdescribed goods (Sec. 20)

Effect of misdescription of goods:

Warehouseman is underthe obligation to deliver theidentical property stored with himand if he fails to do so, he is liabledirectly to the owner.

As against a bona fidepurchaser of a warehouse receipt, thewarehouseman is estopped from

denying that he has received thegoods described in the receipt[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


49/79


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claimsIf such person had been soentrusted with the possession ofgoods such that a pledge by himat the time of the deposit to one

who took the goods in good faithfor value would have been valid.

Sec. 29. A warehouseman loses his lien:

1.by surrendering possession of thegoods2.by refusing to deliver the goods when ademand is made with which he is bound tocomplySec. 31. A warehouseman having a valid lienagainst the person demanding the goods mayrefuse to deliver the goods until the lien issatisfied.

The warehousemans lien is

possessory in nature (PNB vs Judge Se) Involuntary parting withpossession of goods ordinarily does not resultin loss of his lien by a warehouseman (93C.J.S. 59) A warehouseman who hasreleased his lien by the surrender of the goodsmay not thereafter claim a lien on other goodsof the same depositor for unpaid charges onthe goods if the goods were delivered to himunder different bailments The loss of the warehousemanslien does not necessarily mean the

extinguishments of the depositors obligationto pay the warehousing fees and chargeswhich subsists to be a personal liability Remedies discussed in PNB vs.Sajo, 292 SCRA 202 (1998)To refuse to deliverthe goods until his lien is satisfied(Sec 31)To sell the goods bypublic auction and apply theproceeds to the value of the lien

(Sec 33 and 34)

Effects:

.the warehouseman is notliable for non-delivery evenif the receipt given for thegoods were negotiated(Sec. 36)


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.where the sale was madewithout the publicationrequired and before thetime provided by law, suchsale is void and thepurchaser of the goodsacquires no title in them(Eastern Paper Mills Co.,Inc. vs RepublicWarehousing Corp, 170SCRA 595)

By other meansallowed by law to a creditor against

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law][Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gerv

asio.comm_law][Ces_Sicangco/Rowena_Romero.tax_law]


52/79

his debtor, to collect from thedepositor all charges andadvances which the depositorexpressly or impliedly contractedwith the warehouseman to pay(Sec 32)Other remediesallowed by law to enforce a lienagainst personal property (Sec35)

Thewarehouseman may refuse to deliver goodsto any holder of the receipt when thestorage fee stipulated in the receipt has notyet been paidPNB vs. Se (1996)

While the PNB is entitled to the stocks of sugaras the endorsee of the quedans, delivery to itshall be effected only upon payment of thestorage fees. Imperative is the right of the

warehouseman to demand payment of his lien atthis juncture, because in accordance with Section29 of the Warehouse Receipts Law, thewarehouseman loses his lien upon goods bysurrendering possession thereof. In other words,the lien may be lost where the warehousemansurrenders the possession of the goods withoutrequiring payment of his lien, because awarehouseman's lien is possessory in nature.

But the warehouseman cannot refuse todeliver the goods because of an adverse

claim of ownership [PNB vs. Sayo, 292 SCRA202 (1998)]Rules on attachment/execution ofgoods deposited:In case of negotiable receipt,the goods cannot be attached or leviedin execution unless:

.receipt is firstsurrendered

.its negotiation isenjoined.receipt is impounded bythe court (Sec. 25)Creditors remedies: seek for the

attachment of the receipt or seek aidfrom courts to compel the debtor to


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satisfy claims by means allowed by lawin regard to property which cannotreadily be attached or levied upon byordinary process (Sec. 26)

Not applicable:

If the depositor is not the owner ofthe goods (thief) or one who has noright to convey title to the goodsbinding upon the owner

Actions for recovery or manualdelivery of goods by the real ownerWhere attachment is made prior tothe issuance of receiptRights acquired by attaching creditorscannot be defeated by the issuance of anegotiable receipt of title thereafter(International Breeding Co. vs TerminalWarehouse Co., 126 Atl. 902)

In case of a nonnegotiablereceipt, the goods can beattached, provided it is done prior to thenotification of the warehouseman of thetransfer (Sec. 42); reason: absent suchnotice, both the warehouseman and thesheriff have a right to assume that thegoods are still owned by the person whosename appears in the receipt

7. Liabilities

CivilliabilitiesCriminalliabilitiesWarehouseman For damages 1. issuanceor his agent suffered forfailure tocomply withlegal dutiesof receiptsfor goods notreceived(Sec. 50)

2. issuanceof receiptcontainingfalsestatement(Sec. 51)3. issuanceof duplicatenegotiablewarehouse


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receipt notmarked assuch (Sec.52)4. issuanceof anegotiablewarehousereceipt forgoods ofwhich he isan ownerwithoutstating suchfact ofownership(Sec. 51)5. delivery of

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]



55/79

CivilliabilitiesCriminalliabilitiesgoodswithoutobtainingnegotiablewarehousereceipt (Sec.54)3rd persons Negotiationof warehousereceiptissued formortgagedgoods withintent todeceive

General BondedWarehouse Act(Act 3893 as amended by

RA 247)

1. PurposeAn act to regulate the business ofreceiving commodities for storage,giving the director of Commerce andIndustry the duty to enforce if, providingpenalties for violation of the provisions,exempting cooperative marketingassociations of commodity producersfrom application thereof.

To protect depositors by giving them adirect recourse against the bond filed bythe warehouseman in case of the lattersinsolvencyTo encourage the establishment of morewarehouses2. Definition ofTerms2.1. WarehouseEvery building, structure, or other protectedenclosure in which commodities are kept forstorage.

2.2. WarehousemanA person engaged in the business receivingcommodities for storage

2.3. ReceiptAny receipt issued by a warehouseman forcommodities delivered to him.

Gonzales vs Go Tiong (1958)


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The kind or nature of the receipts issued byhim for the deposits is not very material,much less decisive. Though it is desirable thatreceipts issued by a bonded warehousemanshould conform to the provisions of theWarehouseman Receipts Law, said provisionsare not mandatory. Under Section 1 of theWarehouse Receipts Act, the issuance of awarehouse receipt in the form provided by it ismerely permissive and directory and notobligatory.

CommoditiesAny farm, agricultural orhorticultural product;

animal and animal husbandry orlivestock, dairy or poultry product;

water, marine or fish product;

mineral, chemical, drug ormedicinal product;

forestry product; and any raw,processed, manufactured or finished

product or by-product

good, article, or merchandise,either of domestic or of foreignproduction or origin, which may betraded or dealt in openly and legally.

3. Business of ReceivingCommodities for StorageThe business of receiving commodities for storageshall include any contract or transaction wherein

1.the warehouseman is obligated toreturn the very same commodities

delivered to him or pay its value;

2.the commodities delivered is to bemilled for and on account of theowner thereof;

3.the commodities delivered iscommingled with the commodities


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delivered by or belonging to otherpersons and the warehouseman isobligated to return the commodities ofthe same kind or pay its value. The kinds of commodityto be deposited must be those, which may be[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures]


traded or dealt in openly and legally. Thus,[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


58/79

illegal and prohibited goods may not bevalidly received (Sec. 2)

The warehouseman isnot covered by law if the owner merely rentsspace to a certain group of persons becausethe law covers warehouse that acceptsgoods: (a) storage, (b) milling andcommingling with the obligation to returnthe same quantity or to pay their value.Limjoco vs Director of Commerce (1965)

Any contract or transaction wherein the palaydelivered is to be milled for and on account ofthe owner shall be deemed included in thebusiness of receiving rice for storage. In otherwords, it is enough that the palay is delivered,even if only to have it milled.In this case it is a fact that palay is delivered toappellant and sometimes piled inside her"camalig" in appreciable quantities, to wait for itsturn in the milling process. This is precisely thesituation covered by the statute.

The main intention of the law-maker is to giveprotection to the owner of the commodityagainst possible abuses (and we might addnegligence) of the person to whom the physicalcontrol of his properties is delivered.

4. Requirement of LicenseNo person shall engage in the business ofreceiving commodities for storage without firstsecuring a license therefore from the Director ofthe Bureau of Commerce and Industry. Saidlicense shall be annual and shall expire on thethirty-first day of December.

Any person applying for a license shall set forthin the application

the place or places where thebusiness and warehouse are to beestablished or located andthe maximum quantity ofcommodities to be received.There shall be imposed an annual license fee of:

P50 for the first 1000 square meters ofprotected enclosure or 1000 cubicmeters of storage space, or any fractionof such enclosure or space, and2 centavos for each additional squaremeter or cubic meter.5. Requirement of BondThe application shall be accompanied by a cash


59/79

bond or a bond secured by real estate or signedby a duly authorized bonding company at not

less than 33 1/3% of the market value of themaximum quantity or commodities to be received.Said bond shall be so conditioned as to respond forthe market value of the commodities actually

delivered and received at any time thewarehouseman is unable to return thecommodities or to pay its value.

The bond shall be approved by the Director of theBureau of Commerce and Industry before issuing alicense under this Act.Whenever the Director shall determine that a bondapproved by him has become insufficient, he mayrequire an additional bond or bonds to be given bythe warehouseman concerned.Any person injured by the breach of any obligationto secure which a bond is given, shall be entitledto sue on the bond in his own name in any court ofcompetent jurisdiction to recover the damages hemay have sustained by such breach.

Nothing contained herein shall except any propertyof assets of any warehouseman from being suedon in case the bond given is not sufficient torespond for the full market value of thecommodities received by such warehouseman.

6. Requirement of InsuranceEvery person licensed to engage in the business ofreceiving commodities for storage shall insure thecommodities so received and stored against fire.

For palay and corn license, a bond with

the National Grains Authority is required; alsoan insurance cover is required7. Duties of BondedWarehouseman7.1. Storage of CommoditiesEvery warehouseman shall receive for storage,so far as his license and the capacity of hiswarehouse permit, any commodities, of thekind customarily stored therein by him, whichmay be tendered to him in a suitable conditionfor warehousing, in the usual manner and inthe ordinary and usual course of business,without making any discrimination between

persons desiring to avail themselves ofwarehouse facilities.

7.2. Give the necessary bond7.3. Insure against fire the commodityreceived (Sec. 6)[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures]


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[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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i.engaging in business covered bythe Act in violation of the licenserequirement (Sec. 11)ii.receiving a quantity of commoditygreater than its capacity or that specifiedin the license, if the goods deposited arelost or destroyed (Sec. 12)iii.connivance with a warehousemanfor the purpose of evading the licenserequirement (Sec. 13)1.IIITrust Receipts Law(PD 115)

1. Definition of Trust ReceiptAs a document, it is a written or printeddocument signed by the entrustee in favor ofthe entruster whereby the latter releases thegoods to the possession of the former upon

the entrustees promise to hold said goods intrust for the entruster, to sell or dispose of thegoods, and to return the proceeds thereof tothe extent of what is owing to the entruster;OR to return the goods, if unsold or nototherwise dispose of (Sec. 4)Trust Receipt transaction a separate andindependent security transaction intended toaid in financing importers and retail dealerswho do not have sufficient funds to finance theimportation/purchases and who may not beable to acquire credit except through

utilization, as collateral, of the merchandiseimported/purchased (Nacu vs. CA; South CityHome vs. BA Finance)Goods are owned by the bank, and are onlyreleased to the importer in trust after thegrant of the loan. The bank acquires a securityinterest in the goods as holder of a securitytitle for the advances it made to the entrustee.Entrustee must deliver money or return unsoldgoods to entrustor

Bank is preferred over other creditors.Bank is also not liable to buyer of goods asvendorPurchaser from entrustee gets good title.No particular form is required for trust receipt,but it must substantially contain:


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Description of thegoods, documents or instrumentssubject of the TRTotal invoice value ofthe goods and the amount of the draftto be paid by the entrustee



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Undertaking or acommitment of the entrustee

.to hold in trust for theentruster the goods, documentsor instruments therein described

.to dispose of them in themanner provided for in thetrust receipt

.to turn over the proceeds ofthe sale of the goods,documents or instruments tothe entruster to the extent ofthe amount owing to theentruster or as appears in thetrust receipt or to return thegoods, documents or

instruments in the event of theirnon-sale within the periodspecified therein (Sec. 5)

the trust receipt maycontain other terms and conditionsagreed upon by the parties in addition tothose hereinabove enumerated providedthat such terms and conditions shall notbe contrary to provisions of this Decree,any existing laws, public policy ormorals, public order or good customs

(Sec. 5)trust receipts aredenominated in Philippine currency oracceptable and eligible foreign currency

2. Purposes of the Law To encourage the use of and promotetransactions based on trust receipts;regulate the use of trust receipts; encourageand promote the use of trust receipts as anadditional and convenient aid to commerceand trade

To regulate trust receipt transactions inorder to assure the protection of the rightsand the enforcement of the obligations of theparties involved To declare the misuse ormisappropriation of goods or the proceedsrealized from the sale of goods releasedunder trust receipts as an offense punishableunder Art. 315, RPC (Sec. 2) To punish the dishonesty and abuse of


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confidence in the handling of money orgoods to the prejudice of another regardlessof whether or not the latter is the owner(Colinares vs. CA, 2000)3.NatureofTrustReceiptTransaction

Sec 4. Any transaction by and between anentruster and an entrustee, whereby

the entruster, who owns/holds absolute title orsecurity interests over certain specified goods,documents or instrumentsreleases the same to the possession of theentrustee upon the latter's execution anddelivery of a signed document called a "trustreceipt" wherein the entrustee binds himselfto hold the designatedgoods, documents or instruments intrust for the entruster and

to sell or otherwisedispose of the goods, documents orinstruments with the obligation toturn over to the entruster theproceeds or the goods, documents orinstruments themselves if they areunsold or for other purposessubstantially equivalent to any of thefollowing:

.In the case of goods ordocuments

to sell / procure their sale; orto manufacture or process thegoods with the purpose ofultimate sale: Provided thatthe entruster shall retain titleover the goods whether in itsoriginal or processed formuntil the entrustee hascomplied fully with hisobligation under the trust

receipt; orto load, unload, ship ortranship or otherwise dealwith them in a mannerpreliminary or necessary totheir sale; or.In the case ofinstruments,


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general property rights in such goods/documents/instruments, orwho sells the same to the buyer oncredit, retaining title or other interest assecurity for the payment of the purchasepricedoes not constitute a trust receipt transactionand is outside the purview and coverage of thisDecree.

Notes :

This is not a simple loan transaction betweena creditor and debtor-importerThe law warrants the validity of theentrusters security interest as against thecreditors of the trust receipt agreement.PD 115 Civil CodeAlthough the entrustee

is not the owner of thegoods, anyone whobuys from him acquiresgood title over thegoodsBuyer acquires onlywhatever title theseller has at the timethe sale is perfected(Art 1505)Even if the entrustee isnot the owner, hebears risk of loss while

the goods are in hispossessionGenerally, owner bearsloss

Landl & Co. (Phil) Inc. vs Metropolitan Bank(2004)

A trust receipt agreement is merely a collateralagreement, the purpose of which is to serve assecurity for a loan.

Allied Banking vs Ordonez (1990)

(Capital goods are covered.)

Applies even to goods not destined for sale ormanufacture, and would include items obtainedto repair and maintain equipment used inbusiness

4. Trust Receipts as AgainstOther Transactions


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(Notes on Selected Commercial Laws: A Guidefor Bar Reviewees, Tristan Catindig, 2003 ed.)

OthertransactionsTrust ReceiptTransactionChattelMortgagesubjects theproperty toa lienno lien is createdover the propertyPledge financerpossessesthe propertyperson financedpossesses thepropertyConditional There is a There is no sale of5. Parties[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design]

[Bobbie_StaMaria.printing] [Miles Malaya.lectures][Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]Sale sale of thepropertyfrom theseller to thethe property fromthe entruster tothe entrusteebuyerConsignment 1.Bipartite2.Consignor

retains1. Tripartite2. Seller does notretain title to theownership ofthe propertyproperty

Colinares vs CA (2000)

(Loan vs trust receipts transaction)

This situation belies what normally obtains in a

pure trust receipt transaction where goods areowned by the bank and only released to theimporter in trust subsequent to the grant of theloan. The bank acquires a security interest in thegoods. The ownership of the merchandisecontinues to be vested in the person who hadadvanced payment until he has been paid in full,or if the merchandise has already been sold, theproceeds of the sale should be turned over to him.The bank takes full title to the goods and


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continues to hold that as his indispensable securityuntil the goods are sold and the vendee is calledupon to pay for them. Trust receipts partake of thenature of a conditional sale where the importerbecomes absolute owner of the importedmerchandise as soon as he has paid its price.

Consolidated Bank vs CA (2001)

(Simple loan vs trust receipt transaction)

The delivery to Corporation of the goods subject ofthe trust receipt occurred long before the trustreceipt itself was executed. This situation isinconsistent with what normally obtains in a puretrust receipt transaction, wherein the goods belongin ownership to the bank and are only released tothe importer in trust after the loan is granted.

Robles vs CA (1991)

(Bipartite transactions are covered).

In deciding WON the delivery trust receipts

covered a trial sale transaction or one that fellunder the trust receipts law, the SC found that therequisites under Sec 4 were met:

1)Paramount retained ownership of the

office equipment covered by the receipts;

2)possession of the goods was subject to a

fiduciary obligation to return them within

a specified period or to account for the

proceeds thereof



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5.1. Entrusterlender/financierperson holding title over thegoods, documents or instrumentssubject of a trust receipttransaction; releases possession ofthe goods upon execution of trustreceiptnot the owner of the goods, butmerely a holder of security interestif it is made to appear in thetrust receipt as the owner of thegoods purchased, it is merelytheoretical, an artificial expedientand more of fiction than fact (Garciavs. CA; Vintola vs. IBAA; PNB vs.Pineda); see, however, the contraryview of Prof. Catindig and therulings in Colinares vs. CA and

Prudential Bank vs. IAC

5.2. Entrusteeborrower/buyer/importerperson towhom the goods are delivered forsale or processing in trust, with theobligation to return the proceeds ofsale of the goods or the goodsthemselves to the entruster

the owner ofthe goods purchased; in fact, thelaw imposes on him the risk of lossof the goods. Res perit domino.

5.3. Seller of the goodsnot strictly andactually a party to the trust receipttransaction, but a party to thecontract of sale with thebuyer/importer (entrustee)

6. Rights/Duties of theEntruster6.1. Rights of EntrusterSec.7. The

entruster shall be entitled to.the proceeds from the sale


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of the goods, documents orinstruments to the extent of theamount owing to the entruster or asappears in the trust receipt, or.to the return of the goods,documents or instruments in case ofnon-sale, and

.to the enforcement of allother rights conferred on him in thetrust receiptExtent of securityinterest

.as against theinnocent purchaser for value not preferred (Sec. 11).as againstcreditors of entrustee preferred

(Sec. 12)

Prudential Bank vs NLRC (1995)

(Nature of interest of entruster in goodscovered)

The security interest of the entruster is notmerely an empty or idle title. To a certainextent, such interest becomes a "lien" on thegoods because the entruster's advances willhave to be settled first before the entrustee canconsolidate his ownership over the goods. The

law warrants the validity of petitioner's securityinterest as against all creditors of the trustreceipt agreement. The only exception is whenthe properties are in the hands of an innocentpurchaser for value and in good faith.

Prudential Bank vs NLRC (1995)

The goods covered by trust receipts cannot belevied upon by creditors of the entrustee.

The entruster may cancel the trust and takepossession of the goods, documents or

instruments subject of the trust or of theproceeds realized therefrom at any time upondefault or failure of the entrustee to complywith any of the terms and conditions of thetrust receipt or any other agreement betweenthe entruster and the entrustee.

The entruster in possession of the goods,documents or instruments may, on or afterdefault, give notice to the entrustee of the


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intention to sell, and may, not less than fivedays after serving or sending of such notice,sell the goods, documents or instruments atpublic or private sale, and the entruster may,at a public sale, become a purchaser.

The proceeds of any such sale, whether publicor private, shall be applied

to the payment of the expensesthereof; to the payment of the expensesof re-taking, keeping and storing thegoods, documents or instruments;to the satisfaction of thethe[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design][Bobbie_StaMaria.printing] [Miles Malaya.lectures]


entrustee's indebtedness toentruster.[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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The entrustee shall receive any surplus but

keep said goods

shall be liable to the entruster for anydeficiency.

6.2. Duties of EntrusterTo give possession of the goodsto the entrusteeTo give at least 5 days notice tothe entrustee of the intention to sell thegoods at an intended public sale

State Investment vs CA (2000)

(Entruster not entitled to proceeds of sale ofgoods not covered by trust receipt)

The evidence for PNB fails to establish that the

vehicles sold to the Francos were among thosecovered by the trust receipts. Neither the trustreceipts covering the units imported nor thecorresponding bills of lading contain thechassis and engine numbers of the vehicles inquestion.

or proceeds separate and capable of

identification;return the goods,documents or instruments in the event

of non-sale or upon demand;

observe all otherterms and conditions of the trustreceipt

Vintola vs IBAA (1987)

(Liability of entrustee not extinguished by returnof goods to entruster)

IBAA did not become the real owner of the

goods ; it was merely the holder of a securitytitle for the advances it had made to theVintolas. The goods remain the Vintolas ownproperty. The trust receipt arrangement did notconvert the IBAA into an investor. The fact thatthe Vintolas were unable to sell the seashellsdoes not affect IBAA's right to recover theadvances made under the Letter of Credit

7. Rights/Duties of the


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Entrustee7.1. Rights of EntrusteeTo receive the

surplus from the public saleTo havepossession of the goods as a conditionfor his liability under the Trust ReceiptLaw (Ramos vs. CA)

7.2. Duties of EntrusteeSec. 9.hold the goods,documents or instruments in trustfor the entruster and shall dispose ofthem strictly in accordance with theterms and conditions of the trustreceipt;

receive the

proceeds in trust for the entruster andturn over the same to the extent ofthe amount owing to the entruster or asappears on the trust receipt;

insure thegoods for their total value against lossfrom fire, theft, pilferage or othercasualties;

7.3. Risk of Loss borne by entrusteeSec. 10. The risk of loss shall be borne by the

entrustee ; irrespective of whether or not it wasdue to the fault or negligence of the entrustee,shall not extinguish his obligation to the entrusterfor the value thereof.

7.4. Non-Liability of Entruster for Saleby EntrusteeSec. 8. The entruster holding a security interestshall not, merely by virtue of such interest orhaving given the entrustee liberty of sale or otherdisposition of the goods, documents orinstruments be responsible as principal or asvendor under any sale or contract to sell made by

the entrustee.

8. Purchaser in Good Faith Acquisition by purchaser of goods ingood faithSec 11. Any purchaser of goods from an entrusteewith right to sell, or of documents or instrumentsthrough their customary form of transfer, whobuys such for value and in good faith from theentrustee, acquires said goods, documents or


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instruments free from the entruster's securityinterest.



9. Remedies Available[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law][Hya_Rafael/Mac_Macapagal.crim_law]


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Failure to turn over proceeds of the sale ofgoods or to return unsold goods is a publicnuisance to be abated by the imposition ofpenal sanctions (Tiomico vs. Court ofAppeals, 1999).The offense is malum prohibitum. There isno need to prove damage to the entrustor.(Metropolitan Bank vs. Tonda, 2000), orintent to defraud (People vs. Cuervo, 1981)Offense: estafa under Art 315 of the RevisedPenal Code.Also, liable for damages under Art. 33, CC(Prudential vs. IAC, PP vs. Cuervo, MBTC vs.Tonda)Effect of compliance:before criminalcharge no criminal liability

after charge,before conviction extinguishmentsof criminal liability Liability of entrustee accrues on hisfailure to comply with his obligation toreturn. It is not absolutely necessary thatthe entruster cancels the trust and takepossession of the goods to be able to enforcehis rights under this law. PD 115 allows the bank to takepossession of the goods covered by the trustreceipts. Thus, even though the bank took

possession of the goods covered by the trustreceipts, the entrustees remained liable forthe entire amount of the loans covered bythe trust receipts (Phil. Blooming vs. CA)Lee vs Rodil (1989)

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