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CREDIT, APPLICANT-ENTRUSTEE, SECURED TRANSACTIONS, LETTERS OF CREDIT…

- - - - What can we do with trust or belief?
    - - Why can we borrow money?
        Because of confidence or trust
        
        When the "lender" can trust you or believe you, you can borrow
        
        So How do you borrow?
        So why can they trust you?
        THROUGH Warehouse Receipts, Trust Receipts, Letters of Credit
        
        What are these receipts and letters?
        
        Warehouse Receipts
        
        Trust Receipts
        
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        How does a warehouse receipt show that you can trust or believe the debtor?
        
        How do these devices show that you can trust or believe the debtor?
        
        Why or how is there trust or confidence in receipts?
        
        They're evidence of this trust
- - - - LETTERS OF CREDIT
        Is under "Secured Transactions", why?
        
        GENERAL CONCEPTS
        
        KINDS OF LETTERS OF CREDIT
        
        RULE OF STRICT COMPLIANCE
        
        INDEPENDENCE PRINCIPLE
        Called "Independent Contract" principle
        (Transfield Philippines, Inc. v. Luzon Hydro Corp., G.R. No. 146717, [November 22, 2004], 485 PHIL 699-731)
        
        PROVISIONS NOT PRESCRIBED
        
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        ASSURES BENEFICIARY PROMPT PAYMENT
        The independence principle in letters of credit assures the beneficiary of prompt payment independent of any breach of the underlying or principal obligation and precludes the issuer from determining whether the underlying or principal obligation is actually accomplished or not.
        
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        ASSURES THAT ISSUER IS NOT LIABLE
        Under this principle, issuers assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person.
        
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        FRAUD EXCEPTION RULE
        The independence principle admits of an exception, referred to as the fraud exception rule. The untruthfulness of a certificate accompanying a demand for payment under a letter of credit may qualify as fraud, sufficient to support an injunction against payment.
        However, injunction should not be granted unless:
        
        CLEAR PROOF -
        There is clear proof of fraud;
        
        ABUSE IS OF INDEPENDENT PURPOSE OF LETTER, NOT MERELY FRAUD UNDERLYING OBLIGATION -
        The fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud under the underlying obligation; and
        
        IRREPARABLE INJURY - Irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously affected.
        
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        DOCUMENTS TENDERED BY BENEFICIARY MUST STRICTLY CONFORM TO THE TERMS OF THE LETTER OF CREDIT.
        Under the rule of strict compliance, the documents tendered by the beneficiary must strictly conform to the terms of the letter of credit. The tender of documents must include all documents required by the letter. (Feati)
        
        EFFECT OF NON-CONFORMITY
        An honoring entity that departs from what has been stipulated under the letter of credit, as when it accepts a faulty tender, acts on its own risk and may not thereafter recover from the applicant or the issuer, as the case may be, the money thus paid to the beneficiary. (Feati)
        
        MERE FACT THAT DOCUMENT WAS SPECIFIED IN THE LETTER MEANS SUCH DOCUMENT IS OF VITAL IMPORTANCE
        An honoring entity deals only with documents, and it is not in a position to determine whether or not the documents required by the letter of credit are material or superfluous. The mere fact that the document was specified therein readily means that the document is of vital importance to the applicant. (FEATI Bank & Trust Company v. Court of Appeals & Villaluz, G.R No. 94209, April 30,1991, SCRA 576)
        
        COMMERCIAL LETTERS OF CREDIT
        
        USED AS A METHOD OF PAYMENT IN A CONTRACT OF SALE
        In commercial transactions, a letter of credit (or commercial letter of credit or commercial credit) is used as a method of payment in a contract of sale of goods, so that the seller (the beneficiary) can obtain payment directly from the issuer instead of from the buyer (the applicant and issuer's customer).
        
        ADVANTAGES:
        
        ALLOWS THE SELLER-BENEFICIARY TO PARTY WITH THE GOODS BEFORE IT IS PAID
        
        ALLOWS THE BUYER-APPLICANT TO HAVE CONTROL OF THE GOODS BEFORE PAYING
        It is a financial device developed by merchants as a convenient and relatively safe mode of dealing with the sale of goods to satisfy the seemingly "irreconcilable interests" of a seller-beneficiary, who refuses to part with its goods before it is paid, and a buyer-applicant, who wants to have control of the goods before paying. Thus, it serves to reduce the risk of nonpayment of the purchase price under a contract of sale.
        
        COMMERCIAL CREDITS ARE PAYABLE UPON PRESENTATION BY THE SELLER-BENEFICIARY OF DOCUMENTS THAT IT TOOK STEPS TO COMPLY WITH CONTRACT OF SALE
        Because commercial credits involve the payment of money under a contract of sale, they become payable upon the presentation by the seller-beneficiary of documents that show it has taken affirmative steps to comply with the contract of sale.
        
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        STANDBY LETTERS OF CREDIT
        
        USED AS SECURITY
        In non-sale transactions, a letter of credit (or standby letter of credit or standby credit) is used to guarantee, or secure, either a monetary or a nonmonetary obligation, whereby the issuer agrees to pay the creditor (the beneficiary) if the debtor (the applicant or issuer's customer), defaults on the obligation. It is used to reduce the risk of nonperformance of a contractual obligation of the debtor-applicant.
        
        CREDITOR-BENEFICIARY MUST CERTIFY DEBTOR-APPLICANT'S NON-PERFORMANCE
        In a standby credit, the credit is payable upon certification of the debtor-applicant's nonperformance of the obligation. The creditor-beneficiary of the standby credit must certify that the debtor-applicant has not performed the principal obligation.
        (Transfield)
        
        AS TO THE OBLIGATION ASSUMED BY CORRESPONDENT BANK
        
        UNCONFIRMED - Unconfirmed L/C - One which continues to be the obligation of the issuing bank
        
        CONFIRMED - Confirmed L/C - One which is supported by the absolute assurance to the beneficiary that the confirming bank will undertake the issuing bank's obligation as its own according to the terms and conditions of the credit [FEATI Bank and Trust Co. v. CA, G.R. No. 94209 (1991)]
        
        AS TO REVOCABILITY
        
        REVOCABLE - Revocable L/C - One which can be revoked by the issuing bank without the consent of the buyer and seller
        
        IRREVOCABLE Irrevocable L/C - One which the issuing bank cannot revoke without the consent of the buyer and seller [FEATI Bank and Trust Co. v. CA, G.R. No. 94209 (1991)]
        
        MOST IMPORTANT DEVICE IN INTERNATIONAL TRADE
        the letter of credit which has evolved as the ubiquitous and most important device in international trade. A creation of commerce and businessmen, the letter of credit is also unique in the number of parties involved and its supranational character.||| (Transfield Philippines, Inc. v. Luzon Hydro Corp., G.R. No. 146717, [November 22, 2004], 485 PHIL 699-731)
        
        LETTER OF CREDIT
        A letter of credit is an instrument under which the issuer (usually a bank), at a customer's request (the applicant), agrees to honor a draft or other demand for payment made by a third party (the beneficiary) as long as the draft or demand complies with specified conditions, and regardless of whether any underlying obligation between the applicant and the beneficiary is satisfied.
        (Christopher Leon)
        
        A LETTER OF CREDIT IS SUI GENERIS
        
        HOW SO?
        
        AS A SECURITY TRANSACTION
        To understand it as a security transaction, it is appropriately viewed as an original undertaking by the issuer to substitute its financial strength for that of another (the applicant) with the undertaking to be conditioned on the presentation of a draft or demand for payment (by the beneficiary).
        With a letter of credit from an issuer, the applicant may confidently present the letter of credit to the beneficiary as security to convince the beneficiary to enter into a transaction.
        On the other hand, the beneficiary of the letter of credit is assured of being empowered to call on the letter of credit and obtain its proceeds as security in case the applicant fails to perform its obligation.
        (Christopher Leon)
        
        PARTIES TO A LETTER OF CREDIT
        B. Parties to a Letter of Credit
        
        The Customer, Beneficiary, and Issuer.-The essential parties to the letter of credit and the basic scheme of obligations among them are set out in the following example.
        
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        A USEFUL TOOL
        The letter of credit is a useful tool that can facilitate a commercial transaction by providing either a payment or financing mechanism or by guaranteeing satisfactory performance. Practitioners are encouraged to make imaginative use of them to make an otherwise impossible transaction a reality.' 74
        
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        TRUST IN AN INDIVIDUAL IS OFTEN NOT SUFFICIENT TO INDUCE ANOTHER TO PERFORM A SERVICE OR DELIVER A PRODUCT
        the reputation of an individual principal is often not sufficient to induce another to perform a service or deliver a product. Accordingly, the merchant will seek the credit of an in-dependent party, usually a bank,5 whose larger and more secure re-sources obviate the need to inquire into the creditworthiness of a remote or unknown buyer.
        Christopher Leon, Letters of Credit: A Primer, 45 Md. L. Rev. 432 (1986)
        
        PERSONS OR ORGANIZATION MAY BE AN ISSUER AS WELL
        Although banks and savings and loan associations are the most frequent issuers of letters of credit, a person or organization other than a bank may be an issuer as well.
        Christopher Leon, Letters of Credit: A Primer, 45 Md. L. Rev. 432 (1986)
        
        (TRANSFIELD EXPLAINED BY SOMERA)
        It has evolved as a "merchantile specialty", a ubiquitous and important device in international trade, and as a "creation of commerce and businessmen," a letter of credit is unique because of the number of parties involved and its supranational character. Consequently, a letter of credit change its nature as different transactions occur. If carried through to completion, it ends up as a binding contract between the issuing and honoring entities without any regard or relation to the underlying obligation of the parties.
        
        BEING USED MORE IN DOMESTIC TRANSACTIONS
        The letter of credit has traditionally been associated with inter-national transactions but is being used with increasing frequency in domestic transactions. Although its use dates back centuries, there is limited case law, and little attention is given the subject in an attorney's formal education. Nevertheless, letters of credit deserve the practitioner's consideration since they may be used as creative solutions to problems that might otherwise prevent a transaction. In using this device, however, the practitioner should give careful attention to the governing law. The letter of credit is a specialized document and therefore a small "technical" error may strip it of its reliability and result in financial disaster to the attorney's client.
        (Christopher Leon, Letters of Credit: A Primer, 45 Md. L. Rev. 432 (1986))
        
        BUYER AND SELLER AGREE ON WHAT DOCUMENTS ARE TO BE PRESENTED FOR PAYMENT
        A letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying. 9 To break the impasse, the buyer may be required to contract a bank to issue a letter of credit in favor of the seller so that, by virtue of the letter of credit, the issuing bank can authorize the seller to draw drafts and engage to pay them upon their presentment simultaneously with the tender of documents required by the letter of credit. 10 The buyer and the seller agree on what documents are to be presented for payment, but ordinarily they are documents of title evidencing or attesting to the shipment of the goods to the buyer.||| (Bank of America, NT & SA v. Court of Appeals, G.R. No. 105395, [December 10, 1993])
        
        ALLOWS SELLER TO PART WITH THE GOODS BEFORE PAYING
        Jurisprudence defines it as a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying." 65 Through a letter of credit, a buyer obtains the credit of a third party, usually a bank, to provide assurance of payment. 66 This, in turn, convinces a seller to part with his or her goods even before he or she is paid, as he or she is insured by the third party that he or she will be paid as soon as he or she presents the documents agreed upon.
      - POLICY
        SECTION 2. Declaration of Policy. — It is hereby declared to be the policy of the state
        
        TO ENCOURAGE & PROMOTE USE OF TRUST RECEIPTS AS ADDITIONAL AND CONVENIENT AID TO COMMERCE AND TRADE
        (a) to encourage and promote the use of trust receipts as an additional and convenient aid to commerce and trade;
        
        TO PROVIDE FOR REGULATION OF TRUST RECEIPT TRANSACTIONS TO ASSURE PROTECTION OF RIGHTS AND ENFORCEMENT OF OBLIGATIONS
        (b) to provide for the regulation of trust receipt transactions in order to assure the protection of the rights and the enforcement of obligations of the parties involved therein; and
        
        TO DECLARE MISAPPROPRIATEION OF GOODS OR PROCEEDS ILLEGAL
        (c) to declare the misuse and/or misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released under trust receipts as a criminal offense punishable under Article Three hundred and fifteen of the Revised Penal Code.
        
        DEFINITION OF TERMS
        SECTION 3. Definition of terms. — As used in this Decree, unless the context otherwise requires, the term — cd
        (a) "Document" shall mean written or printed evidence of title to goods.
        (b) "Entrustee" shall refer to the person having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose or purposes specified in the trust receipt agreement.
        (c) "Entruster" shall refer to the person holding title over the goods, documents, or instruments subject of a trust receipt transaction, and any successor in interest of such person.
        (d) "Goods" shall include chattels and personal property other than: money, things in action, or things so affixed to land as to become a part thereof.
        (e) "Instrument" means any negotiable instrument as defined in the Negotiable Instrument Law; any certificate of stock, or bond or debenture for the payment of money issued by a public or private corporation, or any certificate of deposit, participation certificate or receipt, any credit or investment instrument of a sort marketed in the ordinary course of business or finance, whereby the entrustee, after the issuance of the trust receipt, appears by virtue of possession and the face of the instrument to be the owner. "Instrument" shall not include a document as defined in this Decree.
        (f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge, legal or equitable. cdasia
        (g) "Purchaser" means any person taking by purchase.
        (h) "Security Interest" means a property interest in goods, documents or instruments to secure performance of some obligations of the entrustee or of some third persons to the entruster and includes title, whether or not expressed to be absolute, whenever such title is in substance taken or retained for security only.
        (i) "Person" means, as the case may be, an individual, trustee, receiver, or other fiduciary, partnership, corporation, business trust or other association, and two or more persons having a joint or common interest. acd
        ( j) "Trust Receipt" shall refer to the written or printed document signed by the entrustee in favor of the entruster containing terms and conditions substantially complying with the provisions of this Decree. No further formality of execution or authentication shall be necessary to the validity of a trust receipt.
        (k) "Value" means any consideration sufficient to support a simple contract.
        ||| (Trust Receipts Law, Presidential Decree No. 115, [January 29, 1973])
        
        TWO POSSIBLE SITUATIONS IN A TRUST RECEIPT TRANSACTION
        There are two possible situations in a trust receipt transaction.
        (Colinares v. CA, G.R. No. 90828, [September 5, 2000], 394 PHIL 106-124)
        
        ENTREGARLA
        The first is covered by the provision which refers to money received under the obligation involving the duty to deliver it (entregarla) to the owner of the merchandise sold.
        
        DEVOLVERA
        The second is covered by the provision which refers to merchandise received under the obligation to "return" it (devolvera) to the owner.
        
        PURE TRUST RECEIPT TRANSACTION DEFINED AND EXPLAINED
        This situation belies what normally obtains in a pure trust receipt transaction where goods are owned by the bank and only released to the importer in trust subsequent to the grant of the loan.
        (Colinares v. CA)
        
        BANK ACQUIRES A SECURITY INTEREST
        The bank acquires a "security interest" in the goods as holder of a security title for the advances it had made to the entrustee. 35
        (Colinares v. CA)
        
        OWNERSHIP CONTINUES TO BE VESTED IN PERSON WHO ADVANCED PAYMENT UNTIL PAID IN FULL
        The ownership of the merchandise continues to be vested in the person who had advanced payment until he has been paid in full, or if the merchandise has already been sold, the proceeds of the sale should be turned over to him by the importer or by his representative or successor-in-interest. 36
        (Colinares v. CA)
        
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        BANKER LENDS MONEY
        (AS UNDER AN LOC)
        By this arrangement a banker advances money to an intending importer, and thereby lends the aid of capital, of credit, or of business facilities and agencies abroad, to the enterprise of foreign commerce.
        
        LOAN VS TRUST RECEIPT ARRANGEMENT
        (A) trust receipt arrangement does not involve a simple loan transaction between a creditor and debtor-importer. Apart from a loan feature, the trust receipt arrangement has a security feature that is covered by the trust receipt itself. (Vintola v. Insular Bank of Asia and America, 150 SCRA 578 [1987].
        SECURITY FEATURE IS WHAT PROVIDES THE FINANCIAL ASSISTANCE TO IMPORTERS
        That second feature is what provides the much needed financial assistance to our traders in the importation or purchase of goods or merchandise through the use of those goods or merchandise as collateral for the advancements made by a bank (Samo v. People, 115 Phil 346 [1962]).
        TITLE OF THE BANK IS ENSURED
        The title of the bank to the security is the one sought to be protected and not the loan which is a separate and distinct agreement.|||
        (Prudential Bank v. National Labor Relations Commission, G.R. No. 112592, [December 19, 1995], 321 PHIL 792-809)
        
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        THE BANKER'S ADVANCE OF MONEY AND CREDIT SHOULD RECEIVE AMPLEST PROTECTION
        Much of this trade could hardly be carried on by any other means, and therefore it is of the first importance that the fundamental factor in the transaction, the banker's advance of money and credit, should receive the amplest protection.
        
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        PARTIES TO A TRUST RECEIPT
        
        OBLIGATIONS OF THE PARTIES
        
        ROLE OF A TRUST RECEIPT
        
        RATIONALE: TO FINANCE IMPORTERS AND RETAIL DEALERS W/ INSUFFICIENT FUNDS
        Trust receipt transactions are intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.
        (Colinares v. Court of Appeals, G.R. No. 90828, [September 5, 2000], 394 PHIL 106-124)
        
        TRUST RECEIPTS ARE INDISPENSABLE CONTRACTS IN INTERNATIONAL AND DOMESTIC BUSINESS TRANSACTIONS
        Trust receipts are indispensable contracts in international and domestic business transactions. The prevalent use of trust receipts, the danger of their misuse and/or misappropriation of the goods or proceeds realized from the sale of goods, documents or instruments held in trust for entruster-banks, and the need for regulation of trust receipt transactions to safeguard the rights and enforce the obligations of the parties involved are the main thrusts of P.D. 115.
        ||| (People v. Nitafan, G.R. Nos. 81559-60, [April 6, 1992], 284 PHIL 1-9)
      - GENERAL CONCEPTS
        
        FORM OF TRUST RECEIPTS
        
        TRUST RECEIPT FORM: WRITTEN + SIGNED BY ENTRUSTEE IN FAVOR OF ENTRUSTER
        SECTION 3. Definition of terms. — As used in this Decree, unless the context otherwise requires, the term:
        x x x
        (j) "Trust Receipt" shall refer to the written or printed document signed by the entrustee in favor of the entruster containing terms and conditions substantially complying with the provisions of this Decree. No further formality of execution or authentication shall be necessary to the validity of a trust receipt.
        
        REQUIRED CONTENTS OF A TRUST RECEIPT
        SECTION 5. Form of trust receipts; contents. —
        A trust receipt need not be in any particular form, but every such receipt must substantially contain:
        
        DESCRIPTION OF GOODS/DOCUMENTS/INSTRUMENTS
        (a) a description of the goods, documents or instruments subject of the trust receipt;
        
        TOTAL INVOICE VALUE OF GOODS + AMOUNT OF DRAFT TO BE PAID BY ENTRUSTEE
        (2) the total invoice value of the goods and the amount of the draft to be paid by the entrustee;
        
        UNDERTAKING OR A COMMITMENT OF THE ENTRUSTEE
        (a) TO HOLD IN TRUST THE GDI
        (b) TO DISPOSE IN THE MANNER PROVIDED IN THE TRUST RECEIPT
        (c) TO TURN OVER PROCEEDS OF SALE OF GDI TO ENTRUSTER IN CASE OF NON-SALE WITHIN PERIOD SPECIFIED THEREIN
        (3) an undertaking or a commitment of the entrustee
        
        (a) to hold in trust for the entruster the goods, documents or instruments therein described;
        (b) to dispose of them in the manner provided for in the trust receipt; and
        (c) to turn over the proceeds of the sale of the goods, documents or instruments to the entruster to the extent of the amount owing to the entruster or as appears in the trust receipt or to return the goods, documents or instruments in the event of their non-sale within the period specified therein.
        
        TRUST RECEIPT MAY CONTAIN ADDITIONAL TERMS AND CONDITIOSN NOT CONTRARY TO TRUST RECEIPTS LAW
        The trust receipt may contain other terms and conditions agreed upon by the parties in addition to those hereinabove enumerated provided that such terms and conditions shall not be contrary to the provisions of this Decree, any existing laws, public policy or morals, public order or good customs.
        
        TRUST RECEIPT MAY BE DENOMINATED IN PHILIPPINE CURRENCY OR ANY FOREIGN CURRENCY
        SECTION 6. Currency in which a trust receipt may be denominated. — A trust receipt may be denominated in Philippine currency or any foreign currency acceptable and eligible as part of international reserves of the Philippines, the provisions of existing law, executive orders, rules and regulations to the contrary notwithstanding:
        
        FOREIGN CURRENCY CONVERSION SHALL BE ON DATE THE PROCEEDS OF SALE OF GDI ARE TURNED OVER
        Provided, however, That in the case of trust receipts denominated in foreign currency, payment shall be made in its equivalent in Philippine currency computed at the prevailing exchange rate on the date the proceeds of sale of the goods, documents or instruments held in trust by the entrustee are turned over to the entruster or on such other date as may be stipulated in the trust receipt or other agreements executed between the entruster and the entrustee.
        
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        RIGHTS OF ENTRUSTEE
        
        RIGHTS OF ENTRUSTER
        
        ENTRUSTER IS ENTITLED
        
        TO PROCEEDS FROM SALE OF GDI RELEASED UNDER A TRUST RECEIPT TO THE ENTRUSTEE TTEOTAO/AAOTTR
        
        TO THE RETURN OF GDI IN CASE OF NON-SALE
        OR
        
        TO ENFORCE ALL OTHER RIGHTS CONFERRED ON HIM IN THE TRUST RECEIPT SUCH ARE NOT CONTRARY TO THE PROVISIONS OF TRUST RECEIPTS LAW
        SECTION 7. Rights of the entruster. — The entruster shall be entitled to the proceeds from the sale of the goods, documents or instruments released under a trust receipt to the entrustee to the extent of the amount owing to the entruster or as appears in the trust receipt, or to the return of the goods, documents or instruments in case of non-sale, and to the enforcement of all other rights conferred on him in the trust receipt provided such are not contrary to the provisions of this Decree.
        
        TO CANCEL TRUST AND TAKE POSSESSION OF GDI SUBJECT OF TRUST OR PROCEEDS REALIZED THEREFROM
        
        WHEN CAN ENTRUSTEE CANCEL?
        AT ANY TIME UPON DEFAULT OR FAILURE OF THE ENTRUSTEE TO COMPLY WITH ANY OTHER T&C OF TRUST RECEIPT OR ANY OTHER AGREEMENT BETWEEN ENTRUSTER AND ENTRUSTEE
        The entruster may cancel the trust and take possession of the goods, documents or instruments subject of the trust or of the proceeds realized therefrom at any time upon default or failure of the entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the entruster and the entrustee,
        IF IN POSSESSION ALREADY
        
        ENTRUSTER IN POSSESSION OF GDI MAY SELL GDI AND MAY BECOME A PURCHASER AT SUCH SALE
        (a) ON OR AFTER DEFAULT,
        (b) GIVE NOTICE TO THE ENTRUSTEE OF THE INTENTION TO SELL,
        (c) NOT LESS THAN FIVE DAYS AFTER SERVING OR SENDING OF SUCH NOTICE
        and the entruster in possession of the goods, documents or instruments may, on or after default, give notice to the entrustee of the intention to sell, and may, not less than five days after serving or sending of such notice, sell the goods, documents or instruments at public or private sale, and the entruster may, at a public sale, become a purchaser.
        
        APPLICATION OF PROCEEDS
        (Sec. 7)The proceeds of any such sale, whether public or private, shall be applied
        
        EXPENSES OF SALE
        (a) to the payment of the expenses thereof;
        
        EXPENSES OF RE-TAKING, KEEPING, AND STORING GDI
        (b) to the payment of the expenses of re-taking, keeping and storing the goods, documents or instruments;
        
        DEBTS OF ENTRUSTEE TO ENTRUSTER
        (c) to the satisfaction of the entrustee's indebtedness to the entruster.
        
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        RIGHTS OF PURCHASER
        
        PURCHASER IN GOOD FAITH ACQUIRES GDI FREE FROM ENTRUSTER'S SECURITY INTEREST
        SECTION 11. Rights of purchaser for value and in good faith. — Any purchaser of goods from an entrustee with right to sell, or of documents or instruments through their customary form of transfer, who buys the goods, documents, or instruments for value and in good faith from the entrustee, acquires said goods, documents or instruments free from the entruster's security interest.
        
        OBLIGATIONS OF ENTRUSTEE
        
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        TRUST RECEIPT TRANSACTION DEFINED
        
        ANY TRANSACTION BY AND BETWEEN AN "ENTRUSTER" AND "ENTRUSTEE"
        
        ENTRUSTER OWNS OR HOLDS ABSOLUTE TITLE OR SECURITY INTERESTS OVER CERTAIN SPECIFIED GDI
        
        WHEREBY ENTRUSTER RELEASES GDI TO THE POSSESSION OF THE ENTRUSTEE
        
        UPON LATTER'S EXECUTION AND DELIVERY TO THE ENTRUSTER OF A SIGNED DOCUMENT CALLED A "TRUST RECEIPT"
        
        WHEREIN THE ENTRUSTEE
        
        BINDS HIMSELF TO HOLD THE DESIGNATED GDI IN TRUST FOR THE ENTRUSTER AND TO
        
        SELL OR OTHERWISE DISPOSE OF THE GDI
        
        WITH THE OBLIGATION TO TURN OVER TO THE ENTRUSTER
        (i) THE PROCEEDS TTEOTAO/AAOTTR
        (iI) THE GDI THEMSELVES IF THEY ARE UNSOLD OR NOT DISPOSED OF, IN ACCORDANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THE TRUST RECEIPT;
        or
        SECTION 4. What constitutes a trust receipt transaction. — A trust receipt transaction, within the meaning of this Decree, is any transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree as the entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster of a signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt
        
        (iv) FOR OTHER PURPOSES SUBSTANTIALLY EQUIVALENT TO ANY OF THE FOLLOWING
        or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any of the following:
        
        NOT A TRUST RECEIPT IF IT IS A PERSON IN THE BUSINESS OF SELLING GDI FOR PROFIT
        The sale of goods, documents or instruments by a person in the business of selling goods, documents or instruments for profit
        
        PERSON WHO HAS GENERAL PROPERTY RIGHTS AGAINST BUYER IN SUCH GDI
        who, at the outset of the transaction, has, as against the buyer, general property rights in such goods, documents or instruments, or
        
        PERSON WHO SELLS GDI TO BUYER ON CREDIT, RETAINING TITLE OR OTHER INTEREST AS SECURITY FOR PAYMENT OF PURCHASE PRICE
        who sells the same to the buyer on credit, retaining title or other interest as security for the payment of the purchase price, does not constitute a trust receipt transaction and is outside the purview and coverage of this Decree.
        
        1. IN CASE OF GOODS OR DOCUMENTS
        TO SELL
        
        In the case of goods or documents,
        (a) to sell the goods or procure their sale; or
        
        TO MANUFACTURE OR PRCOESS
        THE GOODS WITH THE PURPOSE OF ULTIMATE SALE
        (b) to manufacture or process the goods with the purpose of ultimate sale:
        PROVIDED
        IF FOR MANUFACTURING OR PROCESSING BEFORE ULTIMATE SALE, ENTRUSTER RETAINS TITLE OVER GOODS UNTIL ENTRUSTEE HAS COMPLIED WITH HIS OBLIGATION UNDER THE TRUST RECEIPT
        Provided, That, in the case of goods delivered under trust receipt for the purpose of manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or processed form until the entrustee has complied fully with his obligation under the trust receipt; or
        
        TO LOAD/UNLOAD/SHIP/TRANSHIP OR OTHERWISE DEAL WITH THEM IN A MANNER PRELIMINARY OR NECESSARY TO THEIR SALE
        (c) to load, unload, ship or transship or otherwise deal with them in a manner preliminary or necessary to their sale; or acd
        
        2. IN CASE OF INSTRUMENTS
        
        In the case of instruments, (a) to sell or procure their sale or exchange; or (b) to deliver them to a principal; or (c) to effect the consummation of some transactions involving delivery to a depository or register; or (d) to effect their presentation, collection or renewal.
        
        ENTRUSTEE DEFINED
        (b) "Entrustee" shall refer to the person having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person for the purpose or purposes specified in the trust receipt agreement.
        
        ENTRUSTER DEFINED
        (c) "Entruster" shall refer to the person holding title over the goods, documents, or instruments subject of a trust receipt transaction, and any successor in interest of such person.
        
        TRUST RECEIPT DEFINED
        A trust receipt is a document which expresses a security transaction, where under the lender, having no prior title in the goods and not having possession of the same, lends his money to the borrower on security of the goods, which the borrower is privileged to sell on agreement to pay all or part of the proceeds of the sale to the lender (Black’s Law Dictionary)
      - TRUST RECEIPT
        A trust receipt is a convenient business device that assists importers and merchants in solving their financing problems, and has gained popular acceptance in international and domestic business practices, particularly in commercial banking transactions.
        (Somera)
        
        REQUIRES TO BE WRITTEN
        A trust receipt is a formal contract because, although the law states that a trust receipt need not be in any particular form, the Trust Receipts Law requires that it must be written or printed and must contain specific terms.
        (Somera)
      - TRUST RECEIPT TRANSACTION DEFINED
        A trust receipt transaction is any transaction by and between an entruster and the entrustee, whereby the entruster who owns or holds absolute title or security interest over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt”.
        Transfield Philippines, Inc. v. Luzon Hydro Corp., G.R. No. 146717, [November 22, 2004], 485 PHIL 699-731
    - - FORM OF WAREHOUSE RECEIPTS
        
        OBLIGATIONS AND RIGHTS OF A WAREHOUSEMAN
        
        LIABILITY FOR GOODS
        
        WAREHOUSEMAN IS LIABLE FOR NON-EXISTENCE OR MISDESCRIPTION OF GOODS
        SECTION 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.
        
        LIABLE FOR LOSS OR INJURY TO GOODS CAUSED BY FAILURE TO EXERCISE REQUIRED CARE
        SECTION 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 a 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.
        
        GOODS WITH SEPARATE RECEIPT MUST BE KEPT SEPARATE, EVEN IF FROM SAME DEPOSITOR
        SECTION 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.
        
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        WAREHOUSEMAN NOT LIABLE IF LOSS OR INJURY IS UNAVAOIDABLE
        
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        EXCEPTION: GENERAL DESCRIPTION DOES NOT MAKE THE WAREHOUSEMAN LIABLE
        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.
        
        Liable how? What's the liability? Damages?
        
        OBLIGATION TO DELIVER
        16-19, 8-14
        
        WAREHOUSEMAN'S TITLE OR RIGHT TO POSSESSION OF GOODS SHALL EXCUSE HIM FROM LIABILITY FOR REFUSING TO DELIVER GOODS ACCORDING TO RECEIPT
        SECTION 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.
        
        WAREHOUSEMAN'S DEFENSE MAY REQUIRE ALL ADVERSE CLAIMANTS TO INTERPLEAD
        SECTION 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.
        
        WM IS NOT LIABLE FOR REFUSING TO DELIVER TO AN ADVERSE CLAIMANT IF WAREHOUSEMAN HAS INFORMATION ON SUCH CLAIM
        SECTION 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 the goods, and the warehouseman has information of such claim, the warehouseman shall be excused from liability for refusing to deliver the goods, either to the depositor or person claiming under him or to the adverse claimant, until the warehouseman has had a reasonable time to ascertain the validity of the adverse claim or to bring legal proceedings to compel all claimants to interplead.
        
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        UNLESS SUCH TITLE OR RIGHT IS DERIVED DIRECTLY OR INDIRECTLY FROM A TRANSFER MADE BY THE DEPOSITOR AT THE TIME OF OR SUBSEQUENT TO DEPOSIT FOR STORAGE
        
        NEGOTIATION AND TRANSFER OF WAREHOUSE RECEIPTS
        
        NEGOTIATION
        
        (HOW A QUEDAN BECOMES NEGOTIABLE)
        NEGOTIABLE RECEIPTS MAY BE NEGOTIATED BY DELIVERY
        SECTION 37. Negotiation of Negotiable Receipts by Delivery. — A negotiable receipt may be negotiated by delivery:
        
        WHERE BY TOTR, WM UNDERTAKES TO DELIVER GOODS TO BEARER
        (a) Where, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the bearer, or
        
        WHERE BY TOTR, WM UNDERTAKES TO DELIVER GOODS TO THE ORDER OF A SPECIFIED PERSON AND SUCH PERSON OR SUBSEQUENT ENDORSEE OF RECEIPT HAS ENDORSED IT IN BLANK OR TO BEARER
        (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 TOTR, GOODS ARE DELIVERABLE TO BEARER OR WHERE AS NEGOTIABLE RECEIPT HAS BEEN ENDORSED IN BLANK OR TO BEARER,
        
        [THEN] ANY HOLDER MAY INDORSE THE SAME TO HIMSELF OR TO ANY OTHER SPECIFIED PERSON, AND IN SUCH CASE THE RECEIPT SHALL THEREAFTER BE NEGOTIATED ONLY BY ENDORSEMENT OF SUCH ENDORSEE
        Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or where as negotiable receipt has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any other specified person, and in such case the receipt shall thereafter be negotiated only by the indorsement of such indorsee.
        
        A NEGOTIABLE RECEIPT MAY BE NEGOTIATED BY ENDORSEMENT OF PERSON TO WHOM SUCH GOODS ARE DELIVERABLE
        SECTION 38. Negotiation of Negotiable Receipts 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.
        
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        TRANSFER
        
        QUEDAN NOT IN FORM THAT IT CAN BE NEGOTIATED BY DELIVERY MAY BE TRANSFERRED BY HOLDER BY DELIVERY TO A PURCHASER OR DONEE
        SECTION 39. Transfer of Receipts. — 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.
        NON-NEGOTIABLE RECEIPTS CANNOT BE NEGOTIATED AND ENDORSEMENT DOES NOT GIVE TRANSFEREE AN ADDITIONAL RIGHT
        A non-negotiable receipt can not be negotiated, and the indorsement of such a receipt gives the transferee no additional right.
        
        TRANSFEREE ACQUIRES:
        TITLE OF THE GOODS SUBJECT TO TERMS OF ANY AGREEMENT WITH TRANSFERER
        SECTION 42. Rights of Person to Whom a Receipt has been Transferred. — A person to whom a receipt has been transferred but not negotiated, acquires thereby, as against the transferer, the title of the goods, subject to the terms of any agreement with the transferer.
        
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        CRIMINAL LIABILITY
        
        ISSUING QUEDAN WITHOUT ACTUALLY RECEIVING GOODS
        SECTION 50. Issue of Receipt for Goods Not Received. — A warehouseman, or any 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 by both.
        
        FRAUDULENTLY ISSUEING OR AIDS IN FRAUDULENTLY ISSUING RECEIPT KNOWING IT CONTAINS ANY FALSE STATEMENT
        SECTION 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.
        
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        WAREHOUSE RECEIPTS ARE PENALIZED
        A fundamental distinction between special commercial laws on credit transactions and their Civil Code counterparts, such as the Warehouse Receipts Law in relation to deposit, is the inclusion of provisions criminalizing certain acts and omissions relating to the credit transaction.
        
        WAREHOUSEMAN'S LIEN
        
        WM SHALL HAVE A LIEN ON GOODS DEPOSITED/PROCEEDS THEREOF IN HIS HANDS FOR ALL LAWFUL CHARGES FOR STORAGE AND PRESERVATON OF GOODS
        SECTION 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 CLAIMS FOR MONEY ADVANCED, INTEREST, INSURANCE, TRANSPORTATION, LABOR, WEIGHING, COOPERING, AND OTHER CHARGES AND EXPENSES
        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.
        
        WM'S LIEN MAY BE ENFORCED AGAINST:
        SECTION 28. Against What Property the Lien May be Enforced. — Subject to the provisions of section thirty, a warehouseman's lien may be enforced:
        
        ALL DEPOSITED GOODS BELONGING TO DEBTOR FOR THE CLAIMS TO WHICH THE LIEN IS ASSERTED
        (STORAGE, PRESERVATION, ETC)
        (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
        
        ALL GOODS BELONGING TO OTHERS WHICH HAVE BEEN DEPOSITED BY DEBTOR FOR SUCH CLAIMS + IF SUCH DEBTOR WAS ENTRUSTED WITH POSSESSION OF THE GOODS THAT A PLEDGE WOULD HAVE BEEN VALID (?????)
        (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 intrusted with the possession of the goods that a pledge of the same by him at the time of the deposit to one who took the goods in good faith for value would have been valid.
        
        WM LIEN IS LOST IF
        SECTION 29. How the Lien May be Lost. — A warehouseman loses his lien upon goods:
        
        POSSESSION OF GOODS ARE SURRENDERED
        (a) By surrendering possession thereof, or
        
        REFUSAL TO DELIVER UPON DEMAND THAT WM IS BOUND TO COMPLY WITH
        (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.
        
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        EVEN IN THE ABSENCE OF STIPULATION AS TO WM'S LIEN, SUCH LIEN EXISTS BY OPERATION OF LAW
        Even in the absence of such a provision, law and equity dictate the payment of the warehouseman's lien pursuant to Sections 27 and 31 of the Warehouse Receipts law (R.A. 2137),||| (Philippine National Bank v. Se, Jr., G.R. No. 119231, [April 18, 1996], 326 PHIL 401-416)
        
        CLAIMING TO BE ENTITLED TO GOODS COVERED BY WAREHOUSE RECEIPTS CARRIES WITH IT THE ADMISSION OF THE EXISTENCE AND VALIDITY OF THE TERMS, CONDITIONS, AND STIPULATIONS WRITTEN ON THE QUEDAN
        Petitioner is in estoppel in disclaiming liability for the payment of storage fees due the private respondents as warehouseman while claiming to be entitled to the sugar stocks covered by the subject Warehouse Receipts on the basis of which it anchors its claim for payment or delivery of the sugar stocks. The unconditional presentment of the receipts by the petitioner for payment against private respondents on the strength of the provisions of the Warehouse Receipts Law (R.A. 2137) carried with it the admission of the existence and validity of the terms, conditions and stipulations written on the face of the Warehouse Receipts, including the unqualified recognition of the payment of warehouseman's lien for storage fees and preservation expenses. Petitioner may not now retrieve the sugar stocks without paying the lien due private respondents as warehouseman.
        In view of the foregoing, the rule may be simplified thus: While the PNB is entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only upon payment of the storage fees.
        ||| (Philippine National Bank v. Se, Jr., G.R. No. 119231, [April 18, 1996], 326 PHIL 401-416)
        
        WM'S LIEN IS POSSESSORY IN NATURE
        Imperative is the right of the warehouseman to demand payment of his lien at this juncture, because, in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods by surrendering possession thereof.
        In other words, the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien, because a warehouseman's lien is possessory in nature.||| (Philippine National Bank v. Se, Jr., G.R. No. 119231, [April 18, 1996], 326 PHIL 401-416)
        
        AKIN TO RIGHT OF RETENTION
        The warehouseman's lien under the Warehouse Receipts Law is the warehouseman's legal right or interest in the depositor's property. It is similar to the depositary's right of retention under the Civil Code, which is a means or device by which the depositary is able to obtain payment of what may be due because of the deposit.
        (Somera)
        
        OBLIGATION TO DELIVER IS AKIN TO DEPOSITARY REQUIRED UNDER THE
        NEW CIVIL CODE
        The obligation of the warehouseman to deliver under the Warehouse Receipts Law is not the delivery required for the perfection of real contracts, but is similar to the obligation of the depositary to return under the Civil Code.
        (Somera)
        
        BUT IS SUBJECT TO STRICTER RULES
        Because of the commercial nature of the transactions of a warehouseman, this obligation to deliver is subjected to stricter rules.
        (Somera)
        
        NEED NOT BE IN ANY PARTICULAR FORM
        SECTION 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:
        
        WAREHOUSEMAN MAY INSERT
        TERMS AND CONDITIONS
        SECTION 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:
        
        NON-NEGOTIABLE RECEIPTS DEFINED
        ONLY DELIVERY TO DEPOSITOR OR ANY OTHER SPECIFIED PERSON ALLOWED
        SECTION 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.
        
        NEGOTIABLE RECEIPT DEFINED
        SECTION 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.
        
        DUPLICATES MUST BE LABELLED SO
        SECTION 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 one first issued.
        
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        PROVISIONS THAT A NEGOTIABLE RECEIPT IS NON-NEGOTIABLE IS VOID
        No provision shall be inserted in a negotiable receipt that it is non-negotiable. Such provision, if inserted, shall be void.
        
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        Again what is "order of any person"?
        
        How is it different from other warehouse receipts?
        
        INSERTIONS MUST NOT
        
        CONTRARY TO WAREHOUSE RECEIPTS LAW
        (a) Be contrary to the provisions of this Act.
        
        IMPAIR OBLIGATION TO EXERCISE DEGREE OF CARE IN SAFEKEEPING GOODS THAT A REASONABLY CAREFUL MAN WOULD EXERCISE
        (b) In any wise impair his obligation to exercise that degree of care in the safe-keeping of the goods intrusted to him which a reasonably careful man would exercise in regard to similar goods of his own.
        
        BUT IT LOOKS LIKE IT NEEDS TO BE WRITTEN...
        
        ESSENTIAL TERMS:
        
        LOCATION OF WAREHOUSE W/GOODS
        (a) The location of the warehouse where the goods are stored,
        
        DATE OF ISSUANCE
        (b) The date of issue of the receipt,
        
        CONSECUTIVE NUMBER OF RECEIPT
        (c) The consecutive number of the receipt,
        
        IDENTIFICATION OF RECIPIENT
        (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,
        
        RATE OF STORAGE CHARGES
        (e) The rate of storage charges,
        
        DESCRIPTION OF GOODS or PACKAGES CONTAINING THEM
        (f) A description of the goods or of the packages containing them,
        
        SIGNATURE OF WAREHOUSEMAN or HIS AUTHORIZED AGENT
        (g) The signature of the warehouseman, which may be made by his authorized agent,
        
        IF GOODS ARE OWNED BY WAREHOUSEMAN, THE FACT OF SUCH OWNERSHIP
        (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
        
        ADVANCES or LIABILITIES INCURRED FOR WHICH THE WAREHOUSEMAN CLAIMS A LIEN
        (i) A statement of the amount of advances made or liabilities incurred for which the warehouseman claims a lien.
        IF AMOUNT UNKNOWN, THEN FACT + PURPOSE
        If the precise amount of such advances made or of such liabilities incurred is, at the time of the issue of the receipt, unknown to the warehouseman or to his agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient.
        
        WAREHOUSEMAN FOR DAMAGES CAUSED BY OMISSION FROM A NEGOTIABLE RECEIPT OF ANY OF THE TERMS HEREIN REQUIRED
        A warehouseman shall be liable to any person injured thereby, for all damage caused by the omission from a negotiable receipt of any of the terms herein required.
        
        WHAT HAPPENS TO THE RECEIPT IF THE "ESSENTIAL TERMS" ARE MISSING?
        [ANSWERED!->]
        The provision does not state the effect on the receipt, whether it be void, unenforceable, or still valid. All that the law states is that the warehouseman shall be liable for damages
        
        STILL VALID!
        In the case of Manufacturers' Mercantile Co., vs. Monarch Refrigerating Co. ([1915], 266 Ill., 584), the Supreme Court of Illinois said:
        "The provisions of Uniform Warehouse Receipts Act, sec. 2 (Hurd's Rev. St. 1913, c. 114, sec. 242), as to the contents of the receipt, are for the benefit of the holder and of purchasers from him, and failure to observe these requirements does not render the receipt void in the hands of the holder."
        ||| (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
        
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        A specified person or "his order"
        What does that mean?
        
        ABSENCE OF ONE OF THESE TERMS PERMIT LOOKING INTO THE INTENTION OF THE PARTIES
        As will be seen, the receipt is styled "Quedan" (warehouse receipt) and contains all the requisites of a warehouse receipt as prescribed by section 2, supra, except that it does not, in express terms, state whether the goods received are to be delivered to bearer, to a specified person or to his order.
        The intention to make it a negotiable warehouse receipt appears, nevertheless, quite clearly from the document itself: De Poli deposited the goods in his own warehouse; the warehouse receipt states that he is the owner of the goods deposited; there is no statement that the goods are to be delivered to the bearer of the receipt or to a specified person and the presumption must therefore necessarily be that the goods are in the warehouse subject to the orders of their owner De Poli. As the owner of the goods he had, of course, full control over them while the title remained in him; we certainly cannot assume that it was the intention to have the goods in the warehouse subject to no one's orders. (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
        
        NO NEED TO STATE BRAND OR DISTINGUISHING MARKS IN DESCRIPTION (Req. 6)
        In the case of Hoffman vs. Schoyer ([1892], 143 Ill., 598), the court held that the failure to comply with Act III, April 25, 1871, which requires all warehouse receipts for property stored in Class C to "distinctly state on their face the brands or distinguishing marks upon such property," for which no consequences, penal or otherwise, are imposed, does not render such receipts void as against an assignee for value.
        (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
      - WAREHOUSE RECEIPTS MAY BE ISSUED BY ANY WAREHOUSEMAN
        SECTION 1. Persons Who May Issue Receipts. — Warehouse receipts may be issued by any warehouseman.
        
        INTERPRETED ACCORDING TO INTENT
        A warehouse receipt, like any other document, must be interpreted according to its evident intent (Civil Code, arts. 1281 et seq.)|||
        (Roman v. Asia Banking Corp., G.R. No. L-17825, [June 26, 1922])
        
        THE WAREHOUSEMAN MAY ALSO BE THE ORIGINAL HOLDER OF THE RECEIPT AT THE SAME TIME
        In his dual capacity of warehouseman and the original holder of the receipt, De Poli was the only party to the instrument at the time of its execution and the interpretation he gave it at that time must therefore be considered controlling as to its intent.||| (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
        
        WAREHOUSE RECEIPTS
        ALTERNATIVELY CALLED "QUEDAN"
        As will be seen, the receipt is styled "Quedan" (warehouse receipt) and contains all the requisites of a warehouse receipt as prescribed by section 2, supra, except that it does not, in express terms, state whether the goods received are to be delivered to bearer, to a specified person or to his order.||| (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
        
        NEGOTIABLE RECEIPTS MAY BE SOLD, MORTGAGED, OR PLEDGED
        Check Sec. 48
        
        WAREHOUSEMAN DEFINED
        Sec. 58 "Warehouseman" means a person lawfully engaged in the business of storing goods for profit.||| (Warehouse Receipts Act, Act No. 2137, [February 5, 1912])
    - - PURCHASER IN SEC. 58 INCLUDES "MORTGAGEE OR PLEDGEE"
        The Warehouse Receipt Act is complete in itself and is not affected by previous legislation in conflict with its provisions or incompatible with its spirit or purpose.
        Section 58 provides that within the meaning of the Act "to purchase' includes to take as mortgagee or pledgee" and "'purchaser' includes mortgagee and pledgee."
        It therefore seems clear that, as to the legal title to the property covered by a warehouse receipt, a pledgee is on the same footing as a vendee except that the former is under the obligation of surrendering his title upon the payment of the debt secured.
        To hold otherwise would defeat one of the principal purposes of the Act, i.e., to furnish a basis for commercial credit.||| (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
      - RATIONALE:
        A PURPOSE OF THE WAREHOUSE RECEIPTS ACT IS TO FURNISH A BASIS FOR COMMERCIAL CREDIT
        To hold otherwise would defeat one of the principal purposes of the Act, i.e., to furnish a basis for commercial credit.|||
        (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
        
        AUTHORIZATION OF WAREHOUSEMAN TO COMMINGLE MAY BE IMPLIEDLY RATIFIED
        (Sec. 22 and 23)
        In the present case the warehouse receipts show how many bales of each grade were deposited; the Government grade of each bale was clearly and permanently marked thereon and there can therefore be no confusion of one grade with another; it is not disputed that the bales within the same grade were of equal value and were sold by the assignee for the same price and upon the strength of the Government grading marks.
        Moreover, it does not appear that any of the claimant creditors, except the appellees, hold warehouse receipts for the goods here in question. Under these circumstances, we do not think that the court below erred in treating the bales within each grade as fungible goods under the definition given by the statute.
        It is true that section 22 and 23 provide that the goods must be kept separated and that the warehouseman may not commingle goods except when authorized by agreement or custom, but these provisions are clearly intended for the benefit of the holders of the receipts and not for the benefit of the warehouseman. It would, indeed, be strange if the warehouseman could escape his liability to the owners of the goods by the simple process of commingling them without authorization.
        In the present case the holders of the receipts have impliedly ratified the acts of the warehouseman through the pooling agreement hereinbefore quoted.||| (Bank of the Philippine Islands v. Herridge, G.R. Nos. 21000, 21002-21004 & 21006, [December 20, 1924], 47 PHIL 57-75)
        
        WAREHOUSE RECEIPTS ARE CONTRACTS
        Considering that petitioner does not deny the existence, validity and genuineness of the Warehouse Receipts on which it anchors its claim for payment against private respondents, it cannot disclaim liability for the payment of the storage fees stipulated therein. As contracts, the receipts must be respected by authority of Article 1159 of the Civil Code, to wit:
        "ARTICLE 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith."
        ||| (Philippine National Bank v. Se, Jr., G.R. No. 119231, [April 18, 1996], 326 PHIL 401-416)
    - - WAREHOUSE RECEIPTS DEFINED
        The law does not define a warehouse receipt. However, from relevant provisions, a warehouse receipt is a contract issued by a warehouseman, a person lawfully engaged in the business of storing goods for profit as evidence of goods, or chattels or merchandise in storage or which has been or is about to be stored... in a warehouse, that is, every building, structure, or other protected enclosure in which commodities are kept for storage.
        
        WAREHOUSE RECEIPTS MUST BE IN WRITTEN OR PRINTED FORM
        It is a formal contract because, although the law states that a warehouse receipt need not be in any particular form, the Warehouse Receipts Law requires that it must be written or printed and must contain specific terms.
- - - - A LETTER OF CREDIT IS A COMMERCIAL TRANSACTION