1511.

Ref. book: Law on Sales, by Hector De Leon. ART. 1508. A negotiable document of title may be
negotiated by delivery:
ART. 1507. A document of title in which it is stated that (1) Where by the terms of the document the carrier,
the goods referred to therein will be delivered to the bearer, warehouseman or other bailee issuing the same undertakes
or to the order of any person named in such document is a to deliver the goods to the bearer; or
negotiable document of title.
(2) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes
Definition of terms.
to deliver the goods to the order of a specified person, and
such person or a subsequent indorsee of the document has
(1) Document of title to goods. — Includes any bill of lading, dock indorsed it in blank or to the bearer.
warrant, “quedan,” or warehouse receipt or order for the delivery of
(3) Where by the terms of a negotiable document of title
goods, or any other document used in the ordinary course of business
the goods are deliverable to bearer or where a negotiable
in the sale or transfer of goods, as proof of the possession or control of
document of title has been indorsed in blank or to bearer,
the goods, or authorizing or purporting to authorize the possessor of the
any holder may indorse the same to himself or to any
document to transfer or receive, either by indorsement or by delivery,
specified person, and in such case the document shall
goods represented by such document. (Art. 1636[1].)
thereafter be negotiated only by the indorsement of such
indorsee.
(2) Goods. — Included all chattels personal but not things in action
or money of legal tender in the Philippines. The term includes growing
fruits or crops. (ibid.)
Negotiation of negotiable document by
delivery.
(3) Order. — Relating to documents of title means an order by
indorsement on the documents. (ibid.)
A negotiable document of title is negotiable by delivery if the goods
are deliverable to the bearer, or when it is indorsed in blank or to the
Classes of documents of titles.
bearer by the person to whose order the goods are deliverable or by a
Documents of title may be either: subsequent indorsee. An indorsement is in blank when the holder
(1) Negotiable documents of title or those by the terms of which the merely signs his name at the back of the receipt without specifying to
bailee undertakes to deliver the goods to the bearer and those by the whom the goods are to be delivered.
terms of which the bailee undertakes to deliver the goods to the order of
a specified person (Art. 1508.); ART. 1509. A negotiable document of title may be
negotiated by the indorsement of the person to whose order the
(2) Non-negotiable documents of title or those by the terms of goods are by the terms of the document deliverable. Such
which the goods covered are deliverable to a specified person. (Art. indorsement may be in blank, to bearer or to a specified person. If

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indorsed to a specified person, it may be again negotiated by the up before delivering the goods. Accordingly, he is liable to the holder of
indorsement of such person in blank, to bearer or to another an order document if the goods are delivered to the consignee without
specified person. Subsequent negotiations may be made in like surrender of the document even though the latter was marked “not
manner. negotiable.”

Negotiation of negotiable document by ART. 1511. A document of title which is not in such form
indorsement. that it can be negotiated by delivery may be transferred by the
A negotiable document of title by the terms of which the goods are holder by delivery to a purchaser or donee. A nonnegotiable
deliverable to a person specified therein may be negotiated only by the document cannot be negotiated and the indorsement of such a
indorsement of such person. document gives the transferee no additional right.
(1) If indorsed in blank or to bearer, the document becomes Transfer of nonnegotiable documents.
negotiable by delivery. (Art. 1508) A nonnegotiable document of title cannot be negotiated.
(2) If indorsed to a specified person, it may be again negotiated by Nevertheless, it can be transferred or assigned by delivery. In such a
the indorsement of such person in blank, to bearer, or to another case, the transferee or assignee acquires only the rights stated in
specified person. Delivery alone is not sufficient. Article 1514. Even if the document is indorsed, the transferee acquires
no additional right.
ART. 1510. If a document of title which contains an
undertaking by a carrier, warehouseman or other bailee to ART. 1512. A negotiable document of title may be
deliver the goods to bearer, to a specified person or order of negotiated:
a specified person or which contains words of like import, (1) By the owner thereof; or
has placed upon it the words “not negotiable” (2) By any person to whom the possession or custody of
“nonnegotiable,” or the like, such document may the document has been entrusted by the owner, if, by the
nevertheless be negotiated by the holder and is a negotiable terms of the document the bailee issuing the document
document of title within the meaning of this Title. But
undertakes to deliver the goods to the order of the person to
nothing in this Title contained shall be construed as limiting
whom the possession or custody of the document has been
or defining the effect upon the obligations of the carrier,
entrusted, or if at the time of such entrusting the document
warehouseman, or other bailee issuing a document of title
is in such form that it may be negotiated by delivery.
or placing thereon the words “not negotiable,”
“nonnegotiable,” or the like.
Persons who may negotiate a document.
Negotiable documents of title marked “nonnegotiable.”
Under Article 1510, the words “not negotiable,” “nonnegotiable” It will be noticed that the provision does not give a power to
and the like when placed upon a document of title in which the negotiate documents of title equal to that allowed under the Negotiable
goods are to be delivered to “order” or to “bearer” have no effect and Instruments Law (Act No. 2031.) in the case of bills of exchange and
the document continues to be negotiable. promissory notes inasmuch as neither a thief nor a finder is within the
terms of the article.
When the document of title is to order, the bailee is obliged to take it
 ART. 1513. A person to whom a negotiable document of terms of any agreement with the transferor.
title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the If the document is nonnegotiable, such person also
document to him had or had ability to convey to a purchaser acquires the right to notify the bailee who issued the document
in good faith for value and also such title to the goods as of the transfer thereof, and thereby to acquire the direct
the person to whose order the goods were to be delivered obligation of such bailee to hold possession of the goods for
by the terms of the document had or had ability to convey to him according to the terms of the document.
a purchaser in good faith for value; and
Prior to the notification to such bailee by the transferor
(2) The direct obligation of the bailee issuing the
or transferee of a nonnegotiable document of title, the title of
document to hold possession of the goods for him
the transferee to the goods and the right to acquire the
according to the terms of the document as fully as if such
bailee had contracted directly with him. obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the
transferor, or by a notification to such bailee by the transferor
Rights of person to whom document has been or a subsequent purchaser from the transferor of a subsequent
negotiated. sale of the goods by the transferor.

This article specifies the rights of a person to whom a negotiable

document of title has been duly negotiated, either by delivery, in the ART. 1516. A person who for value negotiates or
transfers a document of title by indorsement or delivery,
case of a document of title to bearer, or by indorsement and delivery, in
including one who assigns for value a claim secured by a
the case of a document of title to order. Such person acquires:
document of title unless contrary intention appears,
warrants:
(1) The title of the person negotiating the document, over the goods
covered by the document; (1) That the document is genuine;
(2) The title of the person (depositor or owner) to whose order by
(2) That he has a legal right to negotiate or transfer it;
the terms of the document the goods were to be delivered, over such
goods; and (3) That he has knowledge of no fact which would impair
(3) The direct obligation of the bailee (warehouseman or carrier) to the validity or worth of the document; and
hold possession of the goods for him, as if the bailee had contracted (4) That he has a right to transfer the title to the goods
directly with him. and that the goods are merchantable or fit for a particular
purpose, whenever such warranties would have been
implied if the contract of the parties had been to transfer
ART. 1514. A person to whom a document of title has without a document of title the goods represented thereby.
been transferred, but not negotiated, acquires thereby, as
against the transferor, the title to the goods, subject to the
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Warranties on sale of documents.
This article treats of the warranties or liabilities of a person
negotiating or transferring a document. They are similar to those of a
person negotiating an instrument by delivery or by a qualified
indorsement under the Negotiable Instruments Law.

The liability is limited only to a violation of the four warranties

set forth in Article 1516-1517.

Rights of person to whom document has been

transferred.

This article refers to the rights of a person to whom a negotiable

document of title (not duly negotiated) has been transferred or of the
transferee of a nonnegotiable document. Such person acquires:
(1) The title to the goods as against the transferor;
(2) The right to notify the bailee of the transfer thereof; and
(3) The right, thereafter, to acquire the obligation of the bailee to
hold the goods for him.