CIVIL CODE OF THE PHILIPPINES

Art. 1507

this would be a case of estafa and the car is an object of the

crime. (See Arenas v. Raymundo, 19 Phil. 47; Art. 105, par.
2, R.P.C.).]
[NOTE: However, when no crime is committed, and only
a civil liability arises (as when a buyer who had not yet paid
for the goods should sell them to another who is in good faith),
the seller cannot recover from the third person the goods, for
here there was neither a losing nor an unlawful (criminal)
deprivation. (See Asiatic Commercial Corp. v. Ang, et al., Vol.
40, O.G. S. No. 15, p. 102).]
[NOTE: For reference purposes, Art. 559 is hereby
quoted:
The possession of movable property acquired in good
faith is equivalent to a title. Nevertheless, one who has lost
any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner
has been unlawfully deprived, has acquired it in good faith
at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.]
Art. 1507. A document of title in which it is stated that
the goods referred to therein will be delivered to the bearer,
or to the order of any person named in such document is
a negotiable document of title.
COMMENT:
(1) What Document of Title Includes
(a)

any bill of lading

(b)

dock warrant

(c)

quedan

(d)

warehouse receipt or order

(e)

any other document used as proof of possession or as

authority to transfer the goods represented by the document.
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(2) Negotiable Document of Title

The document is negotiable if:
(a)

the goods are deliverable to bearer (deliver to bearer);

(b)

or if the goods are deliverable to the order of a certain

person (deliver to the order of X; deliver to Mr. X or
his order).
[NOTE: If the document states that the goods have
already been delivered to the order of the buyer, it is
not negotiable because what is needed is future delivery.
(Hixson v. Ward, 1929, 354 Ill. App. 505).]
[NOTE: A negotiable warehouse receipt is a document of title, but a mere order to the warehouseman to
deliver certain deposited goods to the order of a certain
person, is not a negotiable document of title; this is
merely a warehouse delivery order. (See Transmares Corp.
v. George F. Smith, Inc., 1947-76 N.Y.S. 2d., 137).]

(3) Effect of Typographical or Grammatical Error

A mere typographical or grammatical error does not destroy the negotiability of a document of title, for what should be
considered is the intent. Thus, if the words by order of X are
placed instead of to the order of X the document can still be
considered negotiable. (Felisa Roman v. Asia Banking Corp., 46
Phil. 609). Moreover, a mere incorrectness in the description of
the goods when there can be no doubt of the goods referred to
will not destroy the negotiability of the document. Thus, if the
goods were described as Cagayan tobacco when the depositor
had only Isabela tobacco in the warehouse, the warehouse
receipt is still good and negotiable. (American Foreign Banking
Corp. v. Herridge, 49 Phil. 975).
Art. 1508. A negotiable document of title may be negotiated by delivery:
(1) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes
to deliver the goods to the bearer; or
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CIVIL CODE OF THE PHILIPPINES

Art. 1509

(2) Where by the terms of the document the carrier,

warehouseman or other bailee issuing the same undertakes
to deliver the goods to the order of a specied person and
such person or a subsequent indorsee of the document has
indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title
the goods are deliverable to bearer or where a negotiable
document of title has been indorsed in blank or to bearer,
any holder may indorse the same to himself or to any specied person, and in such case the document shall thereafter
be negotiated only by the endorsement of such indorsee.
COMMENT:
(1) How Negotiable Document of Title is Negotiated
There are two forms of negotiating a negotiable document
of title:

(2)

(a)

mere delivery;

(b)

indorsement PLUS delivery.

When Mere Delivery is Sufcient

Mere delivery (handing over) is sufcient
(a)

If deliverable to bearer.
(NOTE: The holder can just transfer it to a friend,
and the friend will be entitled to the goods.)

(b)

If deliverable to the order of a certain person AND that

person has indorsed it in blank merely (put his name at
the back) or indorsed it to bearer (at the back, he placed
deliver to bearer and then he signed his name). The
document can now be negotiated by mere delivery.
[NOTE: Mercantile practice is followed in this article (Commissioners Note, 1 U.L.A. 1950 Ed.; Sec. 28,
p. 397).]

Art. 1509. A negotiable document of title may be negotiated by the indorsement of the person to whose order the
goods are by the terms of the document deliverable. Such
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indorsement may be in blank, to bearer or to a specied

person. If indorsed to a specied person, it may be again
negotiated by the indorsement of such person in blank, to
bearer or to another specied person. Subsequent negotiations may be made in like manner.
COMMENT:
(1) Negotiation by Indorsement and Delivery
(a)

This refers to negotiation by indorsement and delivery.

(b)

Example: The document says deliver to the order of Mr.

X To negotiate it, Mr. X must sign his name at the back
and then deliver. Mere delivery without signing is not
sufcient. When he signs he may:
1)

just sign his name (blank indorsement);

2)

or say deliver to Mr. Y;

3)

or say deliver to bearer.

(NOTE: Mr. Y can in turn indorse it in blank,
to bearer, or to another specied person.)

(c)

This Article again follows mercantile practice. (Commissioners Note, 1 U.L.A. 1950 Ed., Sec. 29, p. 398).

(2) Effect of Undated Indorsement

It is not necessary to date an indorsement because no
additional protection is given thereby to businessmen. As a
matter of fact, to require dating would be to impede business
transactions. (Hongkong & Shanghai Bank v. Peters, 16 Phil.
284).
(3) Effect of Indorsement and Delivery
Indorsement and delivery of a negotiable quedan ipso facto
transfer possession and ownership of the property referred to
therein. (Philippine Trust Co. v. Nat. Bank, 42 Phil. 413).
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Arts. 1510-1511

Art. 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to bearer, to a specied person or order of a
specied person or which contains words of like import, has
placed upon it the words not negotiable, non-negotiable
or the like, such document may nevertheless be negotiated
by the holder and is a negotiable document of title within
the meaning of this Title. But nothing in this Title contained
shall be construed as limiting or dening the effect upon the
obligations of the carrier, warehouse man, or other bailee
issuing a document of title or placing thereon the words not
negotiable, non-negotiable, or the like.
COMMENT:
Effect of Placing the Word Non-Negotiable
Example:
A negotiable document of title was marked non-negotiable by the warehouseman (or carrier or depositary). Is it
still negotiable?
ANS.: Yes, insofar as the various holders of the note are
concerned, the note is still negotiable. Regarding the intent or
liability of the maker, this Article does not deal with the same.
(See Commissioners Note, 1 U.L.A., 1950 Ed., Sec. 30, p. 398).
Art. 1511. A document of title which is not in such
form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or donee.
A non-negotiable document cannot be negotiated and the
endorsement of such a document gives the transferee no
additional right.
COMMENT:
(1) Effect of Delivery When Document Cannot Be Negotiated By Mere Delivery
Example of 1st sentence of Article
A document of title was non-negotiable. May it still be
given or assigned to another?
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ANS.: Yes, but this does not have the effect of a negotiation. It is a mere transfer or assignment. (See Nixson vs.
Ward, 1929, 254 Ill. App. 505).
(2) Effect of Negotiation and Indorsement of Non-Negotiable Instrument
Example of 2nd sentence of Article
A document of title contained the words deliver to Mr.
X. This is therefore non-negotiable.
(a)

May it be negotiated?
ANS.: No, but it may be transferred.

(b)

Suppose it is indorsed by Mr. X?

ANS.: The indorsement is useless and does not give
the indorsee any additional right. There is in this case
only a transfer or assignment.

Art. 1512. A negotiable document of title may be negotiated:

(1)

By the owner thereof; or

(2) By any person to whom the possession or custody

of the document has been entrusted by the owner, if, by
the terms of the document the bailee issuing the document
undertakes to deliver the goods to the order of the person to
whom the possession or custody of the document has been
entrusted, or if at the time of such entrusting the document
is in such form that it may be negotiated by delivery.
COMMENT:
(1) Who May Negotiate Negotiable Document of Title
(a)

This Article speaks of the person who may negotiate a

negotiable document of title.

(b)

Example: A document of title contained the following

words: Deliver to the order of X or to the order of the
person to whom this document has been entrusted by X.
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Art. 1513

Later, X entrusted the document to Y. May Y negotiate

the same by indorsement?
ANS.: Yes. (Art. 1512, No. 2, 1st part).
(2) Who Bears Loss in Case of Unauthorized Negotiation
If the owner of a negotiable document of title (deliverable
to bearer) entrusts the document to a friend for deposit, but
the friend betrays the trust and negotiates the document by
delivering it to another who is in good faith, the said owner
cannot impugn the validity of the negotiation. As between two
innocent persons, he who made the loss possible should bear
the loss, without prejudice to his right to recover from the
wrongdoer. (Siy Long Bieng and Co. v. Hongkong & Shanghai
Banking Corp., 56 Phil. 598).
Art. 1513. A person to whom a negotiable document of
title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a purchaser
in good faith for value and also such title to the goods as
the person to whose order the goods were to be delivered
by the terms of the document had or had ability to convey
to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to
the terms of the document as fully as if such bailee had
contracted directly with him.
COMMENT:
(1) Rights of Person to Whom Negotiable Document Is
Negotiated
(a)

This Article speaks of some of the rights of a person to

whom a negotiable document of title has been negotiated.

(b)

Note that the bailee (or carrier or depositary) directly

holds the property in behalf of the person to whom the
negotiable document was negotiated. It is as if such
person had dealt directly with the bailee.
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(2) Purpose of the article

The document should be made to really represent the
depositors right to the goods. (See Commissioners Note, 1
U.L.A., 1950 Ed., Sec. 33, p. 40).
Art. 1514. A person to whom a document of title has
been transferred, but not negotiated, acquires thereby, as
against the transferor, the title to the goods, subject to the
terms of any agreement with the transferor.
If the document is non-negotiable such person also acquires the right to notify the bailee who issued the document
of the transfer thereof, and thereby to acquire the direct
obligation of such bailee to hold possession of the goods for
him according to the terms of the document.
Prior to the notication to such bailee by the transferor or transferee of a non-negotiable document of title, the
title of the transferee to the goods and the right to acquire
the 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 notication to such bailee by the
transferor or a subsequent purchaser from the transferor
of a subsequent sale of the goods by the transferor.
COMMENT:
(1) Rights of Mere Transferee
(a)

This Article deals with the rights of a transferee, not the

rights of a person to whom the document was negotiated.

(b)

Note that the transferee does not acquire directly the

obligation of the bailee to hold for him (unlike that referred to in Art. 1513). To acquire the direct obligation
of the bailee, the transferee (or transferor) must notify
the bailee.

(2) Who Can Defeat Rights of Transferee

The third paragraph refers to the persons who can defeat
the right of the transferee PRIOR to the notication.
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Arts. 1515-1516

Art. 1515. Where a negotiable document of title is

transferred for value by delivery, and the indorsement of
the transferor is essential for negotiation, the transferee
acquires a right against the transferor to compel him to
indorse the document unless a contrary intention appears.
The negotiation shall take effect as of the time when the
indorsement is actually made.
COMMENT:
Rule if Indorsement is Needed for Negotiation
Example:
A document of title contained the words deliver to X
or his order. X wanted to negotiate it to Y, but instead of
indorsing it, he merely delivered it to Y. Has there been a
negotiation?
ANS.: No, because ofthe non-indorsement. But Y acquires
a right to compel X to indorse it provided that:
(a)

Y paid value for the document; and

(b)

no contrary intention appears.

Art. 1516. A person who for value negotiates or transfers

a document of title by indorsement or delivery, including
one who assigns for value a claim secured by a document
of title unless a contrary intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer
it;
(3) That he has knowledge of no fact which would impair the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods
and that the goods are merchantable or t for a particular
purpose, whenever such warranties would have been implied
if the contract of the parties had been to transfer without
a document of title the goods represented thereby.
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COMMENT:
(1) Warranties in Negotiation or Transfer
(a)

(b)

This refers to warranties

1)

by a person who negotiates;

2)

by a person who assigns or transfers for value.

Note that there are warranties

1)

about the document;

2)

about the right to the document;

3)

about the goods represented by the document.

[NOTE: Merchantable goods t for at least
the ordinary purpose of the goods.]

(2) Effect of Indorsees Knowledge of Forged Indorsement

If the indorsee knows that any of the former indorsements is a forgery, he does not acquire a valid title to the
document. (See Great Eastern Life Insurance Co. v. Hongkong
& Shanghai Banking Corp., 43 Phil. 678).
Art. 1517. The indorsement of a document of title shall
not make the indorser liable for any failure on the part of
the bailee who issued the document or previous indorsers
thereof to fulll their respective obligations.
COMMENT:
(1) Non-liability of Indorser for Failure of Bailee to Comply
Failure of the bailee or the previous indorsers to comply
with their obligations does not make the present indorsers
liable.
(2) Reason
The indorser warrants only the things mentioned in the
preceding article.
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Arts. 1518-1519

Art. 1518. The validity of the negotiation of a negotiable

document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the
negotiation, or by the fact that the owner of the document was
deprived of the possession of the same by loss, theft, fraud,
accident, mistake, duress, or conversion, if the person to
whom the document was negotiated or a person to whom the
document was subsequently negotiated paid value therefor in
good faith without notice of the breach of duty, or loss, theft,
fraud, accident, mistake, duress or conversion.
COMMENT:
Effect if Owner of Document Was Deprived of It
Example:
A document of title contained the words deliver to bearer.
The document was stolen by T; T subsequently indorsed it to
S, a purchaser in good faith. Is the negotiation to S valid?
ANS.: Yes, notwithstanding the theft by T. Reason: S is
a purchaser for value in good faith; that is, S did not know
that the document had been stolen by T.
Art. 1519. If goods are delivered to a bailee by the owner
or by a person whose act in conveying the title to them to
a purchaser in good faith for value would bind the owner
and a negotiable document of title is issued for them they
cannot thereafter, while in possession of such bailee, be
attached by garnishment or otherwise, or be levied under
an execution unless the document be rst surrendered to
the bailee or its negotiation enjoined. The bailee shall in
no case be compelled to deliver up the actual possession
of the goods until the document is surrendered to him or
impounded by the court.
COMMENT:
Generally No Attachment or Surrender
This Article speaks of two important things (if the document is negotiable):
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(a)

(b)

CIVIL CODE OF THE PHILIPPINES

Generally no attachment or levy, except:

1)

if the document is surrendered to bailee;

2)

or the negotiation of the document enjoined.

The bailee (or depositary or carrier) cannot be compelled

to surrender the goods except:
1)

if the document is surrendered to him;

2)

or the document is impounded by the court. (Art.

1519).
(NOTE: A creditor of the owner of the negotiable document is protected by the next article.)

Art. 1520. A creditor whose debtor is the owner of a

negotiable document of title shall be entitled to such aid
from courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the
claim by means thereof as is allowed at law or in equity
in regard to property which cannot readily be attached or
levied upon by ordinary legal process.
COMMENT:
Right of Creditor
Here, special aid is to be given to the creditor because
the document concerned is negotiable. Attachment is not easily
made.
Art. 1521. Whether it is not for the buyer to take possession of the goods or for the seller to send them to the
buyer is a question depending in each case on the contract,
express or implied, between the parties. Apart from any
such contract, express or implied, or usage of trade to the
contrary, the place of delivery is the sellers place of business if he has one, and if not his residence; but in case of a
contract of sale of specic goods, which to the knowledge of
the parties when the contract or the sale was made were in
some other place, then that place is the place of delivery.
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