Chapter 7

DOCUMENTS OF TITLE
Group 5:
Tansiongco, Hannah Therese
Luistro, Lorenz James
Alunan, Arexton

DOCUMENT OF TITLE

- Includes any bill of lading, dock warrant, quedan, or warehouse receipt or order for the delivery of goods, or any
document used in the ordinary course of business in the sale or transfer of goods, or authorizing or purporting to
authorize the possessor thereof to transfer or receive, either by endorsement or by delivery, goods represented by such
document.

FUNCTIONS
(1) Evidence of the possession or control of the goods described
(2) Medium of transferring title and possession over the goods described, without having to effect actual delivery.

Case: Siy Cong Bieng vs HK and Shanghai Bank

A warehouse receipt represents the goods, but the entrusting of the receipt is more than the mere delivery of
goods; it is a representation that the one whom the possession of the receipt has been so entrusted has the title of the
goods.

Philippine Trust Co. vs National Bank

The endorsement and delivery of a negotiable instrument quedan prior to the filing of the petition for
insolvency, operates as the transfer of possession and ownership of the goods referred, and had the effect of divorcing
the property covered from the estate of the insolvent.

RATIONALE

- Not innovations or inventions of legislators, but evolved from the commercial practices of merchants and gained much
acceptance under clearly defined commercial customs.

- Documents of title have been recognized by the State as the medium by which such transactions be prompted by the
instruments which evidence the merchandise covered.

Types of Documents of Title

1. Negotiable Document of Title
2. Non-Negotiable Document of Title
3. Effects of Errors on Document of Title
4. Effects of Use of “Non-Negotiable” Terms on Negotiable Documents of Title

Negotiable Document of Title

-A document of title in which states that the goods referred to therein are available “to bearer”, or “to order” of
any person named in such document, is a negotiable document of title.

Non-Negotiable Document of Title

-A document of title which does not state that the goods referred to are deliverable either to bearer or to the
order of any person named therein, is a non-negotiable.
Effects Of Error on Document of Title

Clerical errors in the words of negotiability, such as the use of the term “by the order” instead of “to the order” does not
destroy the negotiability of a warehouse receipt.

Effects of Use of “Non-Negotiable” terms on Negotiable Documents of Title

If a document of title which contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to
bearer, to a specified person or order, to the order of a specified person, or which contains words like import, has placed
upon it the words “non-negotiable” or the like, such document may be negotiated by the holder and is a negotiable
document of title.

NEGOTIATION OF NEGOTIABLE DOCUMENTS OF TITLE

WHO can negotiate?

1. The owner or the person to whom it was originally issued

2. To any person to whom the possession or custody of the document has been entrusted by the owner

How is Negotiation Properly Effected

• By Delivery Alone

a. where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes
to deliver the goods to the bearer
b. when originally the document of the title was issued “to the order” of a specified person, such person or a
subsequent endorsee of the document has endorsed it in blank or to the bearer

• By Endorsement and Delivery

– May be negotiated only by endorsement of the person to whose order the goods are delivered, coupled
with a delivery thereof.
– Such endorsement may be blank, to bearer or to specified person.
– If endorsed to a specific person, it may be again be negotiated by the endorsement of such person in
blank, to bearer or to another specified person.

Effects of Proper Negotiation

• Such title to goods as the person negotiating the document to him had ability to convey in good faith and for
value
• 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 the ability to convey to a purchaser in good faith and for value
• 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.

Effects of Merely Transferring/Delivering of Order Negotiable Documents of Title

 Art. 1511 NCC A negotiable document of title which is not in such form that it can be negotiated by delivery
“may be transferred by the holder by the delivery to a purchase or donee” meaning that the transferee would
thereby own the document of title.
• Art. 1514 of NCC “ person to whom a document 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, and the
transferee, the goods are owned by the transferee, but not as to the rest of the world, including the bailee.
• Art. 1515 of NCC, where a negotiable document of title is transferred for the value by delivery, and the
endorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor
to compel him to endorse the document unless a contrary intention appears; meaning that the negotiation shall
take effect as of the time when the endorsement is actually made.
 • Art. 1515 of NCC, where a negotiable document of title is transferred for the value by delivery, and the
endorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor
to compel him to endorse the document unless a contrary intention appears; meaning that the negotiation shall
take effect as of the time when the endorsement is actually made.

Art. 1518 of NCC provides the validity of the negotiation of a negotiable document of title is NOT impaired by these
facts:
• The negotiation was a breach of duty on the part of the person making the negotiation
• The owner of the document was deprived of the possession by means of loss, theft, fraud, accident, mistake,
duress and conversion
• It cannot be dealt separate from the goods it covers, the legal consequences of un authorized negotiation is also
exclusive for the goods covered.
• Even in theft if the document is deliverable to bearer, he may impart title to transfer it to holder in due course.
• The effects of unauthorized negotiation are more liberal and protective of the holder who takes it in good faith
and for value

Case: Siy Long Bieng vs. HSBC

 as between the owner of a negotiable document of title who endorsed it in blank and entrusted it to a and the
holder of such negotiable document of title to whom it is negotiated and who received it in good faith and for
value, the latter is preferred.

 as between two innocent persons, he who made the loss possible should bear the loss.

Assignment of Non-Negotiable Documents of Title

How Assignment Made

• A non-negotiable document cannot be negotiated and its endorsement gives a transferee no additional right
(Art. 1511 NCC)
• 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.
• Art. 1624 a perfected mere consent in a sale constitutes an assignment
• Art. 1625 assignment would require its appearance in a public instrument otherwise it “shall produce NO effect
as against third persons.”

Effects of Transfer by Assignment

The person duly assigned acquires:

• The title of goods, subject to the terms of any agreement with the transferor
• 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 good for him according to the terms of the document.

WARRANTIES ON NEGOTIATION AND ASSIGNMENT OF DOCUMENT OF TITLE

• A person who for value negotiates or transfers a document of title by endorsement or delivery, including one
who assigns for value a claim secured by a document of title, unless a contrary intention appears, warrants that:
• The document is genuine;
• He has a legal right to negotiate or transfer it;
• He has no knowledge of any fact which would impair the validity of worth of the document
• He has a right to transfer the title to the goods;
 • The goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied
if the contract of the parties had been to transfer without a document of title the goods represented thereby

Effects When Owner of the Document of Title Has No Legal Title to the Goods
1. When goods covered by a non- negotiable document
 Where the goods are covered by a non-negotiable document of title, and under the premise that the
assignee- buyer had obtained possession of the goods by the proper notification to the bailee of such
purchase, the situation would have to be governed by the formula provided under Article 559 of the civil
code.

2. When goods covered by negotiable document

 In a situation where the goods are covered by a negotiable document of title properly negotiated to the
holder-buyer, the premise would have to be that by issuing such negotiable document the bailee has
constituted himself as an agent to possess the goods for the benefit of the holder of the document as his
principal, then it becomes apparent that the same principles under Article 559 of the civil code would have
to apply.

Rules on Levy/Garnishment of Goods Covered by Documents of Title

When non-negotiable document title

• In case of a non-negotiable document title, possession and ownership of the document title (by assignment)
does not necessarily bring with it possession or title over the goods covered thereby; it is the notification of the
bailee of the assignment that is the operative fact that will transfer title and/or possession of the goods in favor
of the transferee-assignee.

When negotiable document title

• In case ownership and possession of the document itself is equivalent to the holder having actual ownership and
possession of the goods covered thereby. The goods are treated to be inseparable from the negotiable
document of title covering them and vice versa.

Tansiongco Luistro Alunan