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CRISTOPHER F. BELMONTE JR.

BSA 4-1

CIVIL CODE PROVISIONS (ARTICLE 1513 – ARTICLE 1518)

Rights acquired by a person to whom a negotiable document of title is negotiated


(Article 1513)

1. The title of the person negotiating the document, over the goods covered by the
document.
2. The title of the depositor or shipper over the goods covered by the document.
3. 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.

Rights of the transferee of a document of title

1. Non-negotiable document of title


The transferee of a non-negotiable document or title acquires the following
rights:
a. As against the transferor, the title to the goods, subject to the term of any
agreement with the transferor.
b. The rights to notify the bailee (warehouseman or carrier) of the transfer to
him of the document of title.

Effect of notification

Upon notification to the bailee of transfer to him of the document, the


transferee acquires the direct obligation of the baileee to hold possession of the
goods for him according to the terms of the document.

Effect of lack of notification

Before notification, the title of the transferee to the goods and right to
acquire the obligation of the bailee may be defeated by the following:

1) The levy of an attachment of execution upon the goods by the creditor of the
transferor.
2) A notification to such bailee by the transferor or a subsequent purchaser
from the transferor of a subsequent sale of the goods by the transferor.
2. Negotiable document of title
The transferee to whom negotiable document of title has been transferred
but not negotiated acquires the following rights:

a. As against the transferor, the title to the goods, subject to the term of any
agreement with the transferor. (Article 1514)
b. The right to notify bailee (warehouseman or carrier) of the transfer to him of
the document of title. (Article 1514)

Effect of notification

Upon notification to the bailee of the transfer to him of the document, the
transferee acquires the direct obligation of the bailee to hold possession of the
goods for him according to the terms of the document. (Article 1514)

Effect of lack of notification

Before notification, the title of the transferee to the goods and right to
acquire the obligation of the bailee may be defeated by the following:

1) The levy of an attachment or execution upon the goods by the creditor of


the transferor.
2) A notification to such bailee by the transferor or a subsequent purchaser
from the transferor of a subsequent sale of the goods by the transferor.
(Article 1514)

c. The right to compel the transferor to indorse the document unless a contrary
intention appears. (Article 1515)

Effect of indorsement

1) The negotiaton takes effect upon the indorsement.


2) Upon indorsement, the transferee acquires the direct obligation of the
bailee to hold possession of the goods. No further notification by the
transferee to the bailee is required upon such indorsement completed by
delivery (Article 1513, 1514) for the transferee to acquire such direct
obligation.

Warranties of a person transferring or negotiating a document of title (Article 1516)

A person who for value negotiates or transfers a document of title by indorsement r


delivery, including one who assigns for value a claim secured by a document of title unless
a contrary intention appears, warrants the following:

1. That the document is genuine.


Thus, if the transferee cannot obtain the goods from the warehouseman
because the warehouse receipt is forged, he can hold liable the person transferring
or negotiating the document to him.

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.
Thus, a transferor is not liable if at the time he transferred the document, he
had no knowledge that the same was already worthless because goods presented by
it had been lost.

4. That he has a right to transfer the title to the goods and that the goods are
merchantable or fit for a particular purpose, whenever such warranties would have
been to transfer without a document of title the goods represented thereby.
These refer to the warranty against eviction and warranty against hidden
defects.

Effect of failure of bailee or previous indorsers to fulfill their obligations

The indorser shall not be liable for any failure on the part of the bailee who issued
the document or previous indorsers to fulfill their respective obligations. (Article 1517)

EXAMPLE PROBLEMS:

D, depositor; W, warehousema. An order negotiable warehouse receipt was issued for


the goods. Thereafter, D indorsed the receipt to A, A to B, and B to H, holder.

1. When H presented the receipt to W, W failed to deliver the goods to him because
they were lost through his negligence. Is D, A or B liable to H for failure of W to
deliver the goods?

Answer: No, because an indorser is not liable for the failure of the bailee to fulfill his
obligation. (Article 1517)

2. Supposing that the receipt presented by H to W was forged for which reason W
refused to deliver the goods to H, will D, A r B be liable to H?

Answer: Yes, because an indorser warrants that the document of title is genuine.
(Article 1516)
3. Supposing that D stole the goods of T and deposited them in W's warehouse, may H
obtain delivery of the goods from W assuming that H is a holder for value and
without notice?

Answer: No, because H acquired only whatever rights D had over the goods, which was
the same right acquired by the indorsers subsequent to D. (Article 1513) A depositor
who has no title to the goods cannot confer title to them by depositing them with a
warehouseman or the bailee and obtaining a receipt therefor notwithstanding that the
purchaser of the goods is an innocent purchaser for value.

4. Refer to No. 3. Will D, A or B be liable to H by reason of the non-delivery of the goods


to H?

Answer: Yes, because an indorser warrants that he has the right to transfer the title to
the goods. (Article 1515, paragraph 4)

Non-impairment of the validity of negotiation although it was made in breach of


duty, etc. (Article 1518)

The validity of the negotiation, if the person to whom the document is negotiated or
a person to whom the document is subsequently negotiated was a purchaser for value in
good faith and without notice, is not impaired by the following:

1. That the negotiation was made in breach of duty of the person negotiating.
2. That the owner of the document was deprived of the possession of the same by loss,
theft, fraud, accident, mistake, duress or conversion.

Example:
S delivers his goods to C, a common carrier, for shipment. C issues to S a bill
of ladinh for the goods which states that they are to be delivered to bearer.
However, the bill of lading is stolen by T who thereafter negotiates it by mere
delivery to H, a defective title. Is the negotiation of T to H valid?

Answer: Yes, because the validity of the negotiation is not impaired by the fact that the
owner of the document was deprived thereof by theft. (Article 1518) Accordingly, H
can obtain possession of the goods.
WAREHOUSE RECEIPTS LAW

SECTION 18: WAREHOUSE 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.

Duty of warehouseman where there are several claimants.

(1) Must determine within the reasonable time the validity of the conflicting claims
(Section 18), and deliver to the person whom he finds is entitled to the
possession of the goods. However, he is not excused from liability in case he
makes a mistake. (see Section 10)
(2) Must bring complaint in interpleader (Section 1, Rule 63, Rule of Court.) and
require the different claimants to litigate among themselves. (Section 17) In such
case, the warehouseman will be relieved from liability in delivering the goods to
the person whom the court finds to have a better right

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