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Article 1505-1512

By: Jerald L. Luna

Art. 1505

General Rule:
No one can give what he does not have

Exceptions:

A. When the owner of the goods by his conduct precluded from denying the sellers authority.
Example: If A sells Bs property to C, and B consents, B is estopped from denying
As authority to sell. (Gutierrez Hermanos v. Orense, 28 Phil. 571).

B. Second Paragraph (Nos. 1, 2, 3) of Art. 1505

Art. 1505
Nothing in this Title, however, shall affect:

1. The provisions of any factors acts, recording laws or any other


provision of law enabling the apparent owner of goods to dispose of
them as if he were the true owner thereof;

2. The validity of any contract of sale under statutory power of sale or


under the order of a court of competent jurisdiction;

3. Purchases made in a merchants store or in fairs, or markets, in


accordance with the Code of Commerce

Some Recording Acts


(a) Sale of large cattle no transfer of large cattle shall
be valid unless the same is registered, and a certificate of transfer
obtained (Sec. 59, Rev. Adm. Code).

(b) Land registration law. (Act 496).


(c) Sale of vessels record at each principal port of entry.
(Sec. 1171, Rev. Adm. Code).

Art. 1506
Where the seller of goods has a voidable title thereto, but his

title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in
good faith, for value, and without notice of the sellers defect
of title.

Effect if Seller Has Only a Voidable


Title
A bought a car from B (an insane man), and in turn sold the

car to C who is in good faith. After delivery of the car to C, he


becomes its owner if, at the time he bought it, the contract
between A and B had not yet been annulled.

Reasons for the Law

(a) Before a voidable contract is annulled it is considered


valid.

(b) Where one of two innocent parties must suffer, he who


placed the offender in a position to do wrong must suffer.
(Neal, etc., Co. v. Tarley, 1917).

Purchase from a Thief

Can a buyer acquire title from a thief (a person who stole and
then sold the goods to him)?

ANS.: No, because the owner has been unlawfully deprived of it. Hence,
the true owner can get it back without reimbursement.

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.

What Document of Title Includes


any bill of lading
dock warrant
quedan
warehouse receipt or order
any other document used as proof of possession or as

authority to transfer the goods represented by the document.

Art. 1508
How Negotiable Document of Title is Negotiated
There are two forms of negotiating a negotiable document of
title:

mere delivery;
indorsement PLUS delivery.

When Mere Delivery is Sufficient


If deliverable to bearer.
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.

Art. 1509
Negotiation by Indorsement and Delivery
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 suffi cient. 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.

Art. 1510
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
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?

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).

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 nonnegotiable.

(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
Who May Negotiate Negotiable Document of Title
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. Later, X
entrusted the document to Y. May Y negotiate the same by
indorsement?

ANS.: Yes. (Art. 1512, No. 2, 1st part).

.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.