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Non-Negotiable Document of Title

Source:
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.
*This is a new provision and is based on SECTION 31 of the Uniform Sales Act. It is
similar to SECTION 39 of the Warehouse Receipt Law except for the word “receipt”.

Definition:
 A non-negotiable document is by terms of which the goods are deliverable to a specified
person.
o A non-negotiable document is one where by its terms, it is deliverable to the
bearer, or to the order of any person named in the document.
 It cannot be negotiated by the holder.
o However, it can be assigned or transferred by delivery to a purchaser or donee.

Effect of Indorsement
 Indorsement of such receipt gives the transferee no additional right.
 He will just be entitled to the rights of a transferee provided in ARTICLE 1514 whether
the conveyance is by indorsement, delivery or assignment.
o Example:
The words “deliver to Juan dela Cruz” appear in a document of title. This cannot
be negotiated because it is non-negotiable. It is not deliverable to bearer.
However, it may still be transferred or assigned by Juan dela Cruz. Assuming, Juan
dela Cruz indorsed it, the indorsement has no significance because it grants no
additional rights.

Persons who can negotiate Document of Title (ARTICLE 1512)


1. Owner of the said document
2. Persons 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.

 A mere finder of the document is not included.

*New provision and is based on SECTION 32 of the Uniform Sales Act and similar to
SECTION 40 of the Warehouse Receipts Law

Effect of Transfer
Source:
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 notification 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 notification to such bailee by the transferor or a subsequent
purchaser from the transfer of a subsequent sale of the goods by the transferor.

*This is a new provision and is based on SECTION 36 of the Uniform Sales Act. It is
similar to SECTION 42 of the Warehouse Receipt Law except for the word “receipt”.

 The preceding Article speaks of negotiation while the present Article speaks of transfer.
Negotiation = Negotiable Documents
Transfer = Non-Negotiable Documents

The person to whom the document of title has been transferred but not negotiated acquires the
following rights:
1. The title to the goods as against the transferor but not subject to the terms of
any agreement.
2. The right to notify the bailee of the transfer and to order the bailee to told
possession of the goods for him according to the terms of the agreement.

 Notification is an operative act to transfer the title or possession of the goods in favour
of the transferee.
o Before notification, the bailee is not bound to transfer whose right may be
defeated by a levy or attachment or execution upon the goods by the creditor of
the transferor or by notification to such bailee of the subsequent sale of the
goods.
o There is no legal relationship between the assignee and the bailee until the latter
is informed by the former of the assignment of the document of title

Condition for Allowance of Attachment of Goods

NEGOTIABLE NON-NEGOTIABLE
Goods covered cannot be attached or levied Mere transfer of the document does not
upon on execution unless the document is first constitute delivery of goods.
surrendered to the bailee or its negotiation
restrained by the court. Thus, before notification of the bailee about
 REASON: document might have been the transfer, the bailee is not bound to the
negotiated to other persons who may transferee.
enjoy superior rights and for which the
bailee could be made liable should he Before notice, the transferee’s title and his
fail to deliver the goods later when right to hold the bailee responsible to him for
demanded by such persons. the goods may be defeated by a writ of
attachment/levy on execution upon the goods
by the creditor/s of the transferor.

Transfer of Order Document without Indorsement

Source:
Art. 1515. Where a negotiable document of title is transferred for 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. The negotiation shall take effect as of the time when the endorsement is actually
made.

*This is a new provision and is based on SECTION 35 of the Uniform Sales Act. It is
similar to SECTION 43 of the Warehouse Receipt Law except for the word “receipt” and SECTION
49 of the Negotiable Instruments Law.

This article specifies the rights of a person with whom an order document of title, which may
not be properly negotiated by mere delivery, has been delivered, without indorsement.
1. Right to the goods as against the transferor
2. Right to compel the transferor to indorse the document

 Negotiation shall take effect as of the time when the indorsement is actually made
o No retroactivity.
o Reason: negotiation becomes complete only at the time of the indorsement of
the negotiable document by the transferor.
 If at the time of the indorsement, the transferee knew already of the
defect or flaw in the title of the transferor, he cannot be considered a
buyer in good faith. The fact that he was ignorant of this at the time he
purchased the document will not excuse him if at the time of
indorsement he came to know of the flaw.

 NOTE: (EXCPETION) if the intention of the parties is that the document should be merely
transfer, the transferee has no right to require the transferor to indorse the document