1511.
Ref. book: Law on Sales, by Hector De Leon.
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.
Definition of terms.
(1) Document of title to goods. — Includes any bill of lading, dock
warrant, “quedan,” or warehouse receipt or order for the delivery of
goods, or any other document used in the ordinary course of business
in the sale or transfer of goods, as proof of the possession or control of
the goods, or authorizing or purporting to authorize the possessor of the
document to transfer or receive, either by indorsement or by delivery,
goods represented by such document. (Art. 1636[1].)
(2) Goods. — Included all chattels personal but not things in action
or money of legal tender in the Philippines. The term includes growing
fruits or crops. (ibid.)
(3) Order. — Relating to documents of title means an order by
indorsement on the documents. (ibid.)
Classes of documents of titles.
Documents of title may be either:
(1) Negotiable documents of title or those by the terms of which the
bailee undertakes to deliver the goods to the bearer and those by the
terms of which the bailee undertakes to deliver the goods to the order of
a specified person (Art. 1508.);
(2) Non-negotiable documents of title or those by the terms of
which the goods covered are deliverable to a specified person. (Art.
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
(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 specified person, and
such person or a subsequent indorsee of the document has
indorsed it in blank or to the bearer.
(3) 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
specified person, and in such case the document shall
thereafter be negotiated only by the indorsement of such
indorsee.
Negotiation of negotiable document by
delivery.
A negotiable document of title is negotiable by delivery if the goods
are deliverable to the bearer, or when it is indorsed in blank or to the
bearer by the person to whose order the goods are deliverable or by a
subsequent indorsee. An indorsement is in blank when the holder
merely signs his name at the back of the receipt without specifying to
whom the goods are to be delivered.
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
indorsement may be in blank, to bearer or to a specified person. If
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indorsed to a specified person, it may be again negotiated by the
indorsement of such person in blank, to bearer or to another
specified person. Subsequent negotiations may be made in like
manner.
Negotiation of negotiable document by
indorsement.
A negotiable document of title by the terms of which the goods are
deliverable to a person specified therein may be negotiated only by the
indorsement of such person.
(1) If indorsed in blank or to bearer, the document becomes
negotiable by delivery. (Art. 1508)
(2) If indorsed to a specified person, it may be again negotiated by
the indorsement of such person in blank, to bearer, or to another
specified person. Delivery alone is not sufficient.
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 specified person or order of
a specified person or which contains words of like import,
has placed upon it the words “not negotiable”
“nonnegotiable,” 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 defining the effect upon the obligations of the carrier,
warehouseman, or other bailee issuing a document of title
or placing thereon the words “not negotiable,”
“nonnegotiable,” or the like.
Negotiable documents of title marked “nonnegotiable.”
Under Article 1510, the words “not negotiable,” “nonnegotiable”
and the like when placed upon a document of title in which the
goods are to be delivered to “order” or to “bearer” have no effect and
the document continues to be negotiable.
When the document of title is to order, the bailee is obliged to take it
up before delivering the goods. Accordingly, he is liable to the holder of
an order document if the goods are delivered to the consignee without
surrender of the document even though the latter was marked “not
negotiable.”
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 nonnegotiable
document cannot be negotiated and the indorsement of such a
document gives the transferee no additional right.
Transfer of nonnegotiable documents.
A nonnegotiable document of title cannot be negotiated.
Nevertheless, it can be transferred or assigned by delivery. In such a
case, the transferee or assignee acquires only the rights stated in
Article 1514. Even if the document is indorsed, the transferee acquires
no additional right.
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.
Persons who may negotiate a document.
It will be noticed that the provision does not give a power to
negotiate documents of title equal to that allowed under the Negotiable
Instruments Law (Act No. 2031.) in the case of bills of exchange and
promissory notes inasmuch as neither a thief nor a finder is within the
terms of the article.
 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.
Rights of person to whom document has been
negotiated.
This article specifies the rights of a person to whom a negotiable
document of title has been duly negotiated, either by delivery, in the
case of a document of title to bearer, or by indorsement and delivery, in
the case of a document of title to order. Such person acquires:
(1) The title of the person negotiating the document, over the goods
covered by the document;
(2) The title of the person (depositor or owner) to whose order by
the terms of the document the goods were to be delivered, over such
goods; and
(3) The direct obligation of the bailee (warehouseman or carrier) to
hold possession of the goods for him, as if the bailee had contracted
directly with him.
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 nonnegotiable, 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 nonnegotiable 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 transferor of a subsequent
sale of the goods by the transferor.
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 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 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.
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Warranties on sale of documents.
This article treats of the warranties or liabilities of a person
negotiating or transferring a document. They are similar to those of a
person negotiating an instrument by delivery or by a qualified
indorsement under the Negotiable Instruments Law.

The liability is limited only to a violation of the four warranties

set forth in Article 1516-1517.

Rights of person to whom document has been

transferred.

This article refers to the rights of a person to whom a negotiable

document of title (not duly negotiated) has been transferred or of the
transferee of a nonnegotiable document. Such person acquires:
(1) The title to the goods as against the transferor;
(2) The right to notify the bailee of the transfer thereof; and
(3) The right, thereafter, to acquire the obligation of the bailee to
hold the goods for him.