Documents of Title

Question 1

When is a document of title a negotiable document of title?

Answer 1

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.

Question 2

What is a document of title to goods?

Answer 2

A 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])

Question 3

What are the functions of a document of title?

Answer 3

1. Receipts of, or orders upon, a bailee of goods represented – Documents of title refer to goods and not to money. They all have this in common: that they are receipts of a bailee, or orders upon a bailee. A different name is given in popular speech to the document when it is issued by a carrier and when it is issued by a warehouseman, but in substance the nature of the document is the same in both cases.
2. Evidence of transfer of title and possession of the goods and contract between the parties – A document of title is symbol of the goods covered by it, serving as evidence of (a) transfer of title and (b) transfer of possession. It also serves as an evidence of the (c) contract between the parties who are bound by its terms. So far as concerns the transfer of property between the parties, their intention would be effectual without the document, but where third parties’ rights are involved, the form of the document (i.e.. negotiable or non-negotiable) becomes important.

Question 4

What are examples of documents of title?

Answer 4

There are three most common forms or documents of title, namely:

1. Bill of lading – It is a contract and a receipt for the transport of goods and their delivery to the person named therein, to order, or to bearer. It usually involves three persons – the carrier, the shopper, and the consignee. The shipper and the consignee may be one and the same person. Its acceptance generally constitutes the contract of carriage even though not signed.
2. Dock warrant – It is an instrument given by dock owners to an importer of goods warehoused on the dock as a recognition of the importer’s title to the said goods, upon production of the bill of lading; and
3. Warehouse receipt – a contract or receipt for goods deposited with a warehouseman containing the latter’s undertaking to hold and deliver the said goods to a specified person, to order, or to bearer. Quedan is a warehouse receipt usually for sugar received by a warehouseman.

Question 5

What are the classes of documents of title?

Answer 5

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); or
2. Non-negotiable documents of title or those by the terms of which the goods covered are deliverable to a specified persons (Art. 1511).

Question 6

Who negotiates in a negotiable document of title?

Answer 6

Who negotiates: Only the owner of the document or one to whom possession or custody of the document has been entrusted by the owner, may negotiate it. [Art. 1512]

or the one to whom possession or custody of document has been entrusted by the owner.

Question 7

How is a negotiable document of title negotiated?

Answer 7

How negotiated:

1. By delivery
2. By indorsement and delivery
   
   1. Effect of negotiable documents of title marked “non-negotiable” – no effect (see Art. 1510)
      
      1. A document marked as “not negotiable” when the doc is delivered to “order” or to “bearer” has no effect.
   2. Effect of negotiation
      
      1. rights acquired by the buyer of the negotiable document of title when properly negotiated
         
         1. Title to the goods same as person negotiating doc to him had;
         2. Title to the goods as the person to whose order the goods were delivered
         3. Direct obligation of the bailee to hold possession of goods for person whom nego. doc. of title has been duly negotiated
      2. effect where negotiation impaired by breach of duty, etc.
         
         1. validity of negotation is not impaired if person to whom the doc was negotiated paid value in good faith without notice to the breach
      3. effect where document of title not properly negotiated
         
         1. Person acquires rights against the transferror
         2. Right to compel the transferor to indorse the indorsement
   3. warranties by seller of the document of title
      
      1. Art. 1516
   4. rights of creditors against the goods
      
      1. Go to court and seek injunction (Art. 1520)

Question 8

How is a non-negotiable document of title transferred?

Answer 8

Goods described in a non-negotiable document of title are deliverable only to a specified person. Thus, the carrier will NOT deliver the goods to any holder of the document, or to whom such document of title may have been endorsed by the consignee.

There must be evidence of the sale or donation of the goods. The person must present to the carrier the deed of sale or donation in his favor. Hence, delivery of such document to a purchaser or donee cannot operate as a symbolic delivery of the goods described therein as would pass title to the latter. Even if the deed fo sale or donation is evidenced in a public instrument, the execution of such instrument will not operate as a constructive delivery of the goods described in the bill of lading where the goods are in posession of a third person.