Negotiation of negotiable document by delivery

DOCUMENT OF TITLE same

Art. 1509
INTRODUCTION A negotiable document of title may be negotiated by the
Nature and function of documents of title (2) endorsement of the person to whose order the goods are by the
1. Goods not to money terms of the document deliverable. Such endorsement may be
2. Symbol of goods covered by it, evidence of transfer of in blank, to bearer or to a specified person. If indorsed to a
title and transfer of possession specified person, it may be again negotiated by the
endorsement of such person in blank, to bearer or to another
Most common forms of documents of title (3) specified person. Subsequent negotiations may be made in like
1. Bill of lading manner.
2. Dock warrant
3. Warehouse receipt Negotiation of negotiable document by indorsement (3)
1. Specified – only
Laws governing documents of title (3) 2. Blank – delivery
1. Civil Code 3. Specified- may be
2. Warehouse Receipts Law
3. Code of Commerce

CIVIL CODE PROVISIONS
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. Documents of title to goods
2. Goods
3. Order
Classes of documents of title
1. Negotiable documents of title
2. Non-negotiable documents of title
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 endorsee of the document has indorsed
it in blank or to the bearer.
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 endorsement of such endorsee.
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," "non-negotiable" 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," "non-negotiable," or the like.
Negotiable documents of title marked “non-negotiable”
No effect
WRL - void
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.
Transfer of non-negotiable documents
Cannot be negotiated
Even if document is indorsed, transferee acquires no additional
right
Art. 1512
A negotiable document of title may be negotiated:
(1) By the owner therefor; 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
Does not give power to negotiate documents of title equal to
that allowed by law
If owner permits another to have possession or custody of
negotiable receipts, representation of title upon which bona
fide purchasers for value are entitled to rely despite breaches of
trust or violations of agreement on the part of the apparent
owner.
As between 2 innocent persons, the loss must fall upon him
whose misplaced confidence made the loss possible
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
(3)
1. Title of the person negotiating the document over the
goods covered by the document
2. 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
3. Direct obligation of the bailee (warehouseman or
carrier) to fold possession of the goods for him, as if the
bailee directly contracted with him
One who purchases a negotiable document of title issued to a
thief acquired no rights over the goods. But the purchaser
acquires a good title where the owner is estopped from
asserting his title.
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.
Rights of persons to whom document has been transferred
(3)
1. Title to the goods as against the transferor
2. Right to notify the bailee of the transfer
3. Right to acquire the obligation of the bailee to hold the
goods for him.
Right of the transferee is not absolute as it is subject to the
terms of any agreement with the transferor. He merely steps
into the shoes of the transferor.
Attachment of goods covered by document transferred (2)
1. Receipt non-negotiable
2. Receipt negotiable.
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.
Transfer of order document without indorsement (2)
1. Right to the goods as against the transferor
2. Right to compel the transferor to indorse the document
Rules where document subsequently indorsed
Negotiation shall take effect as of the time when indorsement
is actually made, not at the time the document is delivered.
Art. 1516
A person who for value negotiates or transfers a document of
title by endorsement or delivery, including one who assigns for
value a claim secured by a document of title unless a 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.
Warranties on sale of document (4)
Similar to person negotiating instrument by delivery
Person negotiating or transferring document could be held
liable as when the document was a forgery or he had stolen it.
Art. 1517
The endorsement of a document of title shall not make the
endorser liable for any failure on the part of the bailee who
issued the document or previous endorsers thereof to fulfill
their respective obligations.
Indorser not a guarantor
Indorsement merely to a conveyance by the indorser, not a
contract of guaranty.
Not liable to holder if the bailee fails to deliver the goods
because they were lost due to his fault or negligence.
Art. 1518
The validity of the negotiation of a negotiable document of title
is not impaired by the fact that the negotiation was a breach of
duty on the part of the person making the negotiation, or by the
fact that the owner of the document was deprived of the
possession of the same by loss, theft, fraud, accident, mistake,
duress, or conversion, if the person to whom the document was
negotiated or a person to whom the document was
subsequently negotiated paid value therefor in good faith
without notice of the breach of duty, or loss, theft, fraud,
accident, mistake, duress or conversion.
When negotiation not impaired by fraud, mistake, duress,
etc.
It may be negotiated even by a thief or a finder and the holder
thereof would acquire a good title thereto if he paid value
therefor in good faith without notice of the seller’s defect of
title.
Art. 1519
If goods are delivered to a bailee by the owner or by a person
whose act in conveying the title to them to a purchaser in good
faith for value would bind the owner and a negotiable
document of title is issued for them they cannot thereafter,
while in possession of such bailee, be attached by garnishment
or otherwise or be levied under an execution unless the
document be first surrendered to the bailee or its negotiation
enjoined. The bailee shall in no case be compelled to deliver up
the actual possession of the goods until the document is
surrendered to him or impounded by the court
Attachment or levy upon goods covered by a negotiable
document (3)
1. Document be first surrendered
2. Negotiation is enjoined
3. Document is impounded by the court
Where depositor not owner
Does not apply
To actions for recovery or manual delivery of goods
Art. 1520
A creditor whose debtor is the owner of a negotiable document
of title shall be entitled to such aid from courts of appropriate
jurisdiction by injunction and otherwise in attaching such
document or in satisfying the claim by means thereof as is
allowed at law or in equity in regard to property which cannot
readily be attached or levied upon by ordinary legal process.
Creditor’s remedied to reach negotiable document
Gives court full power to aid by injunction
Art. 1532
Art. 1532. The unpaid seller may exercise his right of stoppage
in transitu either by obtaining actual possession of the goods or
by giving notice of his claim to the carrier or other bailee in
whose possession the goods are. Such notice may be given
either to the person in actual possession of the goods or to his
principal. In the latter case the notice, to be effectual, must be
given at such time and under such circumstances that the
principal, by the exercise of reasonable diligence, may prevent
a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the
carrier, or other bailee in possession of the goods, he must
redeliver the goods to, or according to the directions of, the
seller. The expenses of such delivery must be borne by the
seller. If, however, a negotiable document of title representing
the goods has been issued by the carrier or other bailee, he shall
not obliged to deliver or justified in delivering the goods to the
seller unless such document is first surrendered for
cancellation.
Unpaid seller’s right to stop in transitu
The right of the purchaser for value in good faith to whom such
document has been negotiated is superior to the seller’s lien or
stoppage in transitu even when he acquired the same after
notice of stoppage to the carrier or other bailee.

Art. 1535
Subject to the provisions of this Title, the unpaid seller’s right of
lien or stoppage in transitu is not affected by any sale, or other
disposition of the goods which the buyer may have made, unless
the seller has assented thereto.

If, however, a negotiable document of title has been issued for

goods, no seller’s lien or right of stoppage in transitu shall
defeat the right of any purchaser for value in good faith to
whom such document has been negotiated, whether such
negotiation be prior or subsequent to the notification to the
carrier, or other bailee who issued such document, if the seller’s
claim to a lien or right of stoppage in transit.

Effect of issuance of a negotiable document on seller’s lien

or right of stoppage
Seller can give no larger right than he has

Art. 1749
A stipulation that the common carrier’s liability is limited to the
value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.

Stipulation limiting common carrier’s liability to an agreed

valuation
1. That exempting the carrier from any and all liability for
or damage by its own negligence
2. That providing for an unqualified limitation of such
liability to an agreed valuation
3. That limiting the liability of the carrier to an agreed
valuation unless the shipper declared a higher value and
pays a higher rate of freight