Short answer. Possibly yes. Article 1503 of the Civil Code provides that where the bill of lading is deliverable to the buyer, indorsed in blank, or to the buyer by the named consignee, a good-faith purchaser for value who has no notice of any wrongful transfer obtains ownership, even if the bill of exchange was never honored.
What the law says
If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.
Civil Code, Article 1503 — Reservation of Ownership on Shipment. Read the full provision →
What the law says
Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby.
Civil Code, Article 1503 — Reservation of Ownership on Shipment. Read the full provision →
Good faith, value, and no notice are what protect your title
Article 1503 provides directly for your situation: if, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored. Your good faith, having given value, and lacking notice of the wrongful transfer are the specific conditions the article requires.
The bill of lading has to be in one of three qualifying forms
The protection applies only where the bill of lading takes one of three forms: deliverable to the buyer or the order of the buyer, indorsed in blank, or delivered to the buyer by the named consignee. Whether your bill of lading was blank-indorsed or made out to the buyer, either fits within the forms Article 1503 names as qualifying for this protection.
The seller's earlier problem with the person you bought from
The article explains what went wrong upstream: where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby. That is the wrongful retention the person you bought from committed by not paying and keeping the documents anyway.
What this means for you as the later purchaser
The wrongful conduct of the person who never paid does not automatically defeat your title if you meet the article's own conditions: you purchased in good faith, for value, received delivery of the bill of lading or the goods, and had no notice of the facts that made the earlier transfer wrongful. Meeting all of that is what Article 1503 requires for you to obtain ownership despite the unpaid bill of exchange behind the transaction.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Designer Basktets, Inc. vs. Air Sea Transport, Inc., et al, G.R. No. 184513, March 9, 2016 — read the decision on LawPhil →
- National Power Corporation vs. Province of Quezon and Municipalilty of Pagbilao, G.R. No. 171586, January 25, 2010 — read the decision on LawPhil →