Warner Barnes & Co. v. Diaz & Co.
REITERATIONFacts
The Antecedents: On August 1, 1905, E. Diaz & Co. issued three bills of exchange totaling P2,000 to the order of Uy-Oyan, drawn upon Urrutia & Co. These bills were taken up by Salvador Palanca, who delivered them to Uy-Oyan under an agreement that Uy-Oyan would pay the amount in hemp by August 9, 1905, or the bills would not be paid. The bills were annotated with "According to agreement." Uy-Oyan indorsed the bills in blank and delivered them to Mariano Almonte. Almonte used these bills to pay a debt to Warner Barnes & Co. The indorsement by Uy-Oyan consisted only of his signature and rubric, without a date. Warner Barnes & Co., unaware of the agreement between E. Diaz & Co. and Uy-Oyan, forwarded the bills for collection on August 12, 1905, and credited Almonte's account. However, on August 20, 1905, this entry was canceled as the bills were neither accepted nor paid because Uy-Oyan failed to fulfill his agreement. Procedural History: The bills of exchange were protested for non-acceptance and non-payment, and E. Diaz & Co. was duly informed. Warner Barnes & Co. claimed ownership of the bills, alleging transfer prior to majority. The trial judge ruled that the blank indorsement, lacking a date, did not transfer ownership to Warner Barnes & Co. and was merely for collection. Consequently, the company was not entitled to claim the amount, and the complaint was dismissed. The Petition: Warner Barnes & Co. appealed the trial court's decision, arguing that the blank indorsement, even if undated, transferred ownership, or alternatively, that the assignment by Almonte was valid.
Issue(s)
Whether a blank indorsement, not dated, transfers the ownership of a bill of exchange. Whether an assignment made by a party who has not acquired ownership of the bills of exchange can transfer ownership to another.
Ruling
The Supreme Court affirmed the decision of the trial court, dismissing the complaint. The Court held that the undated blank indorsement did not transfer ownership of the bills of exchange to the plaintiff company, and thus the company could not claim the amount thereof.
Ratio Decidendi
On the issue of whether a blank indorsement, not dated, transfers the ownership of a bill of exchange: The Court held that it does not. Article 461 of the Code of Commerce states that ownership of drafts may be transferred by indorsement, and Article 462 enumerates the requisites for such indorsement, including the date. Article 463 explicitly provides that if the date is omitted in the indorsement, the ownership of the draft shall not be transferred, and it shall be understood as simply a commission for collection. The Court rejected the appellant's argument that Article 465, concerning indorsements signed in blank, is an exception to Article 463. It reasoned that Article 465 merely clarifies the effect of indorsements where value is not stated, and does not override the clear mandate of Article 463 regarding the necessity of a date for the transfer of ownership. To hold otherwise would lead to the absurdity that an indorsement with fewer requisites would be more effective, which is contrary to legal principles. The Court reiterated the doctrine established in International Banking Corporation vs. Montagne that an undated indorsement does not transfer ownership. On the issue of whether an assignment made by a party who has not acquired ownership of the bills of exchange can transfer ownership to another: The Court found that Almonte could not have transferred ownership of the bills to Warner Barnes & Co. because Almonte himself had not acquired ownership. Almonte's purported acquisition of ownership was through the blank indorsement by Uy-Oyan. Since this indorsement was insufficient to transfer ownership to Almonte, he could not, in turn, transfer ownership to the plaintiff company, regardless of the nature of the contract between them. The principle that one cannot transfer a right which one does not possess was applied. The Court noted that it was not claimed that Uy-Oyan, the original payee, had assigned the drafts to the plaintiff, and there was no judicial relation between them. The alleged assignment was made by Almonte in payment of a debt, but Almonte lacked the prerequisite ownership to make such a valid assignment.
Main Doctrine
An indorsement on a bill of exchange that omits the date of its making does not transfer ownership of the draft; it is understood as simply a commission for collection, pursuant to Article 463 of the Code of Commerce.