G.R. No. L-4007
WARNER BARNES & CO., plaintiffs-appellants, vs. E. DIAZ & CO., defendants-appellees.
March 18, 1908

FACTS: 1. On August 1, 1905, E. Diaz & Co. (defendant) issued three bills of exchange totaling P2,000 to the order of Chinaman Uy-Oyan. These bills were issued with a condition: Uy-Oyan agreed to pay the amount in hemp by August 9, 1905, failing which the bills would not be paid. This condition was explicitly noted on the bills as “According to agreement.”
2. On the same day, August 1, 1905, Uy-Oyan indorsed the bills in blank (by signing his name and rubric on the back, but without stating a date) and delivered them to Chinaman Mariano Almonte.
3. Also on the same day, Almonte delivered these bills to Warner Barnes & Co. (plaintiff) to settle a debt. Warner Barnes & Co. acquired the bills without any knowledge of the special agreement between E. Diaz & Co. and Uy-Oyan regarding the hemp payment.
4. On August 12, 1905, Warner Barnes & Co. forwarded the bills to Manila for collection. However, the bills were neither accepted nor paid because Uy-Oyan had failed to fulfill his agreement to pay in hemp. Warner Barnes & Co. subsequently reversed the credit given to Almonte in their books.
5. The bills were duly protested for non-acceptance and non-payment, and E. Diaz & Co. was informed.
6. Warner Barnes & Co. claimed ownership of the bills and sued E. Diaz & Co. to collect the amount. The trial court dismissed the complaint, ruling that due to the lack of a date on Uy-Oyan’s blank indorsement, Warner Barnes & Co. did not acquire ownership of the bills but merely held them as a commission for collection.

ISSUE: 1. Does an undated blank indorsement on a bill of exchange transfer ownership of the bill, or does it merely constitute a commission for collection, according to the Code of Commerce?
2. Could the plaintiff acquire ownership of the bills through an assignment from Almonte, considering Almonte himself did not acquire ownership due to the flawed indorsement?

RULING: The Supreme Court affirmed the trial court’s decision, ruling against Warner Barnes & Co.

1. Regarding the undated blank indorsement:
The Court cited Articles 461, 462, and 463 of the Code of Commerce. Article 461 states that ownership of drafts may be transferred by indorsement. Article 462 lists the requisites of an indorsement, which includes the date it is made. Article 463 explicitly states: “If the statement of the date is omitted in the indorsement, the ownership of the draft shall be transferred, and it shall be understood as simply a commission for collection.”
The Court rejected the appellant’s argument that Article 463 only applies to Article 462 and not to blank indorsements under Article 465. The Court clarified that Article 463 is a general provision establishing the legal effects of omitting the date, applicable to “all cases of indorsements.” To rule otherwise, where omitting the date or value (also mentioned in Art. 465) would still transfer ownership, would create an “absurdity” where fewer requisites lead to a more effective transfer.
Therefore, the undated blank indorsement by Uy-Oyan to Almonte did not transfer ownership of the bills; it merely constituted a commission for collection.

2. Regarding the assignment from Almonte to Warner Barnes & Co.:
The Court held that Almonte could not have transferred ownership of the bills to Warner Barnes & Co., regardless of any contract of assignment, because Almonte himself never acquired ownership. A fundamental principle is that “no one can transfer to another a right which he does not possess.” Since Almonte only held the bills for collection due to the defective indorsement from Uy-Oyan, he could not convey full ownership to Warner Barnes & Co.

The judgment appealed from was affirmed, with costs against the appellant.