6. How can the economic value or “use” of an asset transfer to a third-party without the prior knowledge, consent or active participation of the custodian or person who has the charge over it and possession of it?

1. Understanding Bailment

A bailment is fundamentally different from a sale, which involves the intentional transfer of ownership of personal property in exchange for something of value. In contrast, a bailment entails only the transfer of possession or custody, not ownership. It is typically regarded as a contractual relationship—either express or implied—between the bailor (the owner of the property) and the bailee (the party taking custody), where both agree to act according to specific terms.

2. Rights and Obligations

Under a bailment, the bailee receives control or possession of the property, while the bailor retains full ownership. During the term of the bailment, the bailee’s rights to possess the property take precedence over all others, including the bailor, unless the bailee breaches the terms of the agreement. Once the purpose of the bailment is fulfilled, the bailee is obligated to return the property to the bailor or dispose of it as instructed.

3. Transfer of Economic Value

Under certain forms of bailment, it is possible to transfer the use or economic value of an asset to a third party in exchange for some form of consideration, while the asset itself remains in its original location. In such cases, the custodian may effectively become a trustee or fiduciary for the bailee.

4. Consent and Legal Validity

However, if the custodian is unaware of the transfer of possession, custody, or economic benefit—and has not given their free, prior, and informed consent based on full and complete disclosure of all relevant information—any such agreement is automatically NULL AND VOID and without legal effect.

5. Case of the Indigenous People of the Philippines

This is precisely what occurred in the case of the gold belonging to the Indigenous People of the Philippine Islands. While physical custody remained with the tribal elders and guardians, they were entirely unaware that the economic value of their gold had been transferred to a third party—without their knowledge, consent, or authorization.